View:
Download DOC
Download PDF
Download XLS
Download XBRL
syna-10q_20200328.htm
false 2020 Q3 0000817720 --06-27 Large Accelerated Filer true 0.3333 0.3333 0.3333 0.2500 2.00 0.3333 P5Y 0.3333 0.2500 P1Y P2Y P3Y P4Y 2.00 0.3333 P3Y 0.3333 0.3333 P5Y3M18D P5Y3M18D P4Y1M6D P4Y2M12D P8Y1M6D P7Y P3Y1M6D 0000817720 2019-06-29 2020-03-28 xbrli:shares 0000817720 2020-04-30 iso4217:USD 0000817720 2020-03-31 0000817720 2019-06-30 iso4217:USD xbrli:shares 0000817720 2020-01-01 2020-03-31 0000817720 2019-01-01 2019-03-31 0000817720 2019-07-01 2020-03-31 0000817720 2018-07-01 2019-03-31 0000817720 us-gaap:CommonStockMember 2019-06-30 0000817720 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0000817720 us-gaap:TreasuryStockMember 2019-06-30 0000817720 us-gaap:RetainedEarningsMember 2019-06-30 0000817720 us-gaap:CommonStockMember srt:RestatementAdjustmentMember 2019-06-30 0000817720 us-gaap:AdditionalPaidInCapitalMember srt:RestatementAdjustmentMember 2019-06-30 0000817720 us-gaap:TreasuryStockMember srt:RestatementAdjustmentMember 2019-06-30 0000817720 us-gaap:RetainedEarningsMember srt:RestatementAdjustmentMember 2019-06-30 0000817720 srt:RestatementAdjustmentMember 2019-06-30 0000817720 us-gaap:RetainedEarningsMember 2019-07-01 2019-09-30 0000817720 2019-07-01 2019-09-30 0000817720 us-gaap:CommonStockMember 2019-07-01 2019-09-30 0000817720 us-gaap:AdditionalPaidInCapitalMember 2019-07-01 2019-09-30 0000817720 us-gaap:TreasuryStockMember 2019-07-01 2019-09-30 0000817720 us-gaap:CommonStockMember 2019-09-30 0000817720 us-gaap:AdditionalPaidInCapitalMember 2019-09-30 0000817720 us-gaap:TreasuryStockMember 2019-09-30 0000817720 us-gaap:RetainedEarningsMember 2019-09-30 0000817720 2019-09-30 0000817720 us-gaap:RetainedEarningsMember 2019-10-01 2019-12-31 0000817720 2019-10-01 2019-12-31 0000817720 us-gaap:CommonStockMember 2019-10-01 2019-12-31 0000817720 us-gaap:AdditionalPaidInCapitalMember 2019-10-01 2019-12-31 0000817720 us-gaap:CommonStockMember 2019-12-31 0000817720 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0000817720 us-gaap:TreasuryStockMember 2019-12-31 0000817720 us-gaap:RetainedEarningsMember 2019-12-31 0000817720 2019-12-31 0000817720 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0000817720 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0000817720 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0000817720 us-gaap:TreasuryStockMember 2020-01-01 2020-03-31 0000817720 us-gaap:CommonStockMember 2020-03-31 0000817720 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0000817720 us-gaap:TreasuryStockMember 2020-03-31 0000817720 us-gaap:RetainedEarningsMember 2020-03-31 0000817720 us-gaap:CommonStockMember 2018-06-30 0000817720 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0000817720 us-gaap:TreasuryStockMember 2018-06-30 0000817720 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0000817720 us-gaap:RetainedEarningsMember 2018-06-30 0000817720 2018-06-30 0000817720 us-gaap:RetainedEarningsMember 2018-07-01 2018-09-30 0000817720 2018-07-01 2018-09-30 0000817720 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-07-01 2018-09-30 0000817720 us-gaap:CommonStockMember 2018-07-01 2018-09-30 0000817720 us-gaap:AdditionalPaidInCapitalMember 2018-07-01 2018-09-30 0000817720 us-gaap:TreasuryStockMember 2018-07-01 2018-09-30 0000817720 us-gaap:CommonStockMember 2018-09-30 0000817720 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0000817720 us-gaap:TreasuryStockMember 2018-09-30 0000817720 us-gaap:RetainedEarningsMember 2018-09-30 0000817720 2018-09-30 0000817720 us-gaap:RetainedEarningsMember 2018-10-01 2018-12-31 0000817720 2018-10-01 2018-12-31 0000817720 us-gaap:CommonStockMember 2018-10-01 2018-12-31 0000817720 us-gaap:AdditionalPaidInCapitalMember 2018-10-01 2018-12-31 0000817720 us-gaap:TreasuryStockMember 2018-10-01 2018-12-31 0000817720 us-gaap:CommonStockMember 2018-12-31 0000817720 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000817720 us-gaap:TreasuryStockMember 2018-12-31 0000817720 us-gaap:RetainedEarningsMember 2018-12-31 0000817720 2018-12-31 0000817720 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0000817720 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0000817720 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000817720 us-gaap:CommonStockMember 2019-03-31 0000817720 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000817720 us-gaap:TreasuryStockMember 2019-03-31 0000817720 us-gaap:RetainedEarningsMember 2019-03-31 0000817720 2019-03-31 0000817720 us-gaap:PhantomShareUnitsPSUsMember 2019-07-01 2020-03-31 0000817720 syna:DeferredStockUnitsMember 2019-07-01 2020-03-31 0000817720 syna:MarketStockUnitsMember 2019-07-01 2020-03-31 0000817720 syna:PerformanceStockUnitsMember 2019-07-01 2020-03-31 0000817720 us-gaap:SalesRevenueNetMember 2019-07-01 2020-03-31 0000817720 us-gaap:AccountsReceivableMember 2019-07-01 2020-03-31 0000817720 srt:MaximumMember 2019-07-01 2020-03-31 0000817720 syna:ContingentConsiderationMilestonesPayableDatesDecember2021ThroughDecember2023Member 2020-03-31 0000817720 syna:AssetPurchaseAgreementMember 2019-12-01 2019-12-31 xbrli:pure 0000817720 syna:AssetPurchaseAgreementMember 2020-03-31 0000817720 syna:AssetPurchaseAgreementMember 2019-05-01 2020-04-30 0000817720 syna:AssetPurchaseAgreementMember 2019-12-31 0000817720 us-gaap:AccountingStandardsUpdate201409Member 2020-03-31 0000817720 us-gaap:StockCompensationPlanMember 2020-01-01 2020-03-31 0000817720 us-gaap:StockCompensationPlanMember 2019-01-01 2019-03-31 0000817720 us-gaap:StockCompensationPlanMember 2019-07-01 2020-03-31 0000817720 us-gaap:StockCompensationPlanMember 2018-07-01 2019-03-31 0000817720 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2020-03-31 0000817720 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2019-06-30 0000817720 syna:DisplayDriverTechnologyMember 2020-03-31 0000817720 syna:AudioAndVideoTechnologyMember 2020-03-31 0000817720 us-gaap:CustomerRelationshipsMember 2020-03-31 0000817720 syna:LicensedTechnologyAndOtherMember 2020-03-31 0000817720 us-gaap:PatentsMember 2020-03-31 0000817720 us-gaap:TradeNamesMember 2020-03-31 0000817720 syna:DisplayDriverTechnologyMember 2019-06-30 0000817720 syna:AudioAndVideoTechnologyMember 2019-06-30 0000817720 us-gaap:CustomerRelationshipsMember 2019-06-30 0000817720 syna:FingerprintAuthenticationTechnologyMember 2019-06-30 0000817720 syna:LicensedTechnologyAndOtherMember 2019-06-30 0000817720 us-gaap:PatentsMember 2019-06-30 0000817720 us-gaap:TradeNamesMember 2019-06-30 0000817720 syna:DisplayDriverTechnologyMember 2019-07-01 2020-03-31 0000817720 syna:AudioAndVideoTechnologyMember 2019-07-01 2020-03-31 0000817720 us-gaap:CustomerRelationshipsMember 2019-07-01 2020-03-31 0000817720 syna:LicensedTechnologyAndOtherMember 2019-07-01 2020-03-31 0000817720 us-gaap:PatentsMember 2019-07-01 2020-03-31 0000817720 us-gaap:TradeNamesMember 2019-07-01 2020-03-31 0000817720 2018-07-01 2019-03-30 0000817720 us-gaap:CostOfSalesMember 2020-01-01 2020-03-31 0000817720 us-gaap:CostOfSalesMember 2019-01-01 2019-03-31 0000817720 us-gaap:CostOfSalesMember 2019-07-01 2020-03-31 0000817720 us-gaap:CostOfSalesMember 2018-07-01 2019-03-30 0000817720 srt:MaximumMember 2020-03-31 0000817720 syna:ZeroPointFiveZeroPercentConvertibleSeniorNotesDueTwoThousandTwentyTwoMember 2020-03-31 0000817720 syna:ZeroPointFiveZeroPercentConvertibleSeniorNotesDueTwoThousandTwentyTwoMember 2019-07-01 2020-03-31 syna:Day 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember 2020-02-28 0000817720 syna:ForFourFiscalQuartersEndingAfterDateOfMaterialAcquisitionMember us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember 2020-02-28 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember 2020-01-29 2020-02-28 0000817720 us-gaap:LetterOfCreditMember syna:AmendedAndRestatedCreditAgreementMember 2020-02-28 0000817720 us-gaap:BridgeLoanMember syna:AmendedAndRestatedCreditAgreementMember 2020-02-28 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember 2020-03-31 0000817720 syna:AmendedAndRestatedCreditAgreementMember 2020-04-30 0000817720 syna:AmendedAndRestatedCreditAgreementMember us-gaap:RevolvingCreditFacilityMember 2019-07-01 2020-03-31 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember us-gaap:FederalFundsEffectiveSwapRateMember 2019-07-01 2020-03-31 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-07-01 2020-03-31 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember us-gaap:BaseRateMember srt:MinimumMember 2019-07-01 2020-03-31 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember us-gaap:BaseRateMember srt:MaximumMember 2019-07-01 2020-03-31 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember us-gaap:LondonInterbankOfferedRateLIBORMember srt:MinimumMember 2019-07-01 2020-03-31 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember us-gaap:LondonInterbankOfferedRateLIBORMember srt:MaximumMember 2019-07-01 2020-03-31 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember srt:MinimumMember 2019-07-01 2020-03-31 0000817720 us-gaap:RevolvingCreditFacilityMember syna:AmendedAndRestatedCreditAgreementMember srt:MaximumMember 2019-07-01 2020-03-31 0000817720 syna:ForFourFiscalQuartersEndingAfterDateOfMaterialAcquisitionMember syna:AmendedAndRestatedCreditAgreementMember us-gaap:RevolvingCreditFacilityMember 2020-03-31 0000817720 syna:ThereafterMember syna:AmendedAndRestatedCreditAgreementMember us-gaap:RevolvingCreditFacilityMember 2020-03-31 0000817720 us-gaap:CostOfSalesMember 2018-07-01 2019-03-31 0000817720 us-gaap:ResearchAndDevelopmentExpenseMember 2020-01-01 2020-03-31 0000817720 us-gaap:ResearchAndDevelopmentExpenseMember 2019-01-01 2019-03-31 0000817720 us-gaap:ResearchAndDevelopmentExpenseMember 2019-07-01 2020-03-31 0000817720 us-gaap:ResearchAndDevelopmentExpenseMember 2018-07-01 2019-03-31 0000817720 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-01-01 2020-03-31 0000817720 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-01-01 2019-03-31 0000817720 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-07-01 2020-03-31 0000817720 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-07-01 2019-03-31 0000817720 us-gaap:CostOfSalesMember us-gaap:PhantomShareUnitsPSUsMember 2020-01-01 2020-03-31 0000817720 us-gaap:CostOfSalesMember us-gaap:PhantomShareUnitsPSUsMember 2019-07-01 2020-03-31 0000817720 us-gaap:ResearchAndDevelopmentExpenseMember us-gaap:PhantomShareUnitsPSUsMember 2020-01-01 2020-03-31 0000817720 us-gaap:ResearchAndDevelopmentExpenseMember us-gaap:PhantomShareUnitsPSUsMember 2019-07-01 2020-03-31 0000817720 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:PhantomShareUnitsPSUsMember 2020-01-01 2020-03-31 0000817720 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:PhantomShareUnitsPSUsMember 2019-07-01 2020-03-31 0000817720 us-gaap:PhantomShareUnitsPSUsMember 2020-01-01 2020-03-31 0000817720 syna:TwoThousandNineteenEquityAndIncentiveCompensationPlanMember 2019-10-29 0000817720 syna:EmployeeStockPurchasePlanMember 2019-10-28 2019-10-29 0000817720 syna:TwoThousandNineteenInducementEquityPlanMember 2019-08-19 0000817720 us-gaap:EmployeeStockOptionMember 2020-03-27 0000817720 syna:DeferredStockUnitsMember 2019-06-30 0000817720 syna:DeferredStockUnitsMember 2020-03-31 0000817720 syna:DeferredStockUnitsMember 2020-03-27 0000817720 syna:MarketStockUnitsMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-07-01 2020-03-31 0000817720 syna:MarketStockUnitsMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-07-01 2020-03-31 0000817720 syna:MarketStockUnitsMember us-gaap:ShareBasedCompensationAwardTrancheThreeMember 2019-07-01 2020-03-31 0000817720 syna:MarketStockUnitsMember syna:ShareBasedCompensationAwardTrancheFourMember 2019-07-01 2020-03-31 0000817720 syna:MarketStockUnitsMember srt:MinimumMember 2019-07-01 2020-03-31 0000817720 syna:MarketStockUnitsMember srt:MaximumMember 2019-07-01 2020-03-31 0000817720 srt:MaximumMember us-gaap:ShareBasedCompensationAwardTrancheOneMember syna:ThreeYearPerformanceMember syna:MarketStockUnitsMember 2019-07-01 2020-03-31 0000817720 srt:MaximumMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember syna:ThreeYearPerformanceMember syna:MarketStockUnitsMember 2019-07-01 2020-03-31 0000817720 srt:MaximumMember us-gaap:ShareBasedCompensationAwardTrancheOneMember syna:FourYearPerformanceMember syna:MarketStockUnitsMember 2019-07-01 2020-03-31 0000817720 srt:MaximumMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember syna:FourYearPerformanceMember syna:MarketStockUnitsMember 2019-07-01 2020-03-31 0000817720 srt:MaximumMember us-gaap:ShareBasedCompensationAwardTrancheThreeMember syna:FourYearPerformanceMember syna:MarketStockUnitsMember 2019-07-01 2020-03-31 0000817720 syna:MarketStockUnitsMember 2019-06-30 0000817720 syna:MarketStockUnitsMember 2020-03-31 0000817720 syna:MarketStockUnitsMember 2020-03-27 0000817720 srt:MinimumMember syna:PerformanceStockUnitsMember 2019-07-01 2020-03-31 0000817720 srt:MaximumMember syna:PerformanceStockUnitsMember 2019-07-01 2020-03-31 0000817720 syna:PerformanceStockUnitsMember 2019-06-30 0000817720 syna:PerformanceStockUnitsMember 2020-03-31 0000817720 syna:PerformanceStockUnitsMember 2020-03-27 0000817720 us-gaap:PhantomShareUnitsPSUsMember 2020-03-31 0000817720 us-gaap:PhantomShareUnitsPSUsMember 2020-03-27 0000817720 syna:EmployeeStockPurchasePlanMember 2019-07-01 2020-03-31 0000817720 syna:EmployeeStockPurchasePlanMember 2020-03-31 syna:Segment syna:Product 0000817720 country:CN 2020-01-01 2020-03-31 0000817720 country:CN 2019-01-01 2019-03-31 0000817720 country:CN 2019-07-01 2020-03-31 0000817720 country:CN 2018-07-01 2019-03-31 0000817720 country:JP 2020-01-01 2020-03-31 0000817720 country:JP 2019-01-01 2019-03-31 0000817720 country:JP 2019-07-01 2020-03-31 0000817720 country:JP 2018-07-01 2019-03-31 0000817720 country:TW 2020-01-01 2020-03-31 0000817720 country:TW 2019-01-01 2019-03-31 0000817720 country:TW 2019-07-01 2020-03-31 0000817720 country:TW 2018-07-01 2019-03-31 0000817720 syna:OtherForeignCountryMember 2020-01-01 2020-03-31 0000817720 syna:OtherForeignCountryMember 2019-01-01 2019-03-31 0000817720 syna:OtherForeignCountryMember 2019-07-01 2020-03-31 0000817720 syna:OtherForeignCountryMember 2018-07-01 2019-03-31 0000817720 country:KR 2020-01-01 2020-03-31 0000817720 country:KR 2019-01-01 2019-03-31 0000817720 country:KR 2019-07-01 2020-03-31 0000817720 country:KR 2018-07-01 2019-03-31 0000817720 country:US 2020-01-01 2020-03-31 0000817720 country:US 2019-01-01 2019-03-31 0000817720 country:US 2019-07-01 2020-03-31 0000817720 country:US 2018-07-01 2019-03-31 0000817720 syna:MobileProductApplicationsMember 2020-01-01 2020-03-31 0000817720 syna:MobileProductApplicationsMember 2019-01-01 2019-03-31 0000817720 syna:MobileProductApplicationsMember 2019-07-01 2020-03-31 0000817720 syna:MobileProductApplicationsMember 2018-07-01 2019-03-31 0000817720 syna:PcProductApplicationsMember 2020-01-01 2020-03-31 0000817720 syna:PcProductApplicationsMember 2019-01-01 2019-03-31 0000817720 syna:PcProductApplicationsMember 2019-07-01 2020-03-31 0000817720 syna:PcProductApplicationsMember 2018-07-01 2019-03-31 0000817720 syna:InternetOfThingsProductApplicationsMember 2020-01-01 2020-03-31 0000817720 syna:InternetOfThingsProductApplicationsMember 2019-01-01 2019-03-31 0000817720 syna:InternetOfThingsProductApplicationsMember 2019-07-01 2020-03-31 0000817720 syna:InternetOfThingsProductApplicationsMember 2018-07-01 2019-03-31 0000817720 us-gaap:SalesRevenueNetMember syna:CustomerAMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-03-31 0000817720 us-gaap:SalesRevenueNetMember syna:CustomerAMember us-gaap:CustomerConcentrationRiskMember 2019-07-01 2020-03-31 0000817720 us-gaap:SalesRevenueNetMember syna:CustomerBMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-03-31 0000817720 us-gaap:SalesRevenueNetMember syna:CustomerBMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-03-31 0000817720 us-gaap:SalesRevenueNetMember syna:CustomerBMember us-gaap:CustomerConcentrationRiskMember 2019-07-01 2020-03-31 0000817720 us-gaap:SalesRevenueNetMember syna:CustomerCMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-03-31 0000817720 us-gaap:SalesRevenueNetMember syna:CustomerCMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-03-31 0000817720 us-gaap:SalesRevenueNetMember syna:CustomerDMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-03-31 0000817720 us-gaap:SalesRevenueNetMember syna:CustomerDMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-03-31 0000817720 srt:MaximumMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-07-01 2020-03-31 0000817720 srt:MaximumMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-03-31 0000817720 syna:CustomerAMember us-gaap:AccountsReceivableMember us-gaap:CreditConcentrationRiskMember 2019-07-01 2020-03-31 0000817720 syna:CustomerBMember us-gaap:AccountsReceivableMember us-gaap:CreditConcentrationRiskMember 2019-07-01 2020-03-31 0000817720 syna:CustomerCMember us-gaap:AccountsReceivableMember us-gaap:CreditConcentrationRiskMember 2019-07-01 2020-03-31 0000817720 syna:CustomerCMember us-gaap:AccountsReceivableMember us-gaap:CreditConcentrationRiskMember 2018-07-01 2019-06-30 0000817720 syna:CustomerDMember us-gaap:AccountsReceivableMember us-gaap:CreditConcentrationRiskMember 2018-07-01 2019-06-30 0000817720 srt:MaximumMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2019-07-01 2020-03-31 0000817720 srt:MaximumMember us-gaap:AccountsReceivableMember us-gaap:CustomerConcentrationRiskMember 2018-07-01 2019-06-30 0000817720 syna:EmployeeSeveranceAndBenefitsMember syna:FiscalTwoThousandTwentyRestructuringPlanMember 2019-11-01 2020-03-31 0000817720 syna:EmployeeSeveranceAndBenefitsMember syna:FiscalTwoThousandTwentyRestructuringPlanMember 2020-03-31 0000817720 syna:EmployeeSeveranceAndBenefitsMember syna:FiscalTwoThousandNineteenRetructucturingPlanMember 2018-07-01 2019-06-30 0000817720 syna:EmployeeSeveranceAndBenefitsMember syna:FiscalTwoThousandNineteenRetructucturingPlanMember 2019-06-30 0000817720 syna:EmployeeSeveranceAndBenefitsMember syna:FiscalTwoThousandNineteenRetructucturingPlanMember 2019-07-01 2020-03-31 0000817720 syna:EmployeeSeveranceAndBenefitsMember syna:FiscalTwoThousandNineteenRetructucturingPlanMember 2020-03-31 0000817720 syna:EmployeeSeveranceAndBenefitsMember syna:DivestitureOfTDDIRestructuringPlanMember 2019-07-01 2020-03-31 0000817720 syna:EmployeeSeveranceAndBenefitsMember syna:DivestitureOfTDDIRestructuringPlanMember 2020-03-31

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

☒

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

 

For the quarterly period ended March 28, 2020

 

☐

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

 

For the transition period from              to             .

Commission file number 000-49602

 

SYNAPTICS INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

77-0118518

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1251 McKay Drive

San Jose, California 95131

(Address of principal executive offices) (Zip code)

(408) 904-1100

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $.001 per share

SYNA

The Nasdaq Global Select Market

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

☒

  

Accelerated filer

 

☐

 

 

 

 

Non-accelerated filer

 

☐  

  

Smaller reporting company

 

☐

Emerging growth company

 

☐

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

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

Number of shares of Common Stock outstanding at April 30, 2020: 34,035,706

 

 

 

 

 

SYNAPTICS INCORPORATED

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 28, 2020

TABLE OF CONTENTS

 

 

 

 

  

 

  

Page

Part I. Financial Information

  

 

 

 

 

 

   

 

Item 1.

   

Condensed Consolidated Financial Statements (Unaudited):

  

3

 

 

 

 

 

 

 

  

Condensed Consolidated Balance Sheets—March 31, 2020 and June 30, 2019

  

3

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income—Three and Nine Months Ended March 31, 2020 and 2019

 

4

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Comprehensive Income—Three and Nine Months Ended March 31, 2020 and 2019

  

5

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

6

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Cash Flows—Nine Months Ended March 31, 2020 and 2019

  

8

 

 

 

 

 

 

 

  

Notes to Condensed Consolidated Financial Statements

  

9

 

 

 

 

 

 

Item 2.

  

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

  

26

 

 

 

 

 

 

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

  

35

 

 

 

 

 

 

Item 4.

  

Controls and Procedures

  

35

 

 

Part II. Other Information

  

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

36

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

36

 

 

 

 

 

 

 

 

 

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

37

 

 

 

 

 

 

Item 6.

  

Exhibits

  

38

 

 

 

 

 

 

 

Signatures

  

39

 

 

 

 

PART I—FINANCIAL INFORMATION

 

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value and share amounts)

(unaudited)

 

 

 

March 31,

 

 

June 30,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

472.1

 

 

$

327.8

 

Accounts receivable, net of allowances of $1.7 at March 31, 2020 and $2.1 at June 30, 2019

 

 

238.4

 

 

 

230.0

 

Inventories

 

 

95.5

 

 

 

158.7

 

Current assets held for sale

 

 

12.5

 

 

 

-

 

Prepaid expenses and other current assets

 

 

14.4

 

 

 

14.6

 

Total current assets

 

 

832.9

 

 

 

731.1

 

Property and equipment at cost, net of accumulated depreciation of $139.1 and $133.1 at

   March 31, 2020 and June 30, 2019, respectively

 

 

83.4

 

 

 

103.0

 

Non-current assets held for sale

 

 

17.6

 

 

 

—

 

Goodwill

 

 

361.8

 

 

 

372.8

 

Acquired intangibles, net

 

 

104.4

 

 

 

144.8

 

Non-current other assets

 

 

81.0

 

 

 

58.1

 

 

 

$

1,481.1

 

 

$

1,409.8

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

86.9

 

 

$

98.3

 

Accrued compensation

 

 

47.7

 

 

 

30.4

 

Income taxes payable

 

 

11.8

 

 

 

19.1

 

Other accrued liabilities

 

 

92.8

 

 

 

106.1

 

Total current liabilities

 

 

239.2

 

 

 

253.9

 

Convertible notes, net

 

 

482.0

 

 

 

468.3

 

Other long-term liabilities

 

 

47.0

 

 

 

30.3

 

Total liabilities

 

 

768.2

 

 

 

752.5

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

$0.001 par value; 120,000,000 shares authorized, 65,752,215 and 64,283,948 shares

   issued, and 34,004,920 and 33,349,735 shares outstanding, at March 31, 2020

   and June 30, 2019, respectively

 

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

 

1,323.9

 

 

 

1,266.1

 

Treasury stock: 31,747,295 and 30,934,213 common treasury shares at March 31,

   2020 and June 30, 2019, respectively, at cost

 

 

(1,222.5

)

 

 

(1,192.4

)

Retained earnings

 

 

611.4

 

 

 

583.5

 

Total stockholders' equity

 

 

712.9

 

 

 

657.3

 

 

 

$

1,481.1

 

 

$

1,409.8

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

3

 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net revenue

 

$

328.1

 

 

$

334.0

 

 

$

1,056.3

 

 

$

1,177.1

 

Cost of revenue

 

 

192.5

 

 

 

218.0

 

 

 

635.2

 

 

 

770.4

 

Gross margin

 

 

135.6

 

 

 

116.0

 

 

 

421.1

 

 

 

406.7

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

75.8

 

 

 

82.6

 

 

 

238.8

 

 

 

256.9

 

Selling, general, and administrative

 

 

31.6

 

 

 

34.2

 

 

 

90.6

 

 

 

103.6

 

Acquired intangibles amortization

 

 

2.9

 

 

 

3.0

 

 

 

8.8

 

 

 

8.8

 

Restructuring costs

 

 

6.3

 

 

 

-

 

 

 

26.2

 

 

 

10.4

 

Total operating expenses

 

 

116.6

 

 

 

119.8

 

 

 

364.4

 

 

 

379.7

 

Operating income

 

 

19.0

 

 

 

(3.8

)

 

 

56.7

 

 

 

27.0

 

Interest and other expense, net

 

 

(3.2

)

 

 

(4.3

)

 

 

(9.1

)

 

 

(10.5

)

Income/(loss) before provision/(benefit) for income taxes

   and equity investment loss

 

 

15.8

 

 

 

(8.1

)

 

 

47.6

 

 

 

16.5

 

Provision/(benefit) for income taxes

 

 

10.2

 

 

 

(15.3

)

 

 

17.3

 

 

 

(8.1

)

Equity investment loss

 

 

(0.6

)

 

 

(0.5

)

 

 

(1.5

)

 

 

(1.3

)

Net income

 

$

5.0

 

 

$

6.7

 

 

$

28.8

 

 

$

23.3

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

 

$

0.19

 

 

$

0.86

 

 

$

0.67

 

Diluted

 

$

0.14

 

 

$

0.19

 

 

$

0.83

 

 

$

0.66

 

Shares used in computing net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

34.0

 

 

 

34.4

 

 

 

33.5

 

 

 

34.7

 

Diluted

 

 

35.0

 

 

 

35.0

 

 

 

34.5

 

 

 

35.5

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

4

 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

5.0

 

 

$

6.7

 

 

$

28.8

 

 

$

23.3

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized net gain on investment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1.5

)

Comprehensive income

 

$

5.0

 

 

$

6.7

 

 

$

28.8

 

 

$

21.8

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

5

 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Earnings

 

 

Equity

 

Balance at June 30, 2019, as reported

 

 

64,283,948

 

 

$

0.1

 

 

$

1,266.1

 

 

$

(1,192.4

)

 

$

583.5

 

 

$

657.3

 

Cumulative effect of changes in accounting

   principles

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.9

)

 

$

(0.9

)

Balance at June 30, 2019, as adjusted

 

 

64,283,948

 

 

 

0.1

 

 

 

1,266.1

 

 

 

(1,192.4

)

 

 

582.6

 

 

 

656.4

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4.0

 

 

 

4.0

 

Issuance of common stock for share-

   based award compensation plans

 

 

209,110

 

 

 

—

 

 

 

1.7

 

 

 

—

 

 

 

—

 

 

 

1.7

 

Payroll taxes for deferred stock units

 

 

—

 

 

 

—

 

 

 

(1.5

)

 

 

—

 

 

 

—

 

 

 

(1.5

)

Purchases of treasury stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(17.0

)

 

 

—

 

 

 

(17.0

)

Share-based compensation

 

 

—

 

 

 

—

 

 

 

11.2

 

 

 

—

 

 

 

—

 

 

 

11.2

 

Balance at September 30, 2019

 

 

64,493,058

 

 

 

0.1

 

 

 

1,277.5

 

 

 

(1,209.4

)

 

 

586.6

 

 

 

654.8

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19.8

 

 

 

19.8

 

Issuance of common stock for share-

   based award compensation plans

 

 

895,755

 

 

 

—

 

 

 

11.8

 

 

 

—

 

 

 

—

 

 

 

11.8

 

Payroll taxes for deferred stock units

 

 

—

 

 

 

—

 

 

 

(7.2

)

 

 

—

 

 

 

—

 

 

 

(7.2

)

Share-based compensation

 

 

—

 

 

 

—

 

 

 

12.1

 

 

 

—

 

 

 

—

 

 

 

12.1

 

Balance at December 31, 2019

 

 

65,388,813

 

 

 

0.1

 

 

 

1,294.2

 

 

 

(1,209.4

)

 

 

606.4

 

 

 

691.3

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5.0

 

 

 

5.0

 

Issuance of common stock for share-

   based award compensation plans

 

 

363,402

 

 

 

—

 

 

 

16.5

 

 

 

—

 

 

 

—

 

 

 

16.5

 

Payroll taxes for deferred stock units

 

 

—

 

 

 

—

 

 

 

(0.6

)

 

 

—

 

 

 

—

 

 

 

(0.6

)

Purchases of treasury stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(13.1

)

 

 

—

 

 

 

(13.1

)

Share-based compensation

 

 

—

 

 

 

—

 

 

 

13.8

 

 

 

—

 

 

 

—

 

 

 

13.8

 

Balance at March 31, 2020

 

 

65,752,215

 

 

$

0.1

 

 

$

1,323.9

 

 

$

(1,222.5

)

 

$

611.4

 

 

$

712.9

 

 

See accompanying notes to condensed consolidated financial statements (unaudited)

6

 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury

 

 

Comprehensive

 

 

Retained

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Income

 

 

Earnings

 

 

Equity

 

Balance at June 30, 2018

 

 

62,889,679

 

 

$

0.1

 

 

$

1,195.2

 

 

$

(1,073.9

)

 

$

1.5

 

 

$

606.4

 

 

$

729.3

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3.8

 

 

 

3.8

 

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1.5

)

 

 

—

 

 

 

(1.5

)

Issuance of common stock for share-

   based award compensation plans

 

 

140,379

 

 

 

—

 

 

 

2.1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2.1

 

Payroll taxes for deferred stock units

 

 

—

 

 

 

—

 

 

 

(0.9

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.9

)

Purchases of treasury stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(39.4

)

 

 

—

 

 

 

—

 

 

 

(39.4

)

Share-based compensation

 

 

—

 

 

 

—

 

 

 

16.7

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16.7

 

Balance at September 30, 2018

 

 

63,030,058

 

 

 

0.1

 

 

 

1,213.1

 

 

 

(1,113.3

)

 

 

—

 

 

 

610.2

 

 

 

710.1

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

12.8

 

 

 

12.8

 

Issuance of common stock for share-

   based award compensation plans

 

 

773,486

 

 

 

—

 

 

 

9.3

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9.3

 

Payroll taxes for deferred stock units

 

 

—

 

 

 

—

 

 

 

(6.3

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(6.3

)

Purchases of treasury stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(37.9

)

 

 

—

 

 

 

—

 

 

 

(37.9

)

Share-based compensation

 

 

—

 

 

 

—

 

 

 

16.2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16.2

 

Balance at December 31, 2018

 

 

63,803,544

 

 

$

0.1

 

 

$

1,232.3

 

 

$

(1,151.2

)

 

$

—

 

 

$

623.0

 

 

$

704.2

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6.7

 

 

 

6.7

 

Issuance of common stock for share-

   based award compensation plans

 

 

138,622

 

 

 

—

 

 

 

1.7

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1.7

 

Payroll taxes for deferred stock units

 

 

—

 

 

 

—

 

 

 

(1.8

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1.8

)

Share-based compensation

 

 

—

 

 

 

—

 

 

 

15.9

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15.9

 

Balance at March 31, 2019

 

 

63,942,166

 

 

$

0.1

 

 

$

1,248.1

 

 

$

(1,151.2

)

 

$

—

 

 

$

629.7

 

 

$

726.7

 

 

See accompanying notes to condensed consolidated financial statements (unaudited).

7

 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

28.8

 

 

$

23.3

 

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

 

 

 

 

 

 

 

 

Share-based compensation costs

 

 

37.1

 

 

 

48.7

 

Depreciation and amortization

 

 

21.9

 

 

 

27.5

 

Acquired intangibles amortization

 

 

40.4

 

 

 

56.1

 

Deferred taxes

 

 

0.9

 

 

 

(12.4

)

Amortization of convertible debt discount and issuance costs

 

 

13.7

 

 

 

13.1

 

Amortization of debt issuance costs

 

 

0.4

 

 

 

0.4

 

Impairment recovery on investments

 

 

—

 

 

 

(2.8

)

Acquired in-process research and development

 

 

3.7

 

 

 

—

 

Arbitration settlement

 

 

—

 

 

 

(1.9

)

Equity investment loss

 

 

1.5

 

 

 

1.3

 

Foreign currency remeasurement loss

 

 

(0.6

)

 

 

0.2

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(8.4

)

 

 

27.5

 

Inventories

 

 

50.7

 

 

 

(21.9

)

Prepaid expenses and other current assets

 

 

(0.4

)

 

 

(5.1

)

Other assets

 

 

2.5

 

 

 

(1.3

)

Accounts payable

 

 

(8.6

)

 

 

(35.8

)

Accrued compensation

 

 

17.4

 

 

 

(3.3

)

Acquisition-related liabilities

 

 

—

 

 

 

(6.8

)

Income taxes payable

 

 

(5.3

)

 

 

(9.6

)

Other accrued liabilities

 

 

(27.4

)

 

 

13.6

 

Net cash provided by operating activities

 

 

168.3

 

 

 

110.8

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of in-process research and development

 

 

(2.5

)

 

 

—

 

Proceeds from sales of investments

 

 

—

 

 

 

2.8

 

Purchases of property and equipment

 

 

(11.7

)

 

 

(17.7

)

Net cash used in investing activities

 

 

(14.2

)

 

 

(14.9

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Purchases of treasury stock

 

 

(30.1

)

 

 

(77.3

)

Proceeds from issuance of shares

 

 

30.0

 

 

 

13.1

 

Payroll taxes for deferred stock and market stock units

 

 

(9.3

)

 

 

(8.9

)

Payment of debt issuance costs

 

 

(0.2

)

 

 

—

 

Net cash used in financing activities

 

 

(9.6

)

 

 

(73.1

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(0.2

)

 

 

—

 

Net increase/(decrease) in cash and cash equivalents

 

 

144.3

 

 

 

22.8

 

Cash and cash equivalents at beginning of period

 

 

327.8

 

 

 

301.0

 

Cash and cash equivalents at end of period

 

$

472.1

 

 

$

323.8

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

Cash paid for taxes

 

$

24.0

 

 

$

16.1

 

Cash refund on taxes

 

$

1.3

 

 

$

5.2

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment in current liabilities

 

$

1.2

 

 

$

3.4

 

 

See accompanying notes to condensed consolidated financial statements (unaudited)

 

8

 

SYNAPTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, and U.S. generally accepted accounting principles, or U.S. GAAP. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules and regulations. In our opinion, the financial statements include all adjustments, which are of a normal and recurring nature and necessary for the fair presentation of the results of the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future period. These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended June 29, 2019.

The consolidated financial statements include our financial statements and those of our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.

Our fiscal year is the 52- or 53-week period ending on the last Saturday in June. Our fiscal 2020 is a 52-week period ending June 27, 2020, and our fiscal 2019 was a 52-week period ending on June 29, 2019. The fiscal periods presented in this report are 13- and 39-weeks for the three and nine months ended March 28, 2020, and March 30, 2019. For simplicity, the accompanying condensed consolidated financial statements have been shown as ending on calendar quarter end dates as of and for all periods presented, unless otherwise indicated.

Effective at the beginning of our first quarter of fiscal 2020, the quarter ended September 30, 2019, we adopted the requirements of Accounting Standards Update, or ASU, 2016-02, Leases, or Topic 842, issued by the Financial Accounting Standards Board, or FASB.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, allowance for doubtful accounts, cost of revenue, inventories, loss on purchase commitments, product warranty, accrued liabilities, share-based compensation costs, provision for income taxes, deferred income tax asset valuation allowances, uncertain tax positions, goodwill, intangible assets, investments and loss contingencies. We base our estimates on historical experience, applicable laws and regulations, and various other assumptions that we believe to be reasonable under the circumstances, including our expectations regarding the potential impacts on our business of the COVID-19 pandemic, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Foreign Currency Transactions and Foreign Exchange Contracts

The U.S. dollar is our functional and reporting currency.  We remeasure our monetary assets and liabilities not denominated in the functional currency into U.S. dollar equivalents at the rate of exchange in effect on the balance sheet date. We measure and record non-monetary balance sheet accounts at the historical rate in effect at the date of transaction. We remeasure foreign currency expenses at the weighted average exchange rate in the month that the transaction occurred. Our foreign currency transactions and remeasurement gains and losses are included in selling, general, and administrative expenses in the condensed consolidated statements of income and resulted in net losses of $0.1 million and less than $0.1 million in the three and nine months ended March 31, 2020, respectively, and net losses of $0.1 million and $0.7 million for the three and nine months ended March 31, 2019, respectively.

Leases

We determine if a contract is a lease or contains a lease at the inception of the contract and reassess that conclusion if the contract is modified. All leases are assessed for classification as an operating lease or a finance lease. Operating lease right-of-use, or ROU, assets are included in non-current other assets on our condensed consolidated balance sheet. Operating lease liabilities are separated into a current portion, included within accrued liabilities on our condensed consolidated balance sheet, and a non-current portion, included within operating lease liabilities on our condensed consolidated balance sheet. We do not have any finance lease ROU assets or liabilities. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our

9

 

obligation to make lease payments arising from the lease. We do not obtain and control the right to use the identified asset until the lease commencement date.

Our lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. Because the interest rate implicit in the lease is not readily determinable, we generally use our incremental borrowing rate to discount the lease payments to present value. The estimated incremental borrowing rate is derived from information available at the lease commencement date. We factor in publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Our ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor. Variable lease payments are expensed as incurred and do not factor into the measurement of the applicable ROU asset or lease liability.

The term of our leases equals the non-cancellable period of the lease, including any rent-free periods provided by the lessor, and also include options to renew or extend the lease (including by not terminating the lease) that we are reasonably certain to exercise. We establish the term of each lease at lease commencement and reassess that term in subsequent periods when one of the triggering events outlined in Topic 842 occurs. Operating lease cost for lease payments is recognized on a straight-line basis over the lease term.

Our lease contracts often include lease and non-lease components. For our leases, we have elected the practical expedient offered by the standard to not separate lease from non-lease components and account for them as a single lease component.

We have elected, for all classes of underlying assets, not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease cost for short-term leases is recognized on a straight-line basis over the lease term.

Asset Acquisition

We acquired an emerging technology startup company focused on the design of high-speed connectivity products in August 2019. The purchase price primarily included $2.5 million in cash paid at the closing, and up to $6.5 million in contingent consideration which is payable in set amounts upon meeting various milestones on dates from December 2021 through December 2023. As of March 31, 2020, we have accrued $1.3 million of the contingent consideration as that is the portion which is currently estimable and probable. The acquisition was accounted for as an asset purchase and accordingly we expensed $3.7 million of in-process research and development, recorded liabilities of approximately $1.5 million and recorded a long-term deferred tax asset of $0.3 million in the nine months ended March 31, 2020.

Divestiture

In December 2019, we entered into an asset purchase agreement with a third party to sell the assets of our LCD Touch Controller and Display Driver Integration product line, or TDDI, for LCD mobile displays. We will retain our automotive TDDI product line and our discrete touch and discrete display driver product lines supporting LCD and OLED for the mobile market. Subject to certain post-closing adjustments and indemnification obligations, the aggregate consideration payable by the buyer will be $120.0 million in cash, the dollar value of specified inventory at a purchase price of standard cost plus 5% in cash, and the assumption of certain liabilities as set forth in the asset purchase agreement. The assets sold under the asset purchase agreement, have a preliminary carrying value of approximately $30.1 million as of March 31, 2020, and have been included as $12.5 million of current assets held for sale and $17.6 million of non-current assets held for sale in our condensed consolidated balance sheets. The transaction closed in accordance with the terms of the asset purchase agreement in April 2020 for cash consideration of $120.0 million plus a preliminary inventory amount of $19.4 million.

 

 

10

 

2. Impact of Recently Adopted Accounting Pronouncements

On June 30, 2019, we adopted Accounting Standards Codification Topic 842, or ASC 842, Leases, which requires recognition of ROU assets and lease liabilities for most leases on our consolidated balance sheet. We adopted ASC 842 using a modified retrospective transition approach as of the effective date as permitted by ASC 842. As a result, we were not required to adjust our comparative period financial information for effects of the standard or make the new required lease disclosures for the periods before the date of adoption. We elected the package of practical expedients which allows us not to reassess (1) whether existing or expired contracts, as of the adoption date, contain leases, (2) the lease classification for existing leases, and (3) whether existing initial direct costs meet the new definition. We also elected the practical expedient to not separate lease and non-lease components for our leases, and to not recognize ROU assets and liabilities for short-term leases.

The standard had a material impact on our condensed consolidated balance sheet but did not have a significant impact on our condensed consolidated statements of income or cash flows. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.

The adoption of this new standard at June 30, 2019, resulted in the following changes:

 

•

assets increased by $27.8 million, primarily representing the recognition of ROU assets for operating leases; and

 

•

liabilities increased by $28.4 million, primarily representing the recognition of lease liabilities for operating leases.

3. Revenue Recognition

We adopted Accounting Standards Codification Topic 606, or ASC 606, Revenue from Contracts with Customers, at the beginning of our fiscal 2019. Our revenue is primarily generated from the sale of application specific integrated circuit chips, or ASIC chips, either directly to a customer or to a distributor. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. All of our revenue, except an inconsequential amount, is recognized at a point in time, either on shipment or delivery of the product, depending on customer terms and conditions. We generally warrant our products for a period of 12 months from the date of sale and estimate probable product warranty costs at the time we recognize revenue as the warranty is considered an assurance warranty and not a performance obligation. Non-product revenue is recognized over the same period of time such performance obligations are satisfied. We then select an appropriate method for measuring satisfaction of the performance obligations.

Revenue from sales to distributors is recognized upon shipment of the product to the distributors (sell-in basis). Master sales agreements are in place with certain customers, and these agreements typically contain terms and conditions with respect to payment, delivery, warranty and supply. In the absence of a master sales agreement, we consider a customer's purchase order or our standard terms and conditions to be the contract with the customer.

Our pricing terms are negotiated independently, on a stand-alone basis. In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration which we expect to receive for the sale of such products. In limited situations, we make sales to certain customers under arrangements where we grant stock rotation rights, price protection and price allowances; variable consideration associated with these rights is expected to be inconsequential. These adjustments and incentives are accounted for as variable consideration, classified as other current liabilities under the revenue standard, and are shown as customer obligations in Note 9 Other Accrued Liabilities and Other Long-Term Liabilities. We estimate the amount of variable consideration for such arrangements based on the expected value to be provided to customers, and we do not believe that there will be significant changes to our estimates of variable consideration. When incentives, stock rotation rights, price protection, volume discounts, or price allowances are applicable, they are estimated and recorded in the period the related revenue is recognized. Stock rotation reserves are based on historical return rates and recorded as a reduction to revenue with a corresponding reduction to cost of goods sold for the estimated cost of inventory that is expected to be returned and recorded as prepaid expenses and other current assets. In limited circumstances, we enter into volume-based tiered pricing arrangements and we estimate total unit volumes under such arrangements to determine the expected transaction price for the units expected to be transferred. Such arrangements are accounted for as contract liabilities within other accrued liabilities. Sales returns liabilities are recorded as refund liabilities within other accrued liabilities.

Our accounts receivable balance is from contracts with customers and represents our unconditional right to receive consideration from customers. Payments are generally due within three months of completion of the performance obligation and subsequent invoicing and therefore, do not include significant financing components. To date, there have been no material impairment losses on accounts receivable. There were $0.6 million in contract assets recorded on the condensed consolidated balance sheets as of March 31, 2020 and $0.9 million as of June 30, 2019. Contract assets are presented as part of prepaid expenses and other current assets. Contract liabilities and refund liabilities were $6.7 million and $24.2 million, respectively, as of March 31, 2020, and $4.5 million and $47.5 million, respectively, as of June 30, 2019. Both contract liabilities and refund liabilities are presented as customer obligations in Note 9 Other Accrued Liabilities and Other Long-Term Liabilities. During the nine months ended March 31, 2020, and the nine months

11

 

ended March 31, 2019, we recognized $1.4 million and $0.3 million, respectively, in revenue related to contract liabilities, which was outstanding as of the beginning of each such fiscal year.

We invoice customers for each delivery upon shipment and recognize revenue in accordance with delivery terms. As of March 31, 2020, we did not have any remaining unsatisfied performance obligations with an original duration greater than one year. Accordingly, under the optional exception provided by ASC 606, we do not disclose revenues allocated to future performance obligations of partially completed contracts. We have elected to account for shipping and handling costs as fulfillment costs before the customer obtains control of the goods. We continue to classify shipping and handling costs as a cost of revenue. We have elected to continue to account for collection of all taxes on a net basis.  

We incur commission expense that is incremental to obtaining contracts with customers. Sales commissions (which are recorded as a selling, general and administrative expense in the condensed consolidated statements of income) are expensed when the product is shipped because such commissions are owed after shipment.

Revenue from contracts with customers disaggregated by geographic area based on customer location and groups of similar products is presented in Note 14 Segment, Customers, and Geographical Information.

 

 

4. Net Income Per Share

The computation of basic and diluted net income per share was as follows (in millions, except per share data):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5.0

 

 

$

6.7

 

 

$

28.8

 

 

$

23.3

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares, basic

 

 

34.0

 

 

 

34.4

 

 

 

33.5

 

 

 

34.7

 

Effect of dilutive share-based awards

 

 

1.0

 

 

 

0.6

 

 

 

1.0

 

 

 

0.8

 

Shares, diluted

 

 

35.0

 

 

 

35.0

 

 

 

34.5

 

 

 

35.5

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

 

$

0.19

 

 

$

0.86

 

 

$

0.67

 

Diluted

 

$

0.14

 

 

$

0.19

 

 

$

0.83

 

 

$

0.66

 

 

Our basic net income per share amounts for each period presented have been computed using the weighted average number of shares of common stock outstanding over the period measured. Our diluted net income per share amounts for each period presented include the weighted average effect of potentially dilutive shares. We use the treasury stock method to determine the dilutive effect of our stock options, deferred stock units, or DSUs, market stock units, or MSUs, performance stock units, or PSUs, and our convertible notes.

Dilutive net income per share amounts do not include the potential weighted average effect of 345,783 and 1,558,936 shares of common stock related to certain share-based awards that were outstanding during the three months ended March 31, 2020 and 2019, respectively, and 800,857 and 1,434,049 shares of common stock related to certain share-based awards that were outstanding during the nine months ended March 31, 2020 and 2019, respectively. These share-based awards were not included in the computation of diluted net income per share because their effect would have been antidilutive.

 

 

5. Fair Value

Our financial assets, measured at fair value on a recurring basis under the fair value hierarchy, consisted of money market funds within level 1 financial assets and totaled $262.2 million and $313.7 million as of March 31, 2020 and June 30, 2019, respectively. These money market funds were included in cash and cash equivalents in our condensed consolidated balance sheets.

The fair values of our accounts receivable and accounts payable approximate their carrying values because of the short-term nature of those instruments. Intangible assets, property and equipment, and goodwill are measured at fair value on a non-recurring basis if impairment is indicated.

 

 

12

 

6. Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consisted of the following (in millions):

 

 

 

March 31,

 

 

June 30,

 

 

 

2020

 

 

2019

 

Raw materials and work-in-progress

 

$

48.6

 

 

$

110.7

 

Finished goods

 

 

46.9

 

 

 

48.0

 

 

 

$

95.5

 

 

$

158.7

 

 

We record a write-down, if necessary, to reduce the carrying value of inventory to its net realizable value. The effect of these write-downs is to establish a new cost basis in the related inventory, which we do not subsequently write up. We also record a liability and charge to cost of revenue for estimated losses on inventory we are obligated to purchase from our contract manufacturers when such losses become probable from customer delays, order cancellations, or other factors. As of March 31, 2020, we transferred $12.5 million of inventory to current assets held for sale. See Note 1 Basis of Presentation under the heading Divestiture included in the condensed consolidated financial statements contained elsewhere in this Report.

 

 

7. Acquired Intangibles and Goodwill

Acquired Intangibles

The following table summarizes the life, the gross carrying value and the related accumulated amortization of our acquired intangible assets as of March 31, 2020 and June 30, 2019 (in millions):

 

 

 

 

 

 

 

March 31, 2020

 

 

June 30, 2019

 

 

 

Weighted Average

Life in Years

 

 

Gross Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

Gross Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

Display driver technology

 

 

5.3

 

 

$

164.0

 

 

$

(157.5

)

 

$

6.5

 

 

$

164.0

 

 

$

(148.1

)

 

$

15.9

 

Audio and video

   technology

 

 

5.3

 

 

 

138.6

 

 

 

(69.7

)

 

 

68.9

 

 

 

138.6

 

 

 

(49.4

)

 

 

89.2

 

Customer relationships

 

 

4.1

 

 

 

81.8

 

 

 

(58.5

)

 

 

23.3

 

 

 

81.8

 

 

 

(49.9

)

 

 

31.9

 

Fingerprint authentication

   technology

 

Not

applicable

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

47.2

 

 

 

(47.2

)

 

 

—

 

Licensed technology

   and other

 

 

4.2

 

 

 

7.7

 

 

 

(5.0

)

 

 

2.7

 

 

 

7.7

 

 

 

(3.6

)

 

 

4.1

 

Patents

 

 

8.1

 

 

 

4.4

 

 

 

(2.5

)

 

 

1.9

 

 

 

4.4

 

 

 

(2.0

)

 

 

2.4

 

Tradename

 

 

7.0

 

 

 

1.8

 

 

 

(0.7

)

 

 

1.1

 

 

 

1.8

 

 

 

(0.5

)

 

 

1.3

 

Acquired intangibles,

   gross

 

 

3.1

 

 

$

398.3

 

 

$

(293.9

)

 

$

104.4

 

 

$

445.5

 

 

$

(300.7

)

 

$

144.8

 

 

The total amortization expense for the acquired intangible assets was $11.1 million and $18.1 million for the three months ended March 31, 2020 and 2019, respectively, and $40.4 million and $56.1 million for the nine months ended March 31, 2020 and 2019, respectively. During the three months ended March 31, 2020 and 2019, $8.1 million and $15.2 million, respectively, and $31.6 million and $47.3 million for the nine months ended March 31, 2020 and 2019, respectively, of amortization expense was included in our condensed consolidated statements of income in cost of revenue; the remainder was included in acquired intangibles amortization.

The following table presents expected annual fiscal year aggregate amortization expense as of March 31, 2020 (in millions):

 

Remainder of 2020

 

$

11.1

 

2021

 

 

37.4

 

2022

 

 

32.9

 

2023

 

 

20.4

 

2024

 

 

2.5

 

2025

 

 

0.1

 

Future amortization

 

$

104.4

 

13

 

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired.  There was a reclassification of $11.0 million of goodwill to non-current assets held for sale during the nine months ended March 31, 2020.  

 

 

8. Leases

Our leases mainly include our worldwide office and research and development facilities which are all classified as operating leases. Certain leases include renewal options that are under our discretion. The leases expire at various dates through fiscal year 2026, some of which include options to extend the lease for up to 5 years. For the nine months ended March 31, 2020, we recorded approximately $6.9 million of operating leases expense. Our short-term leases are immaterial and we do not have finance leases.

As of March 31, 2020, the components of leases and lease costs are as follows (in millions):

 

 

 

March 31,

 

 

 

2020

 

Operating lease right-of-use assets

 

$

23.8

 

Operating lease liabilities

 

$

7.6

 

Operating lease liabilities, long-term

 

 

16.2

 

Total operating lease liabilities

 

$

23.8

 

 

Supplemental cash flow information related to leases is as follows (in millions):

 

 

 

Nine Months Ended

 

 

 

March 31,

 

 

 

2020

 

Cash paid for operating leases included in operating

   cash flows

 

$

7.1

 

Supplemental non-cash information related to lease

   liabilities arising from obtaining right-of-use assets

 

 

2.8

 

As of March 31, 2020, the weighted average remaining lease term is 3.7 years, and the weighted average discount rate is 4.21%.  

Future minimum lease payments for the operating lease liabilities are as follows (in millions):

 

 

 

Operating

 

 

 

Lease

 

Fiscal Year

 

Payments

 

Remainder of 2020

 

$

2.3

 

2021

 

 

7.9

 

2022

 

 

7.2

 

2023

 

 

4.0

 

2024

 

 

2.4

 

Thereafter

 

 

1.9

 

Total future minimum operating lease payments

 

 

25.7

 

Less: interest

 

 

(1.9

)

Total lease liabilities

 

$

23.8

 

 

14

 

As of the beginning of our fiscal quarter ended September 30, 2019, our aggregate minimum rental commitments for future fiscal years for non-cancelable operating leases with initial or remaining terms in excess of one year were as follows (in millions):

 

 

 

Operating

 

 

 

Lease

 

Fiscal Year

 

Payments

 

2020

 

$

7.4

 

2021

 

 

3.2

 

2022

 

 

0.9

 

2023

 

 

0.3

 

2024

 

 

0.1

 

Total future minimum operating lease payments

 

$

11.9

 

 

 

9. Other Accrued Liabilities and Other Long-Term Liabilities

Other accrued liabilities consisted of the following (in millions):

 

 

 

March 31,

 

 

June 30,

 

 

 

2020

 

 

2019

 

Customer Obligations

 

$

30.9

 

 

$

52.0

 

Inventory obligations

 

 

30.0

 

 

 

26.7

 

Operating lease liabilities

 

 

7.6

 

 

 

—

 

Warranty

 

 

4.0

 

 

 

4.0

 

Other

 

 

20.3

 

 

 

23.4

 

 

 

$

92.8

 

 

$

106.1

 

 

Other long-term liabilities consisted of the following (in millions):

 

 

 

March 31,

 

 

June 30,

 

 

 

2020

 

 

2019

 

Income taxes payable, long-term

 

$

17.4

 

 

$

16.2

 

Operating lease liabilities, long-term

 

 

16.2

 

 

 

—

 

Other

 

 

13.4

 

 

 

14.1

 

 

 

$

47.0

 

 

$

30.3

 

 

 

 

 

 

 

 

 

 

 

 

10. Indemnifications and Contingencies

Indemnifications

In connection with certain agreements, we are obligated to indemnify the counterparty against third party claims alleging infringement of certain intellectual property rights by us. We have also entered into indemnification agreements with our officers and directors. Maximum potential future payments under these agreements cannot be estimated because these agreements generally do not have a maximum stated liability. However, historical costs related to these indemnification provisions have not been significant. We have not recorded any liability in our condensed consolidated financial statements for such indemnification obligations.

Contingencies

We have in the past, and may in the future, receive notices from third parties that claim our products infringe their intellectual property rights. We cannot be certain that our technologies and products do not and will not infringe issued patents or other proprietary rights of third parties.

Any infringement claims, with or without merit, could result in significant litigation costs and diversion of management and financial resources, including the payment of damages, which could have a material adverse effect on our business, financial condition, and results of operations.

 

 

15

 

11. Debt

Convertible Debt

Our convertible debt consists of an original $525 million aggregate principal amount of 0.50% convertible senior notes due 2022, or the Notes, which were issued in a private placement transaction. The net proceeds from the Notes, after deducting discounts, were $514.5 million.

The Notes bear interest at a rate of 0.50% per year, which is payable semi-annually in arrears, on June 15 and December 15 of each year. The Notes are senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any our liabilities that are not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

The Notes mature on June 15, 2022, or the Maturity Date, unless earlier repurchased, redeemed or converted.

Holders may convert all or any portion of their Notes, in multiples of $1,000 principal amounts, at their option at any time prior to the close of business on the business day immediately preceding March 15, 2022 under certain defined circumstances.

On or after March 15, 2022 until the close of business on the business day immediately preceding the Maturity Date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amounts, at the option of the holder. Upon conversion, we will pay or deliver, at our election, shares of common stock, cash, or a combination of cash and shares of common stock.

The conversion rate for the Notes is initially 13.6947 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $73.02 per share of common stock). The conversion rate is subject to adjustment in certain circumstances.

Upon the occurrence of a fundamental change (as defined in the Notes indenture), holders of the Notes may require us to repurchase for cash all or a portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.

We may not redeem the Notes prior to June 20, 2020. We may redeem for cash all or any portion of the Notes, at our option, on or after June 20, 2020, if the last reported sale price of our common stock, as determined by us, has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date. Our policy is to settle the principal amount of our Notes with cash upon conversion or redemption.

As of the issuance date of the Notes, we recorded $82.1 million of the principal amount to equity, representing the debt discount for the difference between our estimated nonconvertible debt borrowing rate of 4.39% and the coupon rate of the Notes of 0.50% using a five-year life, which coincides with the term of the Notes. In addition, we allocated the total of $11.1 million of debt issuance costs, consisting of the initial purchaser’s discount of $10.5 million and legal, accounting, and printing costs of $579,000, pro rata, to the equity and debt components of the Notes, or $1.9 million and $9.2 million, respectively. The debt discount and the debt issuance costs allocated to the debt component of the Notes are amortized as interest expense using the effective interest method over five years.

The contractual interest expense and amortization of discount on the Notes for the nine months ended March 31, 2020, were as follows (in millions):

 

 

 

Nine Months Ended

 

 

 

March 31,

 

 

 

2020

 

Interest expense

 

$

2.0

 

Amortization of discount and debt issuance costs

 

 

13.7

 

Total interest

 

$

15.7

 

 

16

 

The unamortized amounts of the debt issuance costs and discount associated with the Notes as of March 31, 2020 were $4.3 million and $38.7 million, respectively.

 

Revolving Credit Facility

In February 2020, we entered into the First Amendment to Amended and Restated Credit Agreement, or the Amendment, with the lenders that are party thereto, or the Lenders, and Wells Fargo Bank, National Association, as administrative agent for the Lenders, related to that certain Amended and Restated Credit Agreement, dated September 27, 2017, or the Credit Agreement. Pursuant to the Amendment, the Credit Agreement was amended to, among other things, (i) modify the definition of Consolidated EBITDA (as defined in the Credit Agreement) to increase the maximum limit on the add back of certain restructuring and integration cost and expenses to 30% from 15% of Consolidated EBITDA, (ii) modify the negative covenant for Consolidated Total Leverage Ratio (as defined in the Credit Agreement) at the end of any fiscal quarter to 4.75:1.00 from 3.50:1.00, and for any four quarter period following a Material Acquisition (as defined in the Credit Agreement) to 5:00:1.00 from 3.75:1.00, (iii) modify the circumstances under which the maturity date of the Credit Agreement would be accelerated in advance of the maturity date of the Notes to eliminate the acceleration of the maturity date of the Credit Agreement if we meet certain specified leverage and liquidity covenants, (iv) add a minimum liquidity covenant for each two-week period beginning on the date that is 120 days prior to the maturity date of the Company’s existing convertible senior notes, (v) add certain technical amendments to address LIBOR transition matters, and  (vi) include or revise certain definitions and certain customary representation, warranties and acknowledgments.

 

The Credit Agreement provides for a revolving credit facility in a principal amount of up to $200 million, which includes a $20 million sublimit for letters of credit and a $20 million sublimit for swingline loans. Under the terms of the Credit Agreement, we may, subject to the satisfaction of certain conditions, request increases in the revolving credit facility commitments in an aggregate principal amount of up to $100 million to the extent existing or new lenders agree to provide such increased or additional commitments, as applicable.  Proceeds under the revolving credit facility are available for working capital and general corporate purposes. As of March 31, 2020, there was no balance outstanding under the revolving credit facility . In April 2020, we borrowed $100.0 million under the revolving credit facility.

The revolving credit facility is required to be repaid in full on the earlier of (i) September 27, 2022, and (ii) the date 91 days prior to the Maturity Date of the Notes if the Notes have not been refinanced in full by such date, subject to certain exceptions based on specific covenant calculations. Debt issuance costs of $2.3 million relating to the revolving credit facility will be amortized over 60 months.

Our obligations under the Credit Agreement are guaranteed by the material domestic subsidiaries of our Company, subject to certain exceptions (such material subsidiaries, together with our Company, collectively, the Credit Parties). The obligations of the Credit Parties under the Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority security interest in substantially all of the existing and future personal property of the Credit Parties, including, without limitation, 65% of the voting capital stock of certain of the Credit Parties’ direct foreign subsidiaries, subject to certain exceptions.

The revolving credit facility bears interest at our election of a Base Rate plus an Applicable Margin or LIBOR plus an Applicable Margin. Swingline loans bear interest at a Base Rate plus an Applicable Margin. The Base Rate is a floating rate that is the greater of the Prime Rate, the Federal Funds Rate plus 50 basis points, or LIBOR plus 100 basis points. The Applicable Margin is based on a sliding scale which ranges from 0.25 to 100 basis points for Base Rate loans and 100 basis points to 175 basis points for LIBOR loans. We are required to pay a commitment fee on any unused commitments under the Credit Agreement which is determined on a leverage-based sliding scale ranging from 0.175% to 0.25% per annum. Interest and fees are payable on a quarterly basis. The LIBOR index is expected to be discontinued at the end of 2021. Under our credit facility, when the LIBOR index is discontinued, we will switch to a comparable or successor rate as selected by the Administrative Agent and the Company, which may include the Secured Overnight Financing Rate, or SOFR.

Under the Credit Agreement, there are various restrictive covenants, including three financial covenants which limit the consolidated total leverage ratio, or leverage ratio, the consolidated interest coverage ratio, or interest coverage ratio, a restriction which places a limit on the amount of capital expenditures that may be made in any fiscal year, a restriction that permits up to $50 million per fiscal quarter of accounts receivable financings, and sets the Specified Leverage Ratio. The leverage ratio is the ratio of debt as of the measurement date to earnings before interest, taxes, depreciation and amortization, or EBITDA, for the four consecutive quarters ending with the quarter of measurement. The current leverage ratio shall not exceed 4.75 to 1.00 provided that for the four fiscal quarters ending after the date of a material acquisition, such maximum leverage ratio shall be adjusted to 5.0 to 1.00, and thereafter 4.75 to 1.0. The interest coverage ratio is EBITDA to interest expense for the four consecutive quarters ending with the quarter of measurement. The interest coverage ratio must not be less than 3.50 to 1.0 during the term of the Credit Agreement. The Specified Leverage Ratio is the ratio used in determining, among other things, whether we are permitted to make dividends and/or

17

 

prepay certain indebtedness, at a fixed ratio of 2.25 to 1.00. As of the end of the fiscal quarter, we were in compliance with the restrictive covenants.

 

12. Share-Based Compensation

Share-based compensation and the related tax benefit recognized in our condensed consolidated statements of income were as follows (in millions):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Cost of revenue

 

$

0.8

 

 

$

0.7

 

 

$

2.1

 

 

$

2.4

 

Research and development

 

 

9.0

 

 

 

8.6

 

 

 

24.6

 

 

 

25.4

 

Selling, general, and administrative

 

 

8.1

 

 

 

6.5

 

 

 

17.5

 

 

 

20.9

 

Total

 

$

17.9

 

 

$

15.8

 

 

$

44.2

 

 

$

48.7

 

Income tax expense/(benefit) on share-based compensation

 

$

(1.8

)

 

$

(1.8

)

 

$

(4.5

)

 

$

(4.2

)

 

Included in the preceding table is share-based compensation for our cash-settled phantom stock units, which we granted in October 2019 (see Phantom Stock Units below) (in millions):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

 

March 31,

 

 

March 31,

 

 

 

 

2020

 

 

2020

 

 

Cost of revenue

 

$

0.1

 

 

$

0.2

 

 

Research and development

 

 

3.3

 

 

 

5.8

 

 

Selling, general, and administrative

 

 

0.7

 

 

 

1.1

 

 

Total

 

$

4.1

 

 

$

7.1

 

 

 

Historically, we have issued new shares in connection with our equity-settled share-based compensation plans, however, treasury shares are also available for issuance. Any additional shares repurchased under our common stock repurchase program will be available for issuance under our share-based compensation plans.

New Share-Based Compensation Plans

On October 29, 2019, our stockholders approved: (i) our 2019 Equity and Incentive Compensation Plan, or the 2019 Incentive Plan, to replace our Amended and Restated 2010 Incentive Compensation Plan, and (ii) our 2019 Employee Stock Purchase Plan, or the 2019 ESPP, to replace our Amended and Restated 2010 Employee Stock Purchase Plan. Upon approval of the 2019 Incentive Plan, new awards are no longer issued under the replaced share-based compensation plan. Awards outstanding at October 29, 2019 under our prior share-based compensation plans were not impacted by the approval of the 2019 Incentive Plan and continue to remain outstanding by their terms under the applicable share-based compensation plan.

The 2019 Incentive Plan authorizes our Board of Directors to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, cash incentive awards, performance shares, performance units, and other stock-based awards.  The number of shares approved by stockholders under the 2019 Incentive Plan was 1,230,000. The 2019 ESPP authorizes the Company to provide eligible employees with an opportunity to acquire an equity interest in the Company through the purchase of stock at a discount, with an initial authorization of 1,500,000 shares.

18

 

Effective August 19, 2019, we adopted the 2019 Inducement Equity Plan. 650,000 shares of our common stock have been reserved for issuance under the 2019 Inducement Equity Plan, subject to adjustment for stock dividends, stock splits, or other changes in our common stock or capital structure. The 2019 Inducement Equity Plan is intended to comply with Rule 5635(c)(4) of the Nasdaq Stock Market Listing Rules, which provide an exception to the Nasdaq Stock Market Listing Rules’ on the shareholder approval requirement for the issuance of securities with regards to grants to employees of the Company or its subsidiaries as an inducement material to such individuals entering into employment with the Company or its subsidiaries. An individual is eligible to receive an award under the 2019 Inducement Equity Plan only if he or she was not previously an employee or director of our Company (or is returning to work after a bona-fide period of non-employment), and an award under the 2019 Inducement Equity Plan is a material inducement for him or her to accept employment with our Company.

Stock Options

Stock option activity was as follows:

 

 

 

Stock

 

 

Weighted

 

 

Aggregate

 

 

 

Option

 

 

Average

 

 

Intrinsic

 

 

 

Awards

 

 

Exercise

 

 

Value

 

 

 

Outstanding

 

 

Price

 

 

(in millions)

 

Balance as of June 30, 2019

 

 

1,191,929

 

 

$

59.07

 

 

 

 

 

Granted

 

 

—

 

 

 

—

 

 

 

 

 

Exercised

 

 

(445,019

)

 

 

43.48

 

 

 

 

 

Forfeited

 

 

(6,828

)

 

 

51.12

 

 

 

 

 

Expired

 

 

(297,612

)

 

 

73.95

 

 

 

 

 

Balance as of March 31, 2020

 

 

442,470

 

 

 

64.86

 

 

$

1.9

 

Exercisable at March 31, 2020

 

 

439,141

 

 

 

64.98

 

 

$

1.9

 

 

The aggregate intrinsic value was determined using the closing price of our common stock on March 27, 2020 of $58.86 and excludes the impact of stock options that were not in-the-money.

Deferred Stock Units

DSU activity was as follows:

 

 

 

 

 

 

 

Aggregate

 

 

 

DSU

 

 

Intrinsic

 

 

 

Awards

 

 

Value

 

 

 

Outstanding

 

 

(in millions)

 

Balance as of June 30, 2019

 

 

1,878,853

 

 

 

 

 

Granted

 

 

677,745

 

 

 

 

 

Delivered

 

 

(817,223

)

 

 

 

 

Forfeited

 

 

(317,465

)

 

 

 

 

Balance as of March 31, 2020

 

 

1,421,910

 

 

$

83.7

 

 

The aggregate intrinsic value was determined using the closing price of our common stock on March 27, 2020 of $58.86.

Of the shares delivered, 193,936 shares valued at $8.0 million were withheld to meet statutory tax withholding requirements.

19

 

Market Stock Units

Our 2019 Incentive Plan and our Amended and Restated 2010 Incentive Compensation Plan provide for the grant of MSU awards to our employees, consultants, and directors, and our 2019 Inducement Equity Plan provides for the grant of MSU awards to certain of our employees. An MSU is a promise to deliver shares of our common stock at a future date based on the achievement of market-based performance requirements in accordance with the terms of the MSU grant agreement.

We have granted MSUs to our executive officers and other management members under our Amended and Restated 2010 Incentive Compensation Plan, our 2019 Incentive Plan and our 2019 Inducement Equity Plan, which are designed to vest in three or four tranches with the target quantity for each tranche equal to one-third or one-fourth of the total MSU grant. The first tranche vests based on a one-year performance period; the second tranche vests based on a two-year performance period; the third tranche vests based on a three-year performance period; and the fourth tranche (in the case of four-year vesting) vests based on a four-year performance period. Performance is measured based on the achievement of a specified level of total stockholder return, or TSR, relative to the TSR of the S&P Semiconductor Select Industry Index, or SPSISC Index, for grants made beginning in fiscal 2018, and relative to the Philadelphia Semiconductor Index, or SOX Index, for grants made prior to fiscal 2018. The potential payout ranges from 0% to 200% of the target grant quantity and is adjusted on a two-to-one ratio based on our TSR performance relative to the SPSISC Index TSR or SOX Index TSR using the following formula:

(100% + ([Synaptics TSR — {SPSISC Index TSR or SOX Index TSR}] x 2))

For MSUs vesting over three years, the payout for the first tranche and the second tranche will not exceed 100% and the payout for the third tranche will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the three-year performance period, less shares issued for the first tranche and the second tranche. For MSUs vesting over four years, the payout for the first tranche, the second tranche and the third tranche will not exceed 100% and the payout for the fourth tranche will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the four-year performance period, less shares issued for the first tranche, the second tranche and the third tranche.

Delivery of shares earned, if any, will take place on the dates provided in the applicable MSU grant agreement, assuming the grantee is still an employee, consultant, or director of our Company at the end of the applicable performance period. On the delivery date, we withhold shares to cover statutory tax withholding requirements and deliver a net quantity of shares to the employee, consultant, or director after such withholding. Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares underlying the MSU award.

MSU activity was as follows:

 

 

 

 

 

 

 

Aggregate

 

 

 

MSU

 

 

Intrinsic

 

 

 

Awards

 

 

Value

 

 

 

Outstanding

 

 

(in millions)

 

Balance as of June 30, 2019

 

 

210,732

 

 

 

 

 

Granted

 

 

328,599

 

 

 

 

 

Performance adjustment

 

 

(58,707

)

 

 

 

 

Delivered

 

 

(23,018

)

 

 

 

 

Forfeited

 

 

(75,980

)

 

 

 

 

Balance as of March 31, 2020

 

 

381,626

 

 

$

22.5

 

 

The aggregate intrinsic value was determined using the closing price of our common stock on March 27, 2020 of $58.86.  

We value MSUs using the Monte Carlo simulation model on the date of grant and amortize the compensation expense over the three- or four-year performance and service period on a straight-line basis. The unrecognized share-based compensation cost of our outstanding MSUs was approximately $16.5 million as of March 31, 2020, which will be recognized over a weighted average period of approximately 1.6 years.

Performance Stock Units

Our 2019 Incentive Plan and our Amended and Restated 2010 Incentive Compensation Plan provide for the grant of PSU awards to our employees, consultants, and directors. A PSU is a promise to deliver shares of our common stock at a future date based on the achievement of performance-based requirements in accordance with the terms of the PSU grant agreement.

20

 

We have granted PSUs to our executive officers and other management members under our Amended and Restated 2010 Incentive Compensation Plan, our 2019 Incentive Plan and our 2019 Inducement Equity Plan, which are designed to vest in three tranches with the target quantity for each tranche equal to one-third of the total PSU grant. The grants have a specific one-year performance period and vesting occurs over three service periods with the final service period ending approximately three years from the grant date. Performance is measured based on the achievement of a specified level of non-GAAP earnings per share. The potential payout ranges from 0% to 200% of the target grant quantity and is adjusted on a linear basis with a payout triggering if our non-GAAP earnings per share equals greater than 65% of the target with a maximum payout achieved at 135% of target.

Delivery of shares earned, if any, will take place on the dates provided in the applicable PSU grant agreement, assuming the grantee is still an employee, consultant, or director of our Company at the end of the applicable service period. On the delivery date, we withhold shares to cover statutory tax withholding requirements and deliver a net quantity of shares to the employee, consultant, or director after such withholding. Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares underlying the PSU award.

PSU activity was as follows:

 

 

 

 

 

 

 

Aggregate

 

 

 

PSU

 

 

Intrinsic

 

 

 

Awards

 

 

Value

 

 

 

Outstanding

 

 

(in millions)

 

Balance as of June 30, 2019

 

 

192,618

 

 

 

 

 

Awarded

 

 

328,023

 

 

 

 

 

Performance adjustment

 

 

(10,242

)

 

 

 

 

Released

 

 

(61,668

)

 

 

 

 

Forfeited

 

 

(93,495

)

 

 

 

 

Balance as of March 31, 2020

 

 

355,236

 

 

$

20.9

 

 

The aggregate intrinsic value was determined using the closing price of our common stock on March 27, 2020 of $58.86.

We value PSUs using the aggregate intrinsic value on the date of grant adjusted for estimated performance achievement during the performance period and amortize the compensation expense over the three-year service period on a ratable basis. The unrecognized share-based compensation cost of our outstanding PSUs was approximately $18.5 million as of March 31, 2020, which will be recognized over a weighted average period of approximately 1.4 years.

Phantom Stock Units

The 2019 Incentive Plan authorizes the grant of phantom stock units to non-employee directors, officers and employees. We initially granted phantom stock units in October 2019.  Phantom stock units are cash-settled and entitle the recipient to receive a cash payment equal to the value of a single share for each unit based on the average closing share price of our stock over the thirty calendar days prior to the vesting date. Grants of phantom stock units vest over three years, with an annual vesting date of October 31 each year subsequent to the grant date. We recognize compensation expense for phantom stock units on a straight-line basis for each tranche of each award based on the average closing price of our common stock over the thirty calendar days ended prior to each balance sheet date.  The outstanding phantom stock units had a fair value of $60.17 per unit at March 31, 2020 and our accrued liability for such units was $7.0 million.

Phantom stock activity was as follows:

 

 

 

 

 

 

 

Aggregate

 

 

 

Phantom

 

 

Intrinsic

 

 

 

Stock Units

 

 

Value

 

 

 

Outstanding

 

 

(in millions)

 

Granted

 

 

953,305

 

 

 

 

 

Forfeited

 

 

(95,859

)

 

 

 

 

Balance as of March 31, 2020

 

 

857,446

 

 

$

50.5

 

21

 

 

The aggregate intrinsic value was determined using the closing price of our common stock on March 27, 2020 of $58.86.

The unrecognized share-based compensation cost of our outstanding phantom stock units was approximately $44.6 million as of March 31, 2020, which will be recognized over a weighted average period of approximately 2.6 years.

Employee Stock Purchase Plan

Shares purchased, weighted average purchase price, cash received, and the aggregate intrinsic value for employee stock purchase plan purchases during the nine months ended March 31, 2020 were as follows (in millions, except for shares purchased and weighted average price):

 

Shares purchased

 

 

346,502

 

Weighted average purchase price

 

$

30.50

 

Cash received

 

$

10.6

 

Aggregate intrinsic value

 

$

10.1

 

 

13. Income Taxes

 

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security, or CARES, Act was enacted and signed into law. As of this filing, we do not believe the CARES Act will have a material impact on the income tax provision for the fiscal year ended June 30, 2020.

We account for income taxes under the asset and liability method. The provision for income taxes recorded in interim periods is recorded by applying the estimated annual effective tax rate to year-to-date income before provision for income taxes, excluding the effects of significant unusual or infrequently occurring discrete items. The tax effects of discrete items are recorded in the same period that the related discrete items are reported and results in a difference between the actual effective tax rate and the estimated annual effective tax rate.

The provision for income taxes of $10.2 million and a benefit of $15.3 million for the three months ended March 31, 2020 and 2019, respectively, represented estimated federal, foreign, and state income taxes. The effective tax rate for the three months ended March 31, 2020 diverged from the combined U.S. federal and state statutory tax rate primarily because of foreign withholding taxes, income taxed at higher tax rates, the impact of accounting for qualified stock options and global intangible low-taxed income, or GILTI, partially offset by the benefit of research credits and foreign tax credits. The effective tax rate for the three months ended March 31, 2019, diverged from the combined U.S. federal and state statutory tax rate, primarily because of foreign withholding taxes, the impact of accounting for qualified stock options, foreign deemed paid taxes, foreign income taxed at higher tax rates, and GILTI, partially offset by the benefit of research credits, foreign tax credits, and foreign-derived intangible income deduction.

The provision for income taxes of $17.3 million and the benefit for income taxes of $8.1 million for the nine months ended March 31, 2020 and 2019, respectively, represented estimated federal, foreign, and state income taxes. The effective tax rate for the nine months ended March 31, 2020 diverged from the combined U.S. federal and state statutory tax rate primarily because of foreign withholding taxes, income taxed at higher tax rates, the impact of accounting for qualified stock options and GILTI, partially offset by the benefit of research credits and foreign tax credits. The effective tax rate for the nine months ended March 31, 2019, diverged from the combined U.S. federal and state statutory tax rate, because of foreign withholding taxes, the impact of accounting for qualified stock options, foreign deemed-paid taxes, foreign income taxed at higher tax rates and GILTI, partially offset by the benefit of research credits, release of reserves related to uncertain tax positions, the impact of net shortfalls in share-based compensation deduction, foreign tax credits and foreign-derived intangible income deduction.

The total liability for gross unrecognized tax benefits related to uncertain tax positions increased $2.2 million during the nine months ended March 31, 2020, to $21.1 million from $18.9 million at June 30, 2019, and was included in other long-term liabilities on our condensed consolidated balance sheets. If recognized, the total gross unrecognized tax benefits would reduce the effective tax rate on income from continuing operations. Accrued interest and penalties related to unrecognized tax benefits as of March 31, 2020 were $2.0 million; this balance increased by $0.1 million compared to June 30, 2019. We classify interest and penalties as components of income tax expense. It is reasonably possible that the amount of the liability for unrecognized tax benefits may change within the next twelve months and an estimate of the range of possible changes includes an increase in our liability of up to $2.5 million.

In February 2020, Altera Corporation filed a petition for a writ of certiorari asking the Supreme Court to review the Ninth Circuit Court of Appeals’ decision that reversed the 2015 decision of the U.S. Tax Court in Altera Corp. v. Commissioner, which found that Treasury regulations addressing the treatment of stock-based compensation in a cost sharing agreement with a related party

22

 

were invalid. As of March 31, 2020, there has been no response from the Supreme Court. As our tax filing position is consistent with the Treasury regulations, no adjustment to our financial statements is required. However, due to uncertainties with respect to the ultimate resolution of this case, we will continue to monitor developments in this case.

Our major tax jurisdictions are the United States, Hong Kong SAR, and Japan. From fiscal 2013 onward, we remain subject to examination by one or more of these jurisdictions. In August 2018, we received the revenue agent’s report resolving the fiscal 2014 and fiscal 2015 examination by the Internal Revenue Service with no material impact on our condensed consolidated financial statements. Our case was reviewed by the Joint Committee on Taxation, which concluded in September 2019 with no further impact to our condensed consolidated financial statements.

 

14. Segment, Customers, and Geographic Information

We operate in one segment: the development, marketing, and sale of semiconductor products used in electronic devices and products. We generate our revenue from three broad product categories: the Mobile product market, the personal computing, or PC, product market, and the Internet of Things, or IoT, product market. We sell our products to original equipment manufacturers, or OEMs, and to contract manufacturers that provide manufacturing services to OEMs.

Net revenue within geographic areas based on our customers’ locations for the periods presented was as follows (in millions):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

China

 

$

122.1

 

 

$

190.0

 

 

$

437.1

 

 

$

669.5

 

Japan

 

 

128.1

 

 

 

58.4

 

 

 

340.8

 

 

 

204.9

 

Taiwan

 

 

42.3

 

 

 

47.6

 

 

 

164.0

 

 

 

185.0

 

Other

 

 

21.1

 

 

 

19.6

 

 

 

58.1

 

 

 

48.9

 

South Korea

 

 

13.1

 

 

 

13.8

 

 

 

51.0

 

 

 

45.6

 

United States

 

 

1.4

 

 

 

4.6

 

 

 

5.3

 

 

 

23.2

 

 

 

$

328.1

 

 

$

334.0

 

 

$

1,056.3

 

 

$

1,177.1

 

 

Net revenue from our customers for each group of similar products was as follows (in millions):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Mobile product applications

 

$

176.6

 

 

$

204.7

 

 

$

578.6

 

 

$

741.8

 

PC product applications

 

 

78.9

 

 

 

66.2

 

 

 

228.3

 

 

 

198.7

 

IoT product applications

 

 

72.6

 

 

 

63.1

 

 

 

249.4

 

 

 

236.6

 

 

 

$

328.1

 

 

$

334.0

 

 

$

1,056.3

 

 

$

1,177.1

 

Net revenue from major customers as a percentage of total net revenue for the periods presented was as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Customer A

 

21%

 

 

*

 

 

17%

 

 

*

 

Customer B

 

13%

 

 

10%

 

 

12%

 

 

*

 

Customer C

 

*

 

 

17%

 

 

*

 

 

18%

 

Customer D

 

*

 

 

16%

 

 

*

 

 

14%

 

 

*

Less than 10%

 

 

23

 

We extend credit based on evaluation of a customer’s financial condition, and we generally do not require collateral. Major customer accounts receivable as a percentage of total accounts receivable were as follows:

 

 

 

March 31,

 

 

June 30,

 

 

 

2020

 

 

2019

 

Customer A

 

18%

 

 

*

 

Customer B

 

17%

 

 

*

 

Customer C

 

12%

 

 

25%

 

Customer D

 

*

 

 

16%

 

 

*

Less than 10%

 

 

15. Comprehensive Income

Our comprehensive income generally consists of net income plus the effect of unrealized gains and losses on our investments, primarily due to temporary changes in market value of certain of our auction rate securities, or ARS, investments. In addition, we recognize the noncredit portion of other-than-temporary impairment on debt securities in other comprehensive income. We recognize foreign currency remeasurement adjustments and foreign currency transaction gains and losses in our condensed consolidated statements of income as the U.S. dollar is the functional currency of our foreign entities.

 

 

16. Restructuring Activities

In November 2019, we committed to and initiated activities to restructure and further improve efficiencies in our operational activities to align our cost structure consistent with our revenue levels. Restructuring costs related to the November 2019 restructuring activities were recorded to the restructuring costs line item within our condensed consolidated statements of income. These costs related to severance costs for a reduction in headcount. The activities relating to the November 2019 restructuring action are expected to be complete by the end of fiscal 2020. The restructuring liability activities relating to the November 2019 initiated activity during fiscal 2020 were as follows (in millions):

 

 

 

Employee Severance

 

 

 

and Benefits

 

Accruals

 

$

16.2

 

Cash payments

 

 

(10.0

)

Balance as of March 31, 2020

 

$

6.2

 

 

In August 2018, we committed to and initiated a restructuring of our mobile fingerprint optical business. The costs for this restructuring activity primarily related to severance costs for a reduction in headcount and related costs. These activities were complete as of June 30, 2019. In June 2019, we committed to and initiated a restructuring action intended to reduce our operating cost structure further. The costs for this restructuring action primarily related to severance costs for a reduction in headcount. Restructuring costs related to these fiscal 2019 restructuring activities were recorded to the restructuring costs line item within our condensed consolidated statements of income. The activities relating to the June 2019 restructuring action are complete as of March 31, 2020.

The restructuring liability activities for the fiscal 2019 initiated activity during fiscal 2019 and the nine months ended March 31, 2020 were as follows (in millions):

 

 

 

Employee Severance

 

 

 

and Benefits

 

Accruals

 

$

17.7

 

Cash payments

 

 

(12.5

)

Balance as of June 30, 2019

 

 

5.2

 

Accruals

 

 

7.7

 

Cash payments

 

 

(12.7

)

Balance as of March 31, 2020

 

$

0.2

 

 

In March 2020, we recorded severance costs related to employees who would be transitioning with the sale of our TDDI business in April 2020.  For further information, See Note 1 Basis of Presentation under the heading Divestiture included in the

24

 

condensed consolidated financial statements contained elsewhere in this Report.  The restructuring liability activity for this restructuring activity during the nine months ended March 31, 2020 were as follows (in millions):

 

 

 

Employee Severance

 

 

 

and Benefits

 

Accruals

 

$

2.3

 

Cash payments

 

 

—

 

Balance as of March 31, 2020

 

$

2.3

 

 

 

 

 

 

 

25

 

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

Forward-Looking Statements and Factors That May Affect Results

This Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 (this “Report”) contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For ease of presentation, this Report shows reporting periods ending on calendar quarter end dates as of and for all periods presented, unless otherwise indicated. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business, including our expectations regarding the potential impacts on our business of the COVID-19 pandemic, and can be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements may include words such as “expect,” “anticipate,” “intend,” “believe,” “estimate,” “plan,” “target,” “strategy,” “continue,” “may,” “will,” “should,” variations of such words, or other words and terms of similar meaning. All forward-looking statements reflect our best judgment and are based on several factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Such factors include, but are not limited to, the risks as identified in this Report, the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” sections of our Annual Report on Form 10-K for the fiscal year ended June 29, 2019, and other risks as identified from time to time in our SEC reports. Forward-looking statements are based on information available to us on the date hereof, and we do not have, and expressly disclaim, any obligation to publicly release any updates or any changes in our expectations, or any change in events, conditions, or circumstances on which any forward-looking statement is based. Our actual results and the timing of certain events could differ materially from the forward-looking statements. These forward-looking statements do not reflect the potential impact of any mergers, acquisitions, or other business combinations that had not been completed as of the date of this filing.

Statements made in this Report, unless the context otherwise requires, include the use of the terms “us,” “we,” “our,” the “Company” and “Synaptics” to refer to Synaptics Incorporated and its consolidated subsidiaries.

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, which continues to spread rapidly in the U.S. and globally. Governmental authorities have implemented numerous containment measures, including travel bans and restrictions, quarantines, shelter-in-place orders, and business restrictions and shutdowns, resulting in rapidly changing market and economic conditions.  

While the severity and duration of business disruption to our customers and suppliers due to the COVID-19 pandemic is currently uncertain, we expect that it will adversely impact our business and consolidated results of operations in the near term and may impact our financial condition (including liquidity) in the future. While we have not incurred significant disruptions thus far from the COVID-19 outbreak, we are unable to accurately predict the full impact COVID-19 will have on our future results due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, a potential future recurrence of the outbreak, further containment actions that may be taken by governmental authorities, the impact to the businesses of our customers and suppliers and other factors.

We will continue to evaluate the nature and scope of the impact to our business, consolidated results of operations, and financial condition, and may take further actions altering our business operations and managing our costs and liquidity that we deem necessary or appropriate to respond to this fast moving and uncertain global health crisis and the resulting global economic consequences.

Overview

We are a leading worldwide developer and supplier of custom-designed human interface semiconductor product solutions that enable people to interact more easily and intuitively with a wide variety of mobile computing, communications, entertainment, and other electronic devices. We currently generate revenue from the markets for smartphones, tablets, personal computer, or PC, products, primarily notebook computers, Internet of Things, or IoT, products which include smart devices with voice, speech and video solutions, and other select electronic devices, including devices in automobiles, with our custom human interface solutions. The solutions we deliver either contain or consist of our touch-, display driver-, fingerprint authentication-based-, voice and speech-, or video-semiconductor solutions, which include our chip, customer-specific firmware, and software.

Many of our customers have manufacturing operations in China, and many of our OEM customers have established design centers in Asia. With our expanding global presence, including offices in China, Hong Kong, India, Japan, Korea, Switzerland, Taiwan, and the United States, we are well positioned to provide local sales, operational, and engineering support services to our existing customers, as well as potential new customers, on a global basis.

26

 

Our manufacturing operations are based on a variable cost model in which we outsource all of our production requirements and generally drop ship our products directly to our customers from our contract manufacturers’ facilities, eliminating the need for significant capital expenditures and allowing us to minimize our investment in inventories. This approach requires us to work closely with our contract manufacturers and semiconductor fabricators to ensure adequate production capacity to meet our forecasted volume requirements. We provide our contract manufacturers with six-month rolling forecasts and issue purchase orders based on our anticipated requirements for the next 90 days. However, we generally do not have long-term supply contracts with our contract manufacturers. We use third-party wafer manufacturers to supply wafers and third-party packaging manufacturers to package our proprietary ASICs. In certain cases, we rely on a single source or a limited number of suppliers to provide other key components of our products. Our cost of revenue includes all costs associated with the production of our products, including materials; logistics; amortization of intangibles related to acquired developed technology; backlog; supplier arrangements; manufacturing, assembly, and test costs paid to third-party manufacturers; and related overhead costs associated with our indirect manufacturing operations personnel. Additionally, we charge all warranty costs, losses on inventory purchase obligations, and write-downs to reduce the carrying value of obsolete, slow moving, and non-usable inventory to net realizable value, to cost of revenue.

Our gross margin generally reflects the combination of the added value we bring to our OEM customers’ products by meeting their custom design requirements and the impact of our ongoing cost-improvement programs. These cost-improvement programs include reducing materials and component costs and implementing design and process improvements. Our newly introduced products may have lower margins than our more mature products, which have realized greater benefits associated with our ongoing cost-improvement programs. As a result, new product introductions may initially negatively impact our gross margin.

Our research and development expenses include costs for supplies and materials related to product development, as well as the engineering costs incurred to design ASICs and human interface solutions for OEM customers prior to and after our OEMs’ commitment to incorporate those solutions into their products. In addition, we expense in-process research and development projects acquired as asset acquisitions, which have not yet reached technological feasibility, and which have no foreseeable alternative future use. We continue to commit to the technological and design innovation required to maintain our position in our existing markets, and to adapt our existing technologies or develop new technologies for new markets.

Selling, general, and administrative expenses include expenses related to sales, marketing, and administrative personnel; internal sales and outside sales representatives’ commissions; market and usability research; outside legal, accounting, and consulting costs; and other marketing and sales activities.

Acquired intangibles amortization, included in operating expenses, consists primarily of amortization of customer relationship and tradenames intangible assets recognized under the purchase method for business combinations.

Restructuring costs primarily reflect severance and facilities consolidation costs related to the restructuring of our operations to reduce operating expenses. These headcount and facilities related costs were in cost of revenue, research and development, and selling, general and administrative expenses.

Interest and other expense, net, primarily reflects interest expense on our convertible notes as well as the amortization of debt issuance costs and discount on our convertible notes, partially offset by interest income earned on our cash and cash equivalents as well as impairment recovery on investments.

Equity investment loss includes amortization of intangible assets as well as our portion of the net loss reflected under the equity method of accounting in connection with our investment in OXi Technology Ltd.

27

 

Divestiture

In December 2019, we entered into an asset purchase agreement with a third party to sell the assets of our LCD Touch Controller and Display Driver Integration, or TDDI, product line for LCD mobile displays. We will retain our automotive TDDI product line and our discrete touch and discrete display driver product lines supporting LCD and OLED for the mobile market. Subject to certain post-closing adjustments and indemnification obligations, the aggregate consideration payable by the buyer will be $120.0 million in cash, the dollar value of specified inventory at a purchase price of standard cost plus 5% in cash, and the assumption of certain liabilities, as set forth in the asset purchase agreement. The assets sold under the asset purchase agreement, have a preliminary carrying value of approximately $30.1 million as of March 31, 2020, and have been included as $12.5 million of current assets held for sale and $17.6 million of non-current assets held for sale in our condensed consolidated balance sheets. The transaction closed in accordance with the terms of the asset purchase agreement in April 2020 for cash consideration of $120.0 million plus a preliminary inventory amount of $19.4 million.

Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2020, compared with our critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended June 29, 2019.

Results of Operations

Certain of the data used in our condensed consolidated statements of income for the periods indicated, together with comparative absolute and percentage changes in these amounts, were as follows (in millions, except percentages):

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

 

 

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

 

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

Mobile product applications

 

$

176.6

 

 

$

204.7

 

 

$

(28.1

)

 

 

(13.7

%)

 

$

578.6

 

 

$

741.8

 

 

$

(163.2

)

 

 

(22.0

%)

PC product applications

 

 

78.9

 

 

 

66.2

 

 

 

12.7

 

 

 

19.2

%

 

 

228.3

 

 

 

198.7

 

 

 

29.6

 

 

 

14.9

%

IoT product applications

 

 

72.6

 

 

 

63.1

 

 

 

9.5

 

 

 

15.1

%

 

 

249.4

 

 

 

236.6

 

 

 

12.8

 

 

 

5.4

%

Net revenue

 

 

328.1

 

 

 

334.0

 

 

 

(5.9

)

 

 

(1.8

%)

 

 

1,056.3

 

 

 

1,177.1

 

 

 

(120.8

)

 

 

(10.3

%)

Gross margin

 

 

135.6

 

 

 

116.0

 

 

 

19.6

 

 

 

16.9

%

 

 

421.1

 

 

 

406.7

 

 

 

14.4

 

 

 

3.5

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

75.8

 

 

 

82.6

 

 

 

(6.8

)

 

 

(8.2

%)

 

 

238.8

 

 

 

256.9

 

 

 

(18.1

)

 

 

(7.0

%)

Selling, general, and administrative

 

 

31.6

 

 

 

34.2

 

 

 

(2.6

)

 

 

(7.6

%)

 

 

90.6

 

 

 

103.6

 

 

 

(13.0

)

 

 

(12.5

%)

Acquired intangibles amortization

 

 

2.9

 

 

 

3.0

 

 

 

(0.1

)

 

 

(3.3

%)

 

 

8.8

 

 

 

8.8

 

 

 

-

 

 

 

0.0

%

Restructuring costs

 

 

6.3

 

 

 

-

 

 

 

6.3

 

 

 

100.0

%

 

 

26.2

 

 

 

10.4

 

 

 

15.8

 

 

 

151.9

%

Operating income

 

 

19.0

 

 

 

(3.8

)

 

 

22.8

 

 

 

600.0

%

 

 

56.7

 

 

 

27.0

 

 

 

29.7

 

 

 

110.0

%

Interest and other expense, net

 

 

(3.2

)

 

 

(4.3

)

 

 

1.1

 

 

 

25.6

%

 

 

(9.1

)

 

 

(10.5

)

 

 

1.4

 

 

 

13.3

%

Income/(loss) before provision/

   (benefit) for income taxes

 

 

15.8

 

 

 

(8.1

)

 

 

23.9

 

 

 

295.1

%

 

 

47.6

 

 

 

16.5

 

 

 

31.1

 

 

 

188.5

%

Provision/(benefit) for income taxes

 

 

10.2

 

 

 

(15.3

)

 

 

25.5

 

 

 

166.7

%

 

 

17.3

 

 

 

(8.1

)

 

 

25.4

 

 

 

313.6

%

Equity investment loss

 

 

(0.6

)

 

 

(0.5

)

 

 

(0.1

)

 

 

(20.0

%)

 

 

(1.5

)

 

 

(1.3

)

 

 

(0.2

)

 

 

(15.4

%)

Net income

 

$

5.0

 

 

$

6.7

 

 

$

(1.7

)

 

 

(25.4

%)

 

$

28.8

 

 

$

23.3

 

 

$

5.5

 

 

 

23.6

%

 

28

 

Certain of the data used in our condensed consolidated statements of income presented here as a percentage of net revenue for the periods indicated were as follows:

 

 

 

Three Months Ended

 

 

Percentage

Point

 

 

Nine Months Ended

 

 

Percentage Point

 

 

 

March 31,

 

 

Increase/

 

 

March 31,

 

 

Increase/

 

 

 

2020

 

 

2019

 

 

(Decrease)

 

 

2020

 

 

2019

 

 

(Decrease)

 

Mobile product applications

 

 

53.9

%

 

 

61.3

%

 

 

(7.4

%)

 

 

54.8

%

 

 

63.0

%

 

 

(8.2

%)

PC product applications

 

 

24.0

%

 

 

19.8

%

 

 

4.2

%

 

 

21.6

%

 

 

16.9

%

 

 

4.7

%

IoT product applications

 

 

22.1

%

 

 

18.9

%

 

 

3.2

%

 

 

23.6

%

 

 

20.1

%

 

 

3.5

%

Net revenue

 

 

100.0

%

 

 

100.0

%

 

 

0.0

%

 

 

100.0

%

 

 

100.0

%

 

 

0.0

%

Gross margin

 

 

41.3

%

 

 

34.7

%

 

 

6.6

%

 

 

39.9

%

 

 

34.6

%

 

 

5.3

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

23.1

%

 

 

24.7

%

 

 

(1.6

%)

 

 

22.6

%

 

 

21.8

%

 

 

0.8

%

Selling, general, and administrative

 

 

9.6

%

 

 

10.2

%

 

 

(0.6

%)

 

 

8.6

%

 

 

8.8

%

 

 

(0.2

%)

Acquired intangibles amortization

 

 

0.9

%

 

 

0.9

%

 

 

0.0

%

 

 

0.8

%

 

 

0.7

%

 

 

0.1

%

Restructuring costs

 

 

1.9

%

 

 

0.0

%

 

 

1.9

%

 

 

2.5

%

 

 

0.9

%

 

 

1.6

%

Operating income

 

 

5.8

%

 

 

(1.1

%)

 

 

6.9

%

 

 

5.4

%

 

 

2.3

%

 

 

3.1

%

Interest and other expense, net

 

 

(1.0

%)

 

 

(1.3

%)

 

 

0.3

%

 

 

(0.9

%)

 

 

(0.9

%)

 

 

0.0

%

Income/(loss) before provision/

   (benefit) for income taxes

 

 

4.8

%

 

 

(2.4

%)

 

 

7.2

%

 

 

4.5

%

 

 

1.4

%

 

 

3.1

%

Provision/(benefit) for income taxes

 

 

3.1

%

 

 

(4.6

%)

 

 

7.7

%

 

 

1.6

%

 

 

(0.7

%)

 

 

2.3

%

Equity investment loss

 

 

(0.2

%)

 

 

(0.1

%)

 

 

(0.1

%)

 

 

(0.1

%)

 

 

(0.1

%)

 

 

0.0

%

Net income

 

 

1.5

%

 

 

2.0

%

 

 

(0.5

%)

 

 

2.7

%

 

 

2.0

%

 

 

0.7

%

 

Net Revenue

Net revenue was $328.1 million for the three months ended March 31, 2020, compared with $334.0 million for the three months ended March 31, 2019, a decrease of $5.9 million, or 1.8%. Of this net revenue, $176.6 million, or 53.9%, was from Mobile product applications, $72.6 million, or 22.1%, was from IoT product applications, and $78.9 million, or 24.0%, was from PC product applications. The decrease in net revenue for the three months ended March 31, 2020 was primarily attributable to a decrease in net revenue from Mobile product applications, partially offset by an increase in net revenue from PC product applications and IoT product applications. Net revenue from Mobile product applications decreased as a result of a decline in units sold (which decreased 12.9%) as well as slightly lower average selling prices for Mobile product applications. Net revenue from PC product applications increased due to a growth in units sold (which increased 13.0%) for PC product applications as well as higher average selling prices (which increased 5.5%). Net revenue from IoT product applications increased as a result of an increase in units sold (which increased 29.7%), partially offset by lower average selling prices for IoT product applications (which decreased 11.3%).

Net revenue was $1,056.3 million for the nine months ended March 31, 2020, compared with $1,177.1 million for the nine months ended March 31, 2019, a decrease of $120.8 million, or 10.3%. Of this net revenue, $578.6 million, or 54.8%, was from Mobile product applications, $249.4 million, or 23.6%, was from IoT product applications, and $228.3 million, or 21.6%, was from PC product applications. The decrease in net revenue for the nine months ended March 31, 2020 was primarily attributable to a decrease in net revenue from Mobile product applications, partially offset by an increase in net revenue from PC product applications and IoT product applications. Net revenue from Mobile product applications decreased as a result of a decline in units sold (which decreased 21.7%) as well as slightly lower average selling prices for Mobile product applications. Net revenue from PC product applications increased due to higher average selling prices (which increased 10.6%) as well as a small increase in units sold. Net revenue from IoT product applications increased as a result of an increase in units sold (which increased 12.9%), partially offset by lower average selling prices for IoT product applications.

Gross Margin

Gross margin as a percentage of net revenue was 41.3%, or $135.6 million, for the three months ended March 31, 2020, compared with 34.7%, or $116.0 million, for the three months ended March 31, 2019. The 660 basis point increase in gross margin for the three months ended March 31, 2020, was primarily due to a favorable product mix, and product cost reductions, and a $7.1 million decrease in amortization for amortizable intangibles which are now fully amortized.

Gross margin as a percentage of net revenue was 39.9%, or $421.1 million, for the nine months ended March 31, 2020, compared with 34.6%, or $406.7 million, for the nine months ended March 31, 2019. The 530 basis point increase in gross margin for

29

 

the nine months ended March 31, 2020, was primarily due to a favorable product mix, and product cost reductions, and a $15.7 million decrease in amortization for amortizable intangibles which are now fully amortized.

We continually introduce new product solutions and we sell our technology solutions in designs that are generally unique or specific to an OEM customer’s application, causing gross margin to vary on a product-by-product basis, making our cumulative gross margin a blend of our product-specific designs. As a fabless semiconductor company, our gross margin percentage is generally not materially impacted by our shipment volume. We charge losses on inventory purchase obligations and write-downs to reduce the carrying value of obsolete, slow moving, and non-usable inventory to net realizable value (including warranty costs) to cost of revenue.

Operating Expenses

Research and Development Expenses. Research and development expenses decreased $6.8 million to $75.8 million for the three months ended March 31, 2020, compared with the three months ended March 31, 2019. The decrease in research and development expenses primarily reflected a net $1.1 million decrease in personnel-related costs, which was due to a decrease in average headcount for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, as a result of restructuring activities to reduce operating costs; a $2.9 million decrease in non-employee services; and a $1.2 million decrease in project related costs. The decrease in personnel-related costs was partially offset by $2.1 million of retention program costs with key engineering and management employees designed to ensure operational continuity and support as we transition the Company through senior level management and product focus changes.

Research and development expenses decreased $18.1 million to $238.8 million for the nine months ended March 31, 2020, compared with the nine months ended March 31, 2019. The decrease in research and development expenses primarily reflected a net $5.0 million decrease in personnel-related costs which was due to a decrease in average headcount for the nine months ended March 31, 2020 as compared to the nine months ended March 31, 2019, as a result of restructuring activities to reduce operating costs; a $5.9 million decrease in non-employee services; a $4.6 million decrease in infrastructure costs related to facilities; a $3.3 million decrease in project related costs. The decrease in personnel-related costs was partially offset by $6.6 million of retention program costs with key engineering and management employees designed to ensure operational continuity and support as we transition the Company through senior level management and product focus changes.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased $2.6 million to $31.6 million for the three months ended March 31, 2020, compared with the three months ended March 31, 2019. The decrease in selling, general, and administrative expenses primarily reflected a $1.8 million decrease in non-employee services.

Selling, general, and administrative expenses decreased $13.0 million to $90.6 million for the nine months ended March 31, 2020, compared with the nine months ended March 31, 2019. The decrease in selling, general, and administrative expenses primarily reflected a net $6.9 million decrease in personnel-related costs which was primarily due to a reduction in headcount as a result of restructuring activities to reduce operating costs; a $4.1 million decrease in non-employee services. The decrease in personnel-related costs was partially offset by $3.9 million of retention program costs with key management employees designed to ensure operational continuity and support as we transition the Company through senior level management and product focus changes.

Acquired Intangibles Amortization. Acquired intangibles amortization reflects the amortization of intangibles acquired through acquisitions. For further discussion of acquired intangibles amortization, see Note 7 Acquired Intangibles and Goodwill included in the condensed consolidated financial statements contained elsewhere in this Report.

Restructuring Costs.  Restructuring costs of $26.2 million in the nine months ended March 31, 2020 reflect severance costs for restructuring of our operations to reduce ongoing operating costs, which commenced in the fourth quarter of fiscal 2019 and the second and third quarters of fiscal 2020. The restructuring activities are expected to be complete in the fourth quarter of fiscal 2020. See Note 16 Restructuring Activities included in the condensed consolidated financial statements contained elsewhere in this Report.  

Interest and Other Expense, Net. Interest and other expense, net primarily includes the amortization of debt discount and issuance costs, as well as interest on our debt, partially offset by interest income earned on our cash and cash equivalents as well as impairment recovery on investments. Interest and other expense, net decreased $1.4 million to $9.1 million for the nine months ended March 31, 2020, as compared to $10.5 million for the nine months ended March 31, 2019. The decrease in interest and other expense, net is primarily due to an increase in interest income as a result of higher cash balances and interest rates, partially offset by higher non-cash interest expense on our convertible debt.

Provision for Income Taxes.  On March 27, 2020, the Coronavirus Aid, Relief and Economic Security, or CARES, Act was enacted and signed into law. We do not believe the CARES Act will have a material impact on the income tax provision for the fiscal year ended June 30, 2020.

30

 

We account for income taxes under the asset and liability method. The provision for income taxes recorded in interim periods is recorded by applying the estimated annual effective tax rate to year-to-date income before provision for income taxes, excluding the effects of significant unusual or infrequently occurring discrete items. The tax effects of discrete items are recorded in the same period that the related discrete items are reported and results in a difference between the actual effective tax rate and the estimated annual effective tax rate.

The provision for income taxes of $10.2 million and a benefit of $15.3 million for the three months ended March 31, 2020 and 2019, respectively, represented estimated federal, foreign, and state income taxes. The effective tax rate for the three months ended March 31, 2020 diverged from the combined U.S. federal and state statutory tax rate primarily because of foreign withholding taxes, income taxed at higher tax rates, the impact of accounting for qualified stock options and global intangible low-taxed income, or GILTI, partially offset by the benefit of research credits and foreign tax credits. The effective tax rate for the three months ended March 31, 2019, diverged from the combined U.S. federal and state statutory tax rate, primarily because of foreign withholding taxes, the impact of accounting for qualified stock options, foreign deemed paid taxes, foreign income taxed at higher tax rates, and GILTI, partially offset by the benefit of research credits, foreign tax credits, and foreign-derived intangible income deduction.

The provision for income taxes of $17.3 million and the benefit for income taxes of $8.1 million for the nine months ended March 31, 2020 and 2019, respectively, represented estimated federal, foreign, and state income taxes. The effective tax rate for the nine months ended March 31, 2020 diverged from the combined U.S. federal and state statutory tax rate primarily because of foreign withholding taxes, income taxed at higher tax rates, the impact of accounting for qualified stock options and GILTI, partially offset by the benefit of research credits and foreign tax credits. The effective tax rate for the nine months ended March 31, 2019, diverged from the combined U.S. federal and state statutory tax rate, because of foreign withholding taxes, the impact of accounting for qualified stock options, foreign deemed-paid taxes, foreign income taxed at higher tax rates and GILTI, partially offset by the benefit of research credits, release of reserves related to uncertain tax positions, the impact of net shortfalls in share-based compensation deduction, foreign tax credits and foreign-derived intangible income deduction.

Liquidity and Capital Resources

Our cash and cash equivalents were $472.1 million as of March 31, 2020, compared with $327.8 million as of June 30, 2019, an increase of $144.3 million. The increase primarily reflected $168.3 million of net cash provided by operating activities, $30.0 million of net proceeds from issuance of shares, partially offset by $30.1 million used to repurchase 813,082 shares of our common stock, $11.7 million used for the purchase of property and equipment, $9.3 million used for payroll taxes on DSUs, and $2.5 million used for an asset acquisition completed in August 2019. At this time, we consider earnings of our foreign subsidiaries indefinitely invested overseas and have made no provision for income or withholding taxes, other than the one-time transition tax incurred as part of the Tax Cuts and Jobs Act, that may result from a future repatriation of those earnings. As of March 31, 2020, $191.6 million of cash and cash equivalents was held by our foreign subsidiaries. If these funds are needed for our operations in the United States, we would be required to accrue and pay U.S. and foreign taxes to repatriate these funds.

Cash Flows from Operating Activities. Operating activities during the nine months ended March 31, 2020 generated $168.3 million compared with $110.8 million net cash generated during the nine months ended March 31, 2019. For the nine months ended March 31, 2020, the primary operating activities were adjustments for non-cash charges of $119.0 million and a net change in operating assets and liabilities of $20.5 million. The net change in operating assets and liabilities was primarily attributable to a $50.7 million decrease in inventory and a $17.4 million increase in accrued compensation, partially offset by a $27.4 million decrease in other accrued liabilities, a $8.4 million increase in accounts receivable, net, a decrease of $8.6 million in accounts payable and a decrease of $5.3 million in income taxes payable. From June 30, 2019 to March 31, 2020, our days sales outstanding decreased from 70 days to 65 days due to a larger percentage of the quarter’s net revenue occurring late in the June 30, 2019 quarter compared with a smaller percentage of the quarter’s net revenue occurring late in the March 31, 2020 quarter. Our annual inventory turns increased from five to eight, which was driven by the classification of $12.5 million of inventory as current assets held for sale (which had an impact of 1 turn) as well as stronger product demand throughout the quarter.

Cash Flows from Investing Activities. Cash used in investing activities during the nine months ended March 31, 2020 consisted of $11.7 million for purchases of property and equipment and $2.5 million used for an asset acquisition completed in August 2019.  

Cash Flows from Financing Activities. Net cash used in financing activities for the nine months ended March 31, 2020 was $9.6 million compared with $73.1 million used in financing activities for the nine months ended March 31, 2019. Net cash used in financing activities for the nine months ended March 31, 2020 was related to $30.1 million used to repurchase 813,082 shares of our common stock and $9.3 million used for payroll taxes on DSUs, partially offset by $30.0 of proceeds from issuance of shares.  

Common Stock Repurchase Program. As of March 31, 2020, our board has cumulatively authorized $1.4 billion for our common stock repurchase program, which will expire in July 2021. The program authorizes us to purchase our common stock in the open market or in privately negotiated transactions, depending upon market conditions and other factors. The number of shares

31

 

purchased and the timing of purchases are based on the level of our cash balances, general business and market conditions, and other factors. Common stock purchased under this program is held as treasury stock. From April 2005 through March 31, 2020, we purchased 31,747,295 shares of our common stock in the open market for an aggregate cost of $1.2 billion. During the nine months ended March 31, 2020, we repurchased 813,082 shares of our common stock for a total cost of $30.1 million. As of March 31, 2020, the remaining available authorization under our common stock repurchase program was $177.5 million.

Convertible Debt

On June 20, 2017, we entered into a purchase agreement, or the Purchase Agreement, with Wells Fargo Securities, LLC, as representative of the initial purchasers named therein, collectively, the Initial Purchasers, pursuant to which we agreed to issue and sell, and the Initial Purchasers agreed to purchase, $500 million aggregate principal amount of our 0.50% convertible senior notes due 2022, or the Notes, in a private placement transaction. Pursuant to the Purchase Agreement, we also granted the Initial Purchasers a 30-day option to purchase up to an additional $25 million aggregate principal amount of Notes, which was exercised in full on June 21, 2017. The net proceeds, after deducting the Initial Purchasers’ discounts, were $514.5 million, which included proceeds from the Initial Purchasers’ exercise of their option to purchase additional Notes. We received the net proceeds on June 26, 2017, which we used to repurchase shares of our common stock, retire our outstanding bank debt, and provide additional cash resources to fund the acquisition of Conexant Systems, LLC and the assets of Marvell Technology Group, Ltd.’s multimedia solutions business.

The Notes bear interest at a rate of 0.50% per year. Interest has accrued since June 26, 2017 and is payable semi-annually in arrears, on June 15 and December 15 of each year, beginning on December 15, 2017. The Notes are senior unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any our liabilities that are not so subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

The Notes mature on June 15, 2022, or the Maturity Date, unless earlier repurchased, redeemed or converted.

Holders may convert all or any portion of their Notes, in multiples of $1,000 principal amounts, at their option at any time prior to the close of business on the business day immediately preceding March 15, 2022 under certain defined circumstances.

On or after March 15, 2022 until the close of business on the business day immediately preceding the Maturity Date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amounts, at the option of the holder. Upon conversion, we will pay or deliver, at our election, shares of common stock, cash, or a combination of cash and shares of common stock.

The conversion rate for the Notes is initially 13.6947 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $73.02 per share of common stock). The conversion rate is subject to adjustment in certain circumstances.

Upon the occurrence of a fundamental change (as defined in the Notes indenture), holders of the Notes may require us to repurchase for cash all or a portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.

We may not redeem the Notes prior to June 20, 2020. We may redeem for cash all or any portion of the Notes, at our option, on or after June 20, 2020, if the last reported sale price of our common stock, as determined by us, has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date. Our policy is to settle the principal amount of our Notes with cash upon conversion or redemption.

Bank Credit Facility. We have a $200.0 million revolving credit facility, pursuant to that certain Amended and Restated Credit Agreement, dated September 27, 2017, or the Credit Agreement, which includes a $20 million sublimit for letters of credit and a $20 million sublimit for swingline loans. Under the terms of the Credit Agreement, we may, subject to the satisfaction of certain conditions, request increases in the revolving credit facility commitments in an aggregate principal amount of up to $100 million to the extent existing or new lenders agree to provide such increased or additional commitments, as applicable. Proceeds under the revolving credit facility are available for working capital and general corporate purposes.

In February 2020, we entered into the First Amendment to the Amended and Restated Credit Agreement, or the Amendment, with the lenders that are party thereto, or the Lenders, and Wells Fargo Bank, National Association, as administrative agent for the Lenders. Pursuant to the Amendment, the Credit Agreement was amended to, among other things, (i) modify the definition of Consolidated EBITDA (as defined in the Credit Agreement) to increase the maximum limit on the add back of certain restructuring

32

 

and integration cost and expenses to 30% from 15% of Consolidated EBITDA, (ii) modify the negative covenant for Consolidated Total Leverage Ratio (as defined in the Credit Agreement) at the end of any fiscal quarter to 4.75:1.00 from 3.50:1.00, and for any four quarter period following a Material Acquisition (as defined in the Credit Agreement) to 5:00:1.00 from 3.75:1.00, (iii) modify the circumstances under which the maturity date of the Credit Agreement would be accelerated in advance of the maturity date of the Notes to eliminate the acceleration of the maturity date of the Credit Agreement if we meet certain specified leverage and liquidity covenants, (iv) add a minimum liquidity covenant for each two-week period beginning on the date that is 120 days prior to the maturity date of the Company’s existing convertible senior notes, (v) add certain technical amendments to address LIBOR transition matters, and (vi) include or revise certain definitions and certain customary representation, warranties and acknowledgments.

As of March 31, 2020, there was no balance outstanding under the revolving credit facility. In April 2020, we borrowed $100.0 million under the revolving credit facility.

The revolving credit facility is required to be repaid in full on the earlier of (i) September 27, 2022, and (ii) the date 91 days prior to the Maturity Date of the Notes if the Notes have not been refinanced in full by such date, subject to certain exceptions based on specific covenant calculations. Debt issuance costs of $2.3 million relating to the revolving credit facility will be amortized over 60 months

Our obligations under the Credit Agreement are guaranteed by the material domestic subsidiaries of our Company, subject to certain exceptions (such material subsidiaries, together with our Company, collectively, the Credit Parties). The obligations of the Credit Parties under the Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority security interest in substantially all of the existing and future personal property of the Credit Parties, including, without limitation, 65% of the voting capital stock of certain of the Credit Parties’ direct foreign subsidiaries, subject to certain exceptions.

The revolving credit facility bears interest at our election of a Base Rate plus an Applicable Margin or LIBOR plus an Applicable Margin. Swingline loans bear interest at a Base Rate plus an Applicable Margin. The Base Rate is a floating rate that is the greater of the Prime Rate, the Federal Funds Rate plus 50 basis points, or LIBOR plus 100 basis points. The Applicable Margin is based on a sliding scale which ranges from 0.25 to 100 basis points for Base Rate loans and 100 basis points to 175 basis points for LIBOR loans. We are required to pay a commitment fee on any unused commitments under the Credit Agreement which is determined on a leverage-based sliding scale ranging from 0.175% to 0.25% per annum. Interest and fees are payable on a quarterly basis. The LIBOR index is expected to be discontinued at the end of 2021. Under our credit facility, when the LIBOR index is discontinued, we will switch to a comparable or successor rate as selected by the Administrative Agent and the Company, which may include the Secured Overnight Financing Rate, or SOFR.

Under the Credit Agreement, there are various restrictive covenants, including three financial covenants which limit the consolidated total leverage ratio, or leverage ratio, the consolidated interest coverage ratio, or interest coverage ratio, a restriction which places a limit on the amount of capital expenditures that may be made in any fiscal year, a restriction that permits up to $50 million per fiscal quarter of accounts receivable financings, and sets the Specified Leverage Ratio. The leverage ratio is the ratio of debt as of the measurement date to earnings before interest, taxes, depreciation and amortization, or EBITDA, for the four consecutive quarters ending with the quarter of measurement. The current leverage ratio shall not exceed 4.75 to 1.00 provided that for the four fiscal quarters ending after the date of a material acquisition, such maximum leverage ratio shall be adjusted to 5.0 to 1.00, and thereafter 4.75 to 1.0. The interest coverage ratio is EBITDA to interest expense for the four consecutive quarters ending with the quarter of measurement. The interest coverage ratio must not be less than 3.50 to 1.0 during the term of the Credit Agreement. The Specified Leverage Ratio is the ratio used in determining, among other things, whether we are permitted to make dividends and/or prepay certain indebtedness, at a fixed ratio of 2.25 to 1.00.

$100 Million Shelf Registration. We have registered an aggregate of $100.0 million of common stock and preferred stock for issuance in connection with acquisitions, which shares will generally be freely tradeable after their issuance under the Securities Act unless held by an affiliate of the Company, in which case such shares will be subject to the volume and manner of sale restrictions of Rule 144 of the Securities Act.

Liquidity and Capital Resources. Although consequences of the COVID-19 pandemic and resulting economic uncertainty could adversely affect our liquidity and capital resources in the future, we believe our existing cash and cash equivalents, anticipated cash flows from operating activities, and available credit under our revolving credit facility will be sufficient to meet our working capital and other cash requirements, including our debt service obligations, for at least the next 12 months. On April 2, 2020, the Company borrowed $100 million under the Credit Agreement in order to increase its cash position and preserve financial flexibility out of an abundance of caution as a result of the ongoing uncertainty and volatility in the global markets driven by the COVID-19 pandemic. Our future capital requirements will depend on many factors, including our revenue, the length, duration and severity of the COVID-19 pandemic, the timing and extent of spending to support product development efforts, costs associated with restructuring activities net of projected savings from those activities, costs related to protecting our intellectual property, the expansion of sales and marketing

33

 

activities, timing of introduction of new products and enhancements to existing products, costs to ensure access to adequate manufacturing, costs of maintaining sufficient space for our workforce, the continuing market acceptance of our product solutions, our common stock repurchase program, and the amount and timing of our investments in, or acquisitions of, other technologies or companies. Further equity or debt financing may not be available to us on acceptable terms or at all. If sufficient funds are not available or are not available on acceptable terms, our ability to fund our future long-term working capital needs, take advantage of business opportunities or to respond to competitive pressures could be limited or severely constrained.

Based on our ability to access our cash and cash equivalents, our expected operating cash flows, and our other sources of cash, we do not currently anticipate the need to remit undistributed earnings of our foreign subsidiaries to meet our working capital and other cash requirements, but if we did remit such earnings, we may be required to accrue and pay certain state and foreign taxes to repatriate these funds, which would adversely impact our financial position and results of operations.

Contractual Obligations and Commercial Commitments

Our material contractual obligations and commercial commitments as of March 31, 2020 were as follows (in millions):

 

 

 

Remaining

in Fiscal

Year 2020

 

 

Fiscal

Year 2021

 

 

Fiscal

Year 2022

 

 

Fiscal

Year 2023

 

 

Fiscal

Year 2024

 

 

Thereafter

 

 

Total

 

Long-term debt (1)

 

$

1.3

 

 

$

2.6

 

 

$

527.6

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

531.5

 

Leases

 

 

2.3

 

 

 

7.9

 

 

 

7.2

 

 

 

4.0

 

 

 

2.5

 

 

 

1.9

 

 

 

25.8

 

Purchase obligations and

   other commitments (2)

 

 

36.1

 

 

 

13.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

49.1

 

Transition tax payable (3)

 

 

-

 

 

 

-

 

 

 

0.9

 

 

 

1.8

 

 

 

2.4

 

 

 

3.0

 

 

 

8.1

 

Total

 

$

39.7

 

 

$

23.5

 

 

$

535.7

 

 

$

5.8

 

 

$

4.9

 

 

$

4.9

 

 

$

614.5

 

 

(1)

Represents the principal and interest payable through the maturity date of the underlying contractual obligation.

(2)

Purchase obligations and other commitments include payments due for inventory purchase obligations with contract manufacturers, long-term software tool licenses, and other licenses.

(3)

Represents the remaining balance of the one-time transition tax liability associated with our deemed repatriation of accumulated foreign earnings as a result of the enactment of the Tax Cuts and Jobs Act into law on December 22, 2017.

The amounts in the table above exclude unrecognized tax benefits of $21.1 million. As of March 31, 2020, we were unable to make a reasonably reliable estimate of when cash settlement with a taxing authority may occur in connection with our gross unrecognized tax benefit.

34

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2020, our market risk related to interest rates on our cash and cash equivalents, and foreign currency exchange risks has not changed materially from the risks disclosed in Item 7A of our Annual Report on Form 10-K for the fiscal year ended June 29, 2019.

 

 

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Due to the COVID-19 pandemic, a significant portion of our employees are now working from home while under shelter-in-place orders or other governmental restrictions. Established business continuity plans were initiated in order to mitigate the impact to our control environment, operating procedures, data and internal controls. The design of our processes and controls allow for remote execution with accessibility to secure data.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 28, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

35

 

PART II—OTHER INFORMATION

 

 

We are party to various litigation matters and claims arising from time to time in the ordinary course of business. While the results of such matters cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse effect on our business, financial condition, results of operations or cash flows.  

 

 

ITEM 1A. RISK FACTORS

We refer you to the Company’s risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended June 29, 2019 as well as the risk factors discussed below for material risks that may affect our business. In addition to the risk factors discussed below, the impact of the COVID-19 pandemic may also exacerbate, or in some cases manifest, other risks discussed in Item 1A, “Risk Factors” in our Annual Report on Form 10-K, any of which could have a material effect on us.

Our business, results of operations and financial condition (including liquidity) and prospects may be materially and adversely affected by health epidemics, including the recent COVID-19 pandemic.

 

Public health threats, such as COVID-19, influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate could adversely impact our operations, as well as the operations of our suppliers and customers. Any of these public health threats and related consequences could adversely affect our financial results.

COVID-19, a potentially deadly respiratory tract infection caused by the SARS-CoV-2 virus, has spread rapidly and enveloped most of the world, causing a global public health crisis. On March 11, 2020, the World Health Organization characterized the COVID-19 outbreak as a pandemic. Governments in affected countries are imposing travel bans, quarantines and other emergency public health measures. In response to the virus, national and local governments in numerous countries around the world have implemented substantial lockdown measures, and other countries and local governments may enact similar policies. As of March 31, 2020, the United States has temporarily restricted travel by foreign nationals into the country from a number of areas, including China and Europe. In addition, the federal government and all of the states in the U.S., have declared a state of emergency or similar disaster declaration, and many states, including California where we are headquartered, have enacted shelter-in-place or similar restrictive orders. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses. These restrictions, and future prevention and mitigation measures, are likely to have an adverse impact on global economic conditions, which could materially adversely affect our future operations. Uncertainties regarding the economic impact of the COVID-19 outbreak is likely to result in sustained market turmoil, which could also negatively impact our business, financial condition and cash flows.

These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners. The disruptions to our operations caused by the COVID-19 outbreak may result in inefficiencies, delays and additional costs in our product development, sales, marketing, and customer service efforts that we cannot fully mitigate through remote or other alternative work arrangements. Also, some suppliers of materials used in the production of our products may be located in areas more severely impacted by COVID-19, which could limit our ability to obtain sufficient materials for our products. In addition, the severe global economic disruption caused by COVID-19 may cause our customers and end-users of our products to suffer significant economic hardship, which could result in decreased demand for our products in the future and materially adversely affect our business, results of operations, financial condition (including liquidity) and prospects.

The impact of the COVID-19 pandemic continues to evolve and its duration and ultimate disruption on our customers, end-users, overall demand for our products, supply chain, and the related financial impact to us, cannot be estimated at this time. Should such disruption continue for an extended period of time, the impact could have a more severe adverse effect on our business, results of operations and financial condition (including liquidity).  Additionally, weaker economic conditions generally could result in impairment in value of our tangible or intangible assets, or our ability to raise additional capital, if needed.

 

 

 

36

 

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

Issuer Purchases of Equity Securities

Our Board of Directors has cumulatively authorized $1.4 billion for our common stock repurchase program, which expires at the end of July 2021. As of March 31, 2020, the remaining amount authorized for the repurchase of our common stock was $177.5 million. During the three-month period ended March 31, 2020, repurchases under our common stock repurchase program were as follows:

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

Maximum Dollar

 

 

 

 

 

 

 

 

 

 

 

Number of Shares

 

 

Value of Shares

 

 

 

 

 

 

 

Average

 

 

Purchased

 

 

that May Be

 

 

 

Total

 

 

Price

 

 

as Part of

 

 

Purchased

 

 

 

Number

 

 

Paid

 

 

Publicly

 

 

in the Future

 

 

 

of Shares

 

 

per

 

 

Announced

 

 

Under the

 

Period

 

Purchased

 

 

Share

 

 

Program

 

 

Program

 

December 29, 2019 - January 25, 2020

 

 

—

 

 

 

 

 

 

 

—

 

 

$

190,605,676

 

January 26, 2020 - February 22, 2020

 

 

—

 

 

 

 

 

 

 

—

 

 

 

190,605,676

 

February 23, 2020 - March 28, 2020

 

 

257,419

 

 

$

51.09

 

 

 

257,419

 

 

 

177,454,132

 

Total

 

 

257,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 

ITEM 6. EXHIBITS

 

10.1

 

The First Amendment to Amended and Restated Credit Agreement, dated as of February 14, 2020, by and among Synaptics Incorporated, as borrower, the Lenders that are a party thereto, and Wells Fargo National Association, as administrative agent

 

 

 

10.2

 

First Amendment to Asset Purchase Agreement, entered into as of March 3, 2020, by and among Synaptics Incorporated and Creative Legend Investments Ltd.

 

 

 

10.3*

 

Separation Agreement and Release, executed on March 3, 2020, by and between Hing Chung (Alex) Wong and Synaptics Incorporated

 

 

 

31.1

 

Certification of Chief Executive Officer

 

 

 

31.2

 

Certification of Chief Financial Officer

 

 

 

32.1**

 

Section 1350 Certification of Chief Executive Officer

 

 

32.2**

 

Section 1350 Certification of Chief Financial Officer

 

 

101.INS Inline

 

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

 

101.SCH Inline

 

XBRL Taxonomy Extension Schema Document

 

 

101.CAL Inline

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

101.DEF Inline

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

101.LAB Inline

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

101.PRE Inline

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

104

 

Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

*

Indicates a contract with management or compensatory plan or arrangement.

**

This information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

 

 

38

 

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.

 

 

 

 

 

SYNAPTICS INCORPORATED

 

 

 

 

Date:  May 7, 2020

 

 

 

By:

 

/s/ Michael E. Hurlston

 

 

 

 

Name:

 

Michael E. Hurlston

 

 

 

 

Title:

 

President and Chief Executive Officer

 

 

 

 

 

Date:  May 7, 2020

 

 

 

By:

 

/s/ Dean Butler

 

 

 

 

Name:

 

Dean Butler

 

 

 

 

Title:

 

Senior Vice President and Chief Financial Officer

 

Date:  May 7, 2020

 

 

 

By:

 

/s/ Kermit Nolan

 

 

 

 

Name:

 

Kermit Nolan

 

 

 

 

Title:

 

Corporate Vice President and Chief Accounting Officer

 

39
syna-ex101_99.htm

 

Exhibit 10.1

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”), dated as of February 14, 2020, is entered into by and among (1) SYNAPTICS INCORPORATED, a Delaware corporation (the “Borrower”); (2) the Lenders (as defined in the Credit Agreement referred to below); and (3) WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), as Administrative Agent, with respect to the following:

 

A.The Borrower, the Administrative Agent, the Swingline Lender, the Issuing Lender and the Lenders have previously entered into that certain Amended and Restated Credit Agreement, dated as of September 27, 2017 (as in effect prior to the date hereof, the “Existing Credit Agreement” and as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, including by this Amendment, the “Credit Agreement”).  Capitalized terms are used in this Amendment as defined in the Credit Agreement, unless otherwise defined herein.  

 

B.

The Borrower has requested certain amendments to the Existing Credit Agreement as set forth below.

C.The Administrative Agent and the Lenders are willing to grant such requests on the terms and subject to the conditions set forth in this Amendment.  

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.Amendment.  On the terms and subject to the conditions of this Amendment, as of the Amendment Effective Date (as defined in Section 2 below), the Existing Credit Agreement is hereby amended as set forth in Annex A hereto (stricken text shall be deleted from the Credit Agreement (indicated textually in the same manner as the following example: stricken text) and double-underlined text shall be added to the Credit Agreement (indicated textually in the same manner as the following examples: double-underlined text or double-underlined text)).

2.Conditions Precedent to the Effectiveness of this Amendment.  The effectiveness of the provisions of Section 1 of this Amendment is conditioned upon, and such provisions shall not be effective until, satisfaction of the following conditions (the first date on which all of the following conditions have been satisfied being referred to herein as the “Amendment Effective Date”):

 

 

 

(a)The Administrative Agent shall have received, on behalf of the Lenders, this Amendment, duly executed and delivered by the Borrower, the Administrative Agent and all of the Lenders.

(b)The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower, dated the Amendment Effective Date, certifying that the conditions set forth in Section 2(d) and Section 2(e) below are satisfied.

(c)The Administrative Agent shall have received executed counterparts of an Assignment and Assumption (the “U.S. Bank Assignment and Assumption”) from U.S. Bank National Association, as assignor, and each of Wells Fargo Bank, National Association, MUFG Union Bank, N.A., BMO Harris Bank, N.A. and HSBC Bank USA, N.A., as assignees, with respect to U.S. Bank National Association’s Revolving Credit Commitment under the Existing Credit Agreement.  The U.S. Bank Assignment and Assumption shall be effective immediately prior to the effectiveness of this Amendment.

(d)The Borrower shall have paid (i) to the Administrative Agent or the Arranger, for the account of each Lender, a fee in an amount equal to 0.05% of such Lender’s Revolving Credit Commitment on the Amendment Effective Date (prior to giving effect to the U.S. Bank Assignment and Assumption), (ii) to the Administrative Agent or the Arranger, for the account of each Lender party to the U.S. Bank Assignment and Assumption as an assignee, a fee in an amount equal to 0.125% of the Revolving Credit Commitment assigned to such Lender pursuant to the U.S. Bank Assignment and Assumption and (iii) all other fees and expenses required to be paid to the Administrative Agent (including the reasonable and documented fees, charges and disbursements of external counsel for the Administrative Agent) and the Lenders on or prior to the Amendment Effective Date (including all fees payable pursuant to any engagement or fee letter).

(e)The representations and warranties set forth in this Amendment shall be true and correct in all material respects (except to the extent that such representation and warranty is qualified by materiality or reference to Material Adverse Effect, in which case such representation and warranty must be true in all respects) as of the Amendment Effective Date.  

(f)As of the Amendment Effective Date, no Event of Default exists, or shall occur as a result of the transactions contemplated by this Amendment.

(g)To the extent not previously reported to the Administrative Agent, the Borrower shall have delivered to the Administrative Agent (x) a listing of any Intellectual Property acquired by any Credit Party or the subject of an Intellectual Property application filing by any Credit Party since the Closing Date and (y) an updated Schedule 3.11 to the Collateral Agreement supplementing the information set forth therein since the Closing Date.

3.Representations and Warranties.  In order to induce the Administrative Agent and the Lenders to enter into this Amendment and to amend the Existing Credit Agreement in the manner provided in this Amendment, the Borrower represents and warrants to the Administrative Agent and each Lender as follows:

(a)Authorization; Enforceability.  The Borrower has the right, power and authority and has taken all necessary organizational action to authorize the execution, delivery and performance of this Amendment and the Existing Credit Agreement as amended by this Amendment and each other Credit Party has the right, power and authority and has taken all necessary organizational action to authorize the execution, delivery and performance of this Amendment.  This Amendment and the Credit Agreement have each been duly executed and delivered by the duly authorized officers of each Credit

2

 

 

Party that is a party thereto, and each document constitutes the legal, valid and binding obligation against such Credit Party, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal Debtor Relief Laws from time to time in effect which affect the enforcement of creditors’ rights in general and the availability of equitable remedies and requirements of reasonableness, good faith and fair dealing.  

(b)Compliance of Agreement.  The execution and delivery by the Borrower and each Credit Party of this Amendment, the performance by each Credit Party of this Amendment and the performance by the Borrower of each of this Amendment and the Credit Agreement do not (a) require any Governmental Approval that has not been obtained or violate any Applicable Law relating to any Credit Party where the failure to obtain such Governmental Approval or such violation would reasonably be expected to have a Material Adverse Effect, (b) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of any Credit Party, (c) conflict with, result in a breach of or constitute a default under any indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person, which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, or (d) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by such Person other than Permitted Liens.  

(c)Representations and Warranties in the Credit Agreement.  The Borrower confirms that as of the Amendment Effective Date and after giving effect to this Amendment, (i) the representations and warranties contained in Article VII of the Credit Agreement are true and correct in all material respects, except to the extent any such representation and warranty is qualified by materiality or reference to Material Adverse Effect, in which case, such representation and warranty shall be true, and correct in all respects, on the Amendment Effective Date with the same effect as if made on and as of such date (except for any such representation and warranty that by its terms is made only as of an earlier date, which representation and warranty shall remain true and correct as of such earlier date) and (ii) no Default or Event of Default exists and is continuing.  

4.Miscellaneous.

(a)Reference to and Effect on the Existing Credit Agreement and the other Loan Documents.

(i)Except as specifically amended by this Amendment and the documents executed and delivered in connection herewith, the Existing Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed by the Borrower in all respects.  In furtherance of the foregoing, the Borrower hereby affirms and confirms its pledge, grant and other agreements under each Security Document (including its grants of security interests thereunder).  The Existing Credit Agreement (as amended by this Amendment) and each of the other Loan Documents, taken together, constitute and contain the entire agreement of the Borrower, the Lenders and the Administrative Agent and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof and thereof.

(ii)The execution and delivery of this Amendment and performance of the Credit Agreement shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders under, the Existing Credit Agreement or any of the other Loan Documents and shall not constitute a novation thereof.

3

 

 

(iii)Upon the conditions precedent set forth herein being satisfied, this Amendment shall be construed as one with the Existing Credit Agreement, and the Existing Credit Agreement shall, where the context requires, be read and construed throughout so as to incorporate this Amendment.

(iv)If there is any conflict between the terms and provisions of this Amendment and the terms and provisions of the Credit Agreement or any other Loan Document, the terms and provisions of this Amendment shall govern.

(b)Expenses.  The Borrower acknowledges that all reasonable costs and expenses of the Administrative Agent incurred in connection with this Amendment will be paid by the Borrower in accordance with Section 12.3 of the Existing Credit Agreement.

(c)Headings.  Section and subsection headings in this Amendment are included for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

(d)Counterparts.  This Amendment may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes.  Delivery of an executed counterpart of a signature page of this Amendment by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Amendment.

(e)Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of New York.

5.Loan Documents.  This Amendment is a Loan Document as defined in the Credit Agreement, and the provisions of the Credit Agreement generally applicable to Loan Documents are applicable hereto and incorporated herein by this reference.

 

[This Space Intentionally Left Blank]

 

 

 

4

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

SYNAPTICS INCORPORATED,
a Delaware corporation

 

 

 

By: /s/ John McFarland

Name: John McFarland

 

Title:

Senior Vice President, General counsel and Secretary

 

 

 

 

[Signature Page to First Amendment to A&R Credit Agreement]

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and a Lender

 

 

By: /s/ Spencer Ferry

Name: Spencer Ferry

Title: Vice President

 

 

 

[Signature Page to First Amendment to A&R Credit Agreement]

 

 

 

MUFG UNION BANK, N.A.,
as a Lender

 

 

By: /s/ Matthew Antioco

Name: Matthew Antioco

Title: Director

 

 

 

[Signature Page to First Amendment to A&R Credit Agreement]

 

 

 

 

HSBC BANK USA, N.A.,
as a Lender

 

 

By: /s/ Jeff French

Name: Jeff French

Title: Managing Director

 

 

[Signature Page to First Amendment to A&R Credit Agreement]

 

 

 

BMO HARRIS BANK, N.A.,
as a Lender

 

 

By: /s/ Jeff LaRue

Name: Jeff LaRue

Title: Vice President

 

 

[Signature Page to First Amendment to A&R Credit Agreement]

 

 

 

 

BANK OF AMERICA, N.A.,
as a Lender

 

 

By: /s/ Puneet Lakhotia

Name: Puneet Lakhotia

Title: Vice President

 

 

 

[Signature Page to First Amendment to A&R Credit Agreement]

 

 

 

The undersigned hereby acknowledges (a) that it expects to realize substantial direct and indirect benefits as a result of this Agreement and (b) it has received and reviewed the terms and conditions hereof.  The undersigned hereby, to the extent it is a party to any Security Document or the Subsidiary Guaranty Agreement, (i) affirms and confirms its guarantee, pledge, grant and other agreements under each such Security Document (including its grants of security interests under the Security Documents) and the Subsidiary Guaranty Agreement and (ii) agrees that, notwithstanding the effectiveness of this Agreement or any other transactions contemplated hereby, each Security Document, the Subsidiary Guaranty Agreement and all guarantees, pledges, grants and other agreements thereunder shall continue to be in full force and effect in respect of, and to secure, the Secured Obligations.

 

 

SYNAPTICS INTERNATIONAL, INC.

 

By: /s/ John McFarland

Name: John McFarland

Title:  Corporate Secretary

 

 

[Signature Page to First Amendment to A&R Credit Agreement]

 

 

 

ANNEX A

 

Amended Credit Agreement

[See attached]


 

 

 

 

Published CUSIP Number:  87159JAD6
Revolving Credit CUSIP Number:  87159JAE4



$200,000,000  

AMENDED AND RESTATED CREDIT AGREEMENT

dated as of September 27, 2017,

by and among

SYNAPTICS INCORPORATED,
as Borrower,

the Lenders from time to time party hereto,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent,
Swingline Lender and Issuing Lender

WELLS FARGO SECURITIES, LLC,

as Joint Lead Arranger and Joint Bookrunner

 

MUFG UNION BANK, N.A.

and

BMO CAPITAL MARKETS CORP.
as Joint Lead Arrangers, Joint Bookrunners and Co-Syndication Agents

 

 



 

 

 

 

 

TABLE OF CONTENTS

 

Page

 

ARTICLE I DEFINITIONS

1

 

 

SECTION 1.1.

Definitions1

 

 

SECTION 1.2.

Other Definitions and Provisions3944

 

 

SECTION 1.3.

Accounting Terms3944

 

 

SECTION 1.4.

UCC Terms4045

 

 

SECTION 1.5.

Rounding4045

 

 

SECTION 1.6.

References to Agreement and Laws4045

 

 

SECTION 1.7.

Times of Day4045

 

 

SECTION 1.8.

Letter of Credit Amounts4045

 

 

SECTION 1.9.

Guarantees4145

 

 

SECTION 1.10.

Covenant Compliance Generally4146

 

 

SECTION 1.11.

Available Amount Transactions4146

 

 

SECTION 1.12.

Rates46

 

 

SECTION 1.13.

Divisions46

 

ARTICLE II REVOLVING CREDIT FACILITY

4146

 

 

SECTION 2.1.

Revolving Credit Loans4146

 

 

SECTION 2.2.

Swingline Loans4247

 

 

SECTION 2.3.

Procedure for Advances of Revolving Credit Loans and Swingline Loans4348

 

 

SECTION 2.4.

Repayment and Prepayment of Revolving Credit and Swingline Loans 44.49

 

 

SECTION 2.5.

Permanent Reduction of the Revolving Credit Commitment 45.51

 

 

SECTION 2.6.

Termination of Revolving Credit Facility; Swingline Facility4652

 

ARTICLE III LETTER OF CREDIT FACILITY

4752

 

 

SECTION 3.1.

L/C Facility4752

 

 

SECTION 3.2.

Procedure for Issuance of Letters of Credit4753

 

 

SECTION 3.3.

Commissions and Other Charges4853

 

 

SECTION 3.4.

L/C Participations4854

 

 

SECTION 3.5.

Reimbursement Obligation of the Borrower4955

 

 

SECTION 3.6.

Obligations Absolute5055

 

 

-i-

 

 

 

 

 

 

 

TABLE OF CONTENTS

(continued)

Page

 

 

SECTION 3.7.

Effect of Letter of Credit Application5156

 

 

SECTION 3.8.

Reporting of Letter of Credit Information and L/C Commitment5156

 

 

SECTION 3.9.

Letters of Credit Issued for Restricted Subsidiaries5156

 

 

SECTION 3.10.

Provisions Related to Extended Revolving Credit Commitments5157

 

ARTICLE IV TERM LOAN FACILITY

5257

 

 

SECTION 4.1.

Initial Term Loan5257

 

 

SECTION 4.2.

Procedure for Advance of Term Loan5257

 

 

SECTION 4.3.

Repayment of Term Loans5258

 

 

SECTION 4.4.

Prepayments of Term Loans5358

 

ARTICLE V GENERAL LOAN PROVISIONS

5560

 

 

SECTION 5.1.

Interest5560

 

 

SECTION 5.2.

Notice and Manner of Conversion or Continuation of Loans5662

 

 

SECTION 5.3.

Fees5762

 

 

SECTION 5.4.

Manner of Payment5863

 

 

SECTION 5.5.

Evidence of Indebtedness5863

 

 

SECTION 5.6.

Sharing of Payments by Lenders5964

 

 

SECTION 5.7.

Administrative Agent’s Clawback6065

 

 

SECTION 5.8.

Changed Circumstances6166

 

 

SECTION 5.9.

Indemnity6268

 

 

SECTION 5.10.

Increased Costs 62.68

 

 

SECTION 5.11.

Taxes 64.70

 

 

SECTION 5.12.

Mitigation Obligations; Replacement of Lenders6874

 

 

SECTION 5.13.

Incremental Loans6975

 

 

SECTION 5.14.

Cash Collateral7379

 

 

SECTION 5.15.

Defaulting Lenders7380

 

 

SECTION 5.16.

Extensions of Loans and Revolving Credit Commitments 76.82

 

ARTICLE VI CONDITIONS OF CLOSING AND BORROWING

7985

 

 

SECTION 6.1.

Conditions to Closing and Initial Extensions of Credit7985

 

 

-ii-

 

 

 

 

TABLE OF CONTENTS

(continued)

Page

 

 

SECTION 6.2.

Conditions to All Extensions of Credit after(including any Extensions of Credit on the Closing Date 84)88

 

ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES

8489

 

 

SECTION 7.1.

Organization; Power; Qualification8589

 

 

SECTION 7.2.

Ownership8590

 

 

SECTION 7.3.

Authorization; Enforceability8590

 

 

SECTION 7.4.

Compliance of Agreement, Loan Documents and Borrowing With Laws, Etc8690

 

 

SECTION 7.5.

Compliance With Law; Governmental Approvals8691

 

 

SECTION 7.6.

Tax Returns and Payments 86.91

 

 

SECTION 7.7.

Intellectual Property Matters8791

 

 

SECTION 7.8.

Environmental Matters8791

 

 

SECTION 7.9.

Employee Benefit Matters8892

 

 

SECTION 7.10.

Margin Stock8893

 

 

SECTION 7.11.

Government Regulation8893

 

 

SECTION 7.12.

Material Contracts8893

 

 

SECTION 7.13.

Financial Statements8893

 

 

SECTION 7.14.

No Material Adverse Change8993

 

 

SECTION 7.15.

Solvency8994

 

 

SECTION 7.16.

Title to Properties8994

 

 

SECTION 7.17.

Litigation8994

 

 

SECTION 7.18.

Anti-Terrorism; Anti-Money Laundering; Anti-Corruption8994

 

 

SECTION 7.19.

Senior Indebtedness Status9094

 

 

SECTION 7.20.

Disclosure9094

 

ARTICLE VIII AFFIRMATIVE COVENANTS

9095

 

 

SECTION 8.1.

Financial Statements and Budgets9095

 

 

SECTION 8.2.

Certificates; Other Reports9196

 

 

SECTION 8.3.

Notice of Litigation and Other Matters9398

 

 

SECTION 8.4.

Preservation of Corporate Existence and Related Matters9498

 

 

SECTION 8.5.

Maintenance of Property and Licenses9498

 

 

-iii-

 

 

 

 

TABLE OF CONTENTS

(continued)

Page

 

 

SECTION 8.6.

Insurance9499

 

 

SECTION 8.7.

Accounting Methods and Financial Records9499

 

 

SECTION 8.8.

Payment of Taxes and Other Obligations9599

 

 

SECTION 8.9.

Compliance with Laws and Approvals9599

 

 

SECTION 8.10.

Environmental Laws95100

 

 

SECTION 8.11.

Compliance with ERISA95100

 

 

SECTION 8.12.

Visits and Inspections95100

 

 

SECTION 8.13.

Additional Subsidiaries; Immaterial Subsidiaries96101

 

 

SECTION 8.14.

Designation of Subsidiaries97102

 

 

SECTION 8.15.

Use of Proceeds98103

 

 

SECTION 8.16.

Further Assurances; Post-Closing Obligations98 103

 

 

SECTION 8.17.

Compliance with Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions; Beneficial Ownership Regulation103

 

ARTICLE IX

104

 

NEGATIVE COVENANTS

99104

 

 

SECTION 9.1.

Indebtedness99104

 

 

SECTION 9.2.

Liens101106

 

 

SECTION 9.3.

Investments103109

 

 

SECTION 9.4.

Fundamental Changes105110

 

 

SECTION 9.5.

Asset Dispositions106112

 

 

SECTION 9.6.

Restricted Payments107112

 

 

SECTION 9.7.

Transactions With Affiliates108113

 

 

SECTION 9.8.

Accounting Changes; Organizational Documents109114

 

 

SECTION 9.9.

Payments and Modifications of Subordinated Indebtedness; Prepayments109114

 

 

SECTION 9.10.

No Further Negative Pledges; Restrictive Agreements110115

 

 

SECTION 9.11.

Nature of Business111116

 

 

SECTION 9.12.

Sanctions; Anti-Corruption111116

 

 

SECTION 9.13.

Sale Leasebacks111116

 

 

SECTION 9.14.

Capital Expenditures111116

 

 

-iv-

 

 

 

 

TABLE OF CONTENTS

(continued)

Page

 

 

SECTION 9.15.

Financial Covenants111117

 

 

SECTION 9.16.

Disposal of Subsidiary Interests112117

 

 

SECTION 9.17.

Closing Date Convertible Debt117

 

ARTICLE X DEFAULT AND REMEDIES

112117

 

 

SECTION 10.1.

Events of Default112117

 

 

SECTION 10.2.

Remedies114119

 

 

SECTION 10.3.

Rights and Remedies Cumulative; Non-Waiver; etc115120

 

 

SECTION 10.4.

Crediting of Payments and Proceeds116121

 

 

SECTION 10.5.

Administrative Agent May File Proofs of Claim116122

 

 

SECTION 10.6.

Credit Bidding117122

 

 

SECTION 10.7.

Exclusion of Immaterial Domestic Subsidiaries and Immaterial Foreign Subsidiaries117123

 

ARTICLE XI THE ADMINISTRATIVE AGENT

118123

 

 

SECTION 11.1.

Appointment and Authority118123

 

 

SECTION 11.2.

Rights as a Lender119124

 

 

SECTION 11.3.

Exculpatory Provisions119124

 

 

SECTION 11.4.

Reliance by the Administrative Agent120125

 

 

SECTION 11.5.

Delegation of Duties120126

 

 

SECTION 11.6.

Resignation of Administrative Agent121126

 

 

SECTION 11.7.

Non-Reliance on Administrative Agent and Other Lenders122128

 

 

SECTION 11.8.

No Other Duties, etc122128

 

 

SECTION 11.9.

Collateral and Guaranty Matters123128

 

 

SECTION 11.10.

Secured Hedge Agreements and Secured Cash Management Agreements124129

 

ARTICLE XII MISCELLANEOUS

124130

 

 

SECTION 12.1.

Notices124130

 

 

SECTION 12.2.

Amendments, Waivers and Consents127132

 

 

SECTION 12.3.

Expenses; Indemnity 129.135

 

 

SECTION 12.4.

Right of Setoff132137

 

 

SECTION 12.5.

Governing Law; Jurisdiction, etc132138

 

 

-v-

 

 

 

 

TABLE OF CONTENTS

(continued)

Page

 

 

SECTION 12.6.

Waiver of Jury Trial133139

 

 

SECTION 12.7.

Reversal of Payments133139

 

 

SECTION 12.8.

Injunctive Relief134139

 

 

SECTION 12.9.

Successors and Assigns; Participations 134.139

 

 

SECTION 12.10.

Treatment of Certain Information; Confidentiality139145

 

 

SECTION 12.11.

Performance of Duties141146

 

 

SECTION 12.12.

All Powers Coupled with Interest141146

 

 

SECTION 12.13.

Survival141146

 

 

SECTION 12.14.

Titles and Captions141146

 

 

SECTION 12.15.

Severability of Provisions141146

 

 

SECTION 12.16.

Counterparts; Integration; Effectiveness; Electronic Execution141147

 

 

SECTION 12.17.

Term of Agreement142147

 

 

SECTION 12.18.

USA PATRIOT Act142147

 

 

SECTION 12.19.

Independent Effect of Covenants142147

 

 

SECTION 12.20.

No Advisory or Fiduciary Responsibility142148

 

 

SECTION 12.21.

Inconsistencies With Other Documents143149

 

 

SECTION 12.22.

Consent Regarding Convertible Debt143149

 

 

SECTION 12.23

Acknowledgement and Consent to Bail-In of Affected Financial Institutions149

 

 

SECTION 12.24

Certain ERISA Matters.150

 

 

SECTION 12.25

Acknowledgement Regarding Any Supported QFCs151

 

 

 

 

-vi-

 

 

 

 

 

EXHIBITS

 

 

Exhibit A-1

-

Form of Revolving Credit Note

Exhibit A-2

-

Form of Swingline Note

Exhibit A-3

-

Form of Term Loan Note

Exhibit B

-

Form of Notice of Borrowing

Exhibit C

-

Form of Notice of Account Designation

Exhibit D

-

Form of Notice of Prepayment

Exhibit E

-

Form of Notice of Conversion/Continuation

Exhibit F

-

Form of Officer’s Compliance Certificate

Exhibit G

-

Form of Assignment and Assumption

Exhibit H-1

-

Form of U.S. Tax Compliance Certificate (Non-Partnership Foreign Lenders)

Exhibit H-2

-

Form of U.S. Tax Compliance Certificate (Non-Partnership Foreign Participants)

Exhibit H-3

-

Form of U.S. Tax Compliance Certificate (Foreign Participant Partnerships)

Exhibit H-4

-

Form of U.S. Tax Compliance Certificate (Foreign Lender Partnerships)

Exhibit I

 

Form of Affiliate Assignment Agreement

Exhibit J

 

Form of Solvency Certificate

 

 

 

SCHEDULES

 

 

Schedule 1.1

-

Commitments and Commitment Percentages

Schedule 7.1

-

Jurisdictions of Organization of Credit Parties and Restricted Subsidiaries

Schedule 7.2

-

Subsidiaries and Capitalization

Schedule 7.6

-

Tax Matters

Schedule 7.8

 

Environmental Matters

Schedule 7.12

-

Material Contracts

Schedule 7.16

-

Real Property

Schedule 7.17

 

Litigation

Schedule 9.1

-

Existing Indebtedness

Schedule 9.2

-

Existing Liens

Schedule 9.3

-

Existing Loans, Advances and Investments

Schedule 9.7

-

Transactions With Affiliates

 

 

 

-vii-

 

 

 

 

TABLE OF CONTENTS

 

Page

 

AMENDED AND RESTATED CREDIT AGREEMENT, dated as of September 27, 2017, by and among SYNAPTICS INCORPORATED, a Delaware corporation, as Borrower, the lenders who are party to this Agreement and the lenders who may become a party to this Agreement pursuant to the terms hereof, as Lenders, and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as Administrative Agent for the Lenders.  WELLS FARGO SECURITIES, LLC has been given the titles of joint lead arranger and joint bookrunner in connection with this Agreement; and MUFG UNION BANK, N.A. and BMO CAPITAL MARKETS CORP. have each been given the titles of joint lead arranger, joint bookrunner and co-syndication agent in connection with this Agreement.  

STATEMENT OF PURPOSE

The Borrower, the lenders party thereto and the Administrative Agent entered into a Credit Agreement dated as of September 30, 2014 (as amended prior to the date hereof, the “Existing Credit Agreement”) pursuant to which the Borrower incurred Revolving Credit Commitments and Term Loans.  

The Borrower, the Lenders and the Administrative Agent have agreed to amend and restate the Existing Credit Agreement to, inter alia, (a) reset the aggregate amount of Revolving Credit Commitments to $200,000,000 and (b) extinguish all Term Loan Commitments and Term Loans.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1.Definitions

.  The following terms when used in this Agreement shall have the meanings assigned to them below, provided that notwithstanding anything in this Agreement to the contrary, all terms and provisions in this Agreement relating specifically to Term Loans shall be ignored and deemed of no force or effect, as no Term Loans are permitted hereunder at any time:

“Administrative Agent” means Wells Fargo, in its capacity as Administrative Agent hereunder, and any successor thereto appointed pursuant to Section 11.6.

“Administrative Agent’s Office” means the office of the Administrative Agent specified in or determined in accordance with the provisions of Section 12.1(c).

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

“Affected Financial Institution” means (a) any EEA Financial Institution, or (b) any UK Financial Institution.

 

 

 

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

“Affiliate Assignment Agreement” means an assignment and assumption agreement substantially in the form of Exhibit I, with such amendments or modifications as may be approved by Administrative Agent.  

“Agreement” means this Amended and Restated Credit Agreement, together with all schedules and exhibits hereto, as amended, restated, supplemented or otherwise modified from time to time.

“Amendment and Restatement Agreement” means the amendment and restatement agreement, dated as of the Closing Date, among the Borrower, the Lenders and the Administrative Agent.

“Anti-Terrorism Laws” has the meaning assigned thereto in Section 7.18.  

“Applicable Law” means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.

“Applicable Margin” means the corresponding percentages per annum as set forth below based on the Consolidated Total Leverage Ratio:

Pricing Level

Consolidated Total Leverage Ratio

LIBOR Loans

Base Rate Loans

Commitment Fee

I

Less than 1.50 to 1.00

1.00%

0.25%

0.175%

II

Greater than or equal to 1.50 to 1.00, but less than 2.00 to 1.00

1.25%

0.50%

0.20%

III

Greater than or equal to 2.00 to 1.00, but less than 2.50 to 1.00

1.50%

0.75%

0.20%

IV

Greater than or equal to 2.50 to 1.00

1.75%

1.00%

0.25%

 

The Applicable Margin shall be determined and adjusted quarterly on the date five Business Days after the day on which the Borrower provides an Officer’s Compliance Certificate pursuant to Section 8.2(a) for the most recently ended Fiscal Quarter of the Borrower (each such date, a “Calculation Date”); provided that (a) the Applicable Margin shall be based on Pricing Level III until the Calculation Date after the Fiscal Quarter ending September 30, 2017 and, thereafter the Pricing Level shall be determined by reference to the Consolidated Total Leverage

2

 

 

 

Ratio as of the last day of the most recently ended Fiscal Quarter of the Borrower preceding the applicable Calculation Date as reflected in the applicable Officer’s Compliance Certificate, and (b) if the Borrower fails to provide an Officer’s Compliance Certificate when due as required by Section 8.2(a) for the most recently ended Fiscal Quarter of the Borrower preceding the applicable Calculation Date, the Applicable Margin from the date on which such Officer’s Compliance Certificate was required to have been delivered shall be based on Pricing Level IV until such time as such Officer’s Compliance Certificate is delivered, at which time the Pricing Level shall be determined by reference to the Consolidated Total Leverage Ratio as of the last day of the most recently ended Fiscal Quarter of the Borrower preceding such Calculation Date.  The applicable Pricing Level shall be effective from one Calculation Date until the next Calculation Date.  Any adjustment in the Applicable Margin shall be applicable to all Extensions of Credit then existing or subsequently made or issued.

Notwithstanding the foregoing, in the event that any financial statement or Officer’s Compliance Certificate delivered pursuant to Section 8.1 or 8.2(a) is shown to be inaccurate (regardless of whether (i) this Agreement is in effect, (ii) any commitments under this Agreement or the other Loan Documents are in effect, or (iii) any Obligation is outstanding when such inaccuracy is discovered or such financial statement or Officer’s Compliance Certificate was delivered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “Applicable Period”) than the Applicable Margin applied for such Applicable Period, then (A) the Borrower shall promptly deliver to the Administrative Agent a corrected Officer’s Compliance Certificate for such Applicable Period, (B) the Applicable Margin for such Applicable Period shall be determined as if the Consolidated Total Leverage Ratio in the corrected Officer’s Compliance Certificate were applicable for such Applicable Period, and (C) the Borrower shall, within five Business Days of demand thereof by the Administrative Agent, be obligated to pay to the Administrative Agent the accrued additional interest and fees owing as a result of such increased Applicable Margin for such Applicable Period, which payment shall be promptly applied by the Administrative Agent in accordance with Section 5.4  Nothing in this paragraph shall limit the rights of the Administrative Agent and Lenders with respect to Sections 5.1(b) and 10.2 nor any of their other rights under this Agreement or any other Loan Document.  The Borrower’s obligations under this paragraph shall survive the termination of the Commitments and the repayment of all other Obligations hereunder.

The Applicable Margins set forth above shall be increased as, and to the extent, required by Section 5.13.

Notwithstanding the foregoing, (x) the Applicable Margin in respect of any Class of Extended Revolving Credit Loans or any Extended Term Loans shall be the applicable percentages per annum set forth in the relevant Extension Amendment and (y) the Applicable Margin in respect of any Class of Incremental Term Loans shall be the applicable percentages per annum set forth in the relevant Lender Joinder Agreement.  

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

3

 

 

 

“Arranger” means Wells Fargo Securities, LLC, in its capacity as sole lead arranger and sole bookrunner.

“Asset Disposition” means the sale, transfer, license, lease or other disposition of any Property (including any disposition of Equity Interests and any sale-leaseback) by any Credit Party or any Restricted Subsidiary thereof (or the granting of any option or other right to do any of the foregoing), and any issuance of Equity Interests by any Restricted Subsidiary of the Borrower to any Person that is not a Credit Party or any Restricted Subsidiary thereof.  The term “Asset Disposition” shall not include (a) the sale of inventory in the ordinary course of business, (b) the transfer of assets to the Borrower or any Subsidiary Guarantor pursuant to any other transaction permitted pursuant to Section 9.4, (c) the write-off, discount, sale or other disposition of defaulted or past-due receivables and similar obligations in the ordinary course of business and not undertaken as part of an accounts receivable financing transaction, (d) the disposition of any Hedge Agreement, (e) dispositions of Investments in cash and Cash Equivalents, (f) the transfer by any Credit Party of its assets to any other Credit Party, (g) the transfer by any Non-Credit Party of its assets to any Credit Party (provided that in connection with any new transfer, such Credit Party shall not pay more than an amount equal to the fair market value of such assets as determined in good faith by the applicable Credit Party or Restricted Subsidiary at the time of such transfer) (h) the transfer by any Non-Credit Party of its assets to any other Non-Credit Party, (i) the abandonment of intellectual property determined by the Borrower and its Subsidiaries to no longer be used or useful in the conduct of their business and (j) any sale, transfer or other disposition of any Property having a fair market value of less than $2,000,000.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 12.9), and accepted by the Administrative Agent, in substantially the form attached as Exhibit G or any other form approved by the Administrative Agent.

“Attributable Indebtedness” means, on any date of determination, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease, the capitalized amount or principal amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital Lease.

“Auction” has the meaning assigned thereto in Section 12.9(e)(i).  

“Auction Manager” means (a) either the Administrative Agent or the Arranger, as determined by Borrower, or any of their respective Affiliates or (b) any other financial institution or advisor agreed by Borrower and the Administrative Agent (whether or not an affiliate of the Administrative Agent) to act as an arranger in connection with any repurchases pursuant to Section 12.9(e).  

“Available Amount” means, on any date of determination, the sum of:

(a)

the greater of (A) zero and (B) 50% of Consolidated Net Income for the period of four consecutive Fiscal Quarters most recently ended for which the Borrower has delivered

4

 

 

 

financial statements and an Officer’s Compliance Certificate pursuant to Sections 8.1 and 8.2(a), as adjusted on a Pro Forma Basis in connection with Specified Transactions during such period as set forth in the definition of Pro Forma Basis (such amount, the “Rolling Basket”); plus

(b)

the sum (as adjusted pursuant to clause (c) below) of (such sum, as so adjusted, the “Cumulative Basket”):

(i)

the amount of Net Cash Proceeds of issuances of Qualified Equity Interests of the Borrower during the period beginning on September 30, 2014 and ending on such date of determination; plus

(ii)

without duplication of any amounts added elsewhere in this definition, in the event any Unrestricted Subsidiary has been re-designated as a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, the Borrower or a Restricted Subsidiary, the fair market value of the Investments of the Borrower and the Restricted Subsidiaries made using the Available Amount in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable) beginning on September 30, 2014 and ending on such date of determination; plus

(iii)

without duplication of any amounts added elsewhere in this definition, an amount equal to any returns in cash and Cash Equivalents (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received by the Borrower or any Restricted Subsidiary in respect of any Investments made pursuant to Section 9.3(o) beginning on September 30, 2014 and ending on such date of determination; minus

(c)

the aggregate of amounts applied pursuant to Sections 9.3(o), 9.6(e), 9.9(c)(ii) and 9.14 (or the corresponding provisions of the Existing Credit Agreement) during the Available Amount Reference Period for such date of determination; provided that if, during any Available Amount Reference Period, the aggregate amount applied pursuant to such Sections during such period exceeds the then applicable Rolling Basket, such excess shall be applied to permanently reduce the Cumulative Basket on a dollar-for-dollar basis.

“Available Amount Reference Period” means, with respect to any date of determination, the period commencing on the first day of the period of four consecutive Fiscal Quarters most recently ended for which the Borrower has delivered financial statements and an Officer’s Compliance Certificate pursuant to Sections 8.1 and 8.2(a) and ending on such date of determination.  

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, rule, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as

5

 

 

 

amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

“Base Rate” means, at any time, the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) LIBOR for an Interest Period of one month plus 1%; each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate, the Federal Funds Rate or LIBOR (provided that clause (c) shall not be applicable during any period in which LIBOR is unavailable or unascertainable).  Notwithstanding the foregoing, if the Base Rate shall be less than 1%, the Base Rate shall be deemed to be 1% for purposes of this Agreement.

“Base Rate Loan” means any Loan bearing interest at a rate based upon the Base Rate as provided in Section 5.1(a).

“Benchmark Replacement” means the sum of: (a) the alternate benchmark rate (which may include Term SOFR) that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to LIBOR for U.S. dollar-denominated syndicated credit facilities and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than zero, the Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.

“Benchmark Replacement Adjustment” means, with respect to any replacement of LIBOR with an Unadjusted Benchmark Replacement for each applicable Interest Period, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of LIBOR with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of LIBOR with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities at such time.

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest and other administrative matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of the

6

 

 

 

Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement).

“Benchmark Replacement Date” means the earlier to occur of the following events with respect to LIBOR:

(a)

in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of LIBOR permanently or indefinitely ceases to provide LIBOR; and

(b)

in the case of clause (c) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to LIBOR:

(a)

a public statement or publication of information by or on behalf of the administrator of LIBOR announcing that such administrator has ceased or will cease to provide LIBOR, permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide LIBOR;

(b)

a public statement or publication of information by the regulatory supervisor for the administrator of LIBOR, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for LIBOR, a resolution authority with jurisdiction over the administrator for LIBOR or a court or an entity with similar insolvency or resolution authority over the administrator for LIBOR, which states that the administrator of LIBOR has ceased or will cease to provide LIBOR permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide LIBOR; or

(c)

a public statement or publication of information by the regulatory supervisor for the administrator of LIBOR announcing that LIBOR is no longer representative.

“Benchmark Transition Start Date” means (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by the Administrative Agent or the Required Lenders, as applicable, by notice to the Borrower, the Administrative Agent (in the case of such notice by the Required Lenders) and the Lenders.

“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to LIBOR and solely to the extent that LIBOR has not been replaced with a Benchmark Replacement, the period (a) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no

7

 

 

 

Benchmark Replacement has replaced LIBOR for all purposes hereunder in accordance with Section 5.8(c) and (b) ending at the time that a Benchmark Replacement has replaced LIBOR for all purposes hereunder pursuant to Section 5.8(c).

“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

“Beneficial Ownership Regulation” means 31 CFR § 1010.230.

“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.

“Board of Directors” means (a) with respect to a corporation, the board of directors of such corporation or, except in the context of the definition of “Change in Control”, any duly authorized committee thereof; and (b) with respect to any other entity, the board of directors or similar body of the general partner of such entity or the managers of such entity, any duly authorized committee thereof or any Person, board or committee serving a similar function.

“Borrower” means Synaptics Incorporated, a Delaware corporation.  

“Borrower Materials” has the meaning assigned thereto in Section 8.2.

“Business Day” means (a) for all purposes other than as set forth in clause (b) below, any day other than a Saturday, Sunday or legal holiday on which banks in San Francisco, California and New York, New York, are open for the conduct of their commercial banking business and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, any LIBOR Rate Loan, or any Base Rate Loan as to which the interest rate is determined by reference to LIBOR, any day that is a Business Day described in clause (a) and that is also a London Banking Day.

“Calculation Date” has the meaning assigned thereto in the definition of Applicable Margin.

“Capital Expenditures” means, with respect to the Borrower and its Restricted Subsidiaries on a Consolidated basis, for any period, (a) the additions to property, plant and equipment and other capital expenditures that are (or would be) set forth in a consolidated statement of cash flows of such Person for such period prepared in accordance with GAAP and (b) Capital Lease Obligations during such period, but excluding expenditures for the restoration, repair or replacement of any fixed or capital asset that was destroyed or damaged, in whole or in part, to the extent financed by the proceeds of an insurance policy maintained by or on behalf of such Person.

“Capital Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capital leases.  

8

 

 

 

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Capital Stock” of any Person means any and all shares, interests (including general or limited partnership interests, limited liability company or membership interests or limited liability partnership interests), participations or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock; provided that equity‑based compensation awards that by their terms may only be settled in cash will not be deemed to be Capital Stock.

“Cash Collateralize” means, to pledge and deposit with, or deliver to the Administrative Agent, or directly to the applicable Issuing Lender (with notice thereof to the Administrative Agent), for the benefit of one or more of the Issuing Lenders, the Swingline Lender or the Lenders, as collateral for L/C Obligations or obligations of the Lenders to fund participations in respect of L/C Obligations or Swingline Loans, cash or deposit account balances or, if the Administrative Agent and the applicable Issuing Lender and the Swingline Lender shall agree, in their sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent, such Issuing Lender and the Swingline Lender, as applicable.  

“Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

“Cash Equivalents” means:

 

(a)

United States dollars and such local currencies held by the Borrower or any Restricted Subsidiary from time to time in the ordinary course of business;

 

(b)

securities issued or directly and fully Guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof), maturing not more than 365 days from the date of acquisition;

 

(c)

deposits, certificates of deposit and time deposits, money market accounts, bankers’ acceptances with maturities not exceeding 365 days and overnight bank deposits, in each case, with any commercial bank organized under the laws of the United States or any state, commonwealth or territory thereof or Canada or any province or territory thereof having capital and surplus in excess of $500,000,000 and a rating at the time of acquisition thereof of P‑1 or better from Moody’s or A‑1 or better from S&P;

 

(d)

repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (b) and (c) above entered into with any financial institution meeting the qualifications specified in clause (c) above;

9

 

 

 

 

(e)

commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and in each case maturing within nine months after the date of acquisition;

 

(f)

securities issued and fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, rated at least “A” by Moody’s or S&P and having maturities of not more than 365 days from the date of acquisition;

 

(g)

money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (f) of this definition; and

 

(h)

solely with respect to any Foreign Subsidiary, substantially similar investments to those outlined in clauses of (a) through (g) above, of comparable credit quality (taking into account the jurisdiction where such Foreign Subsidiary conducts business), denominated in the currency of any jurisdiction in which such Person conducts business.

“Cash Management Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card (including non-card electronic payables), purchasing cards, electronic funds transfer and other cash management arrangements.

“Cash Management Bank” means any Person that, (a) at the time it enters into a Cash Management Agreement with a Credit Party, is a Lender, an Affiliate of a Lender, the Administrative Agent or an Affiliate of the Administrative Agent, or (b) at the time it (or its Affiliate) becomes a Lender (including on the Closing Date), is a party to a Cash Management Agreement with a Credit Party, in each case in its capacity as a party to such Cash Management Agreement.

“Change in Control” means an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a “person” or “group” shall be deemed to have “beneficial ownership” of all Equity Interests that such “person” or “group” has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than 35% of the Equity Interests of the Borrower entitled to vote in the election of members of the Board of Directors of the Borrower.  

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following:  (a) the adoption or taking effect of any Applicable Law, (b) any change in any Applicable Law or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law, but if not having the force of law, with respect to any Person, being of a type with which such Person customarily complies) by any

10

 

 

 

Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Class” means, when used in reference to any Loan, whether such Loan is a Revolving Credit Loan, Swingline Loan, Initial Term Loan, Incremental Term Loan (of the same tranche), Extended Term Loans (of the same Extension Series), Extended Revolving Credit Loans (of the same Extension Series) and, when used in reference to any Commitment, whether such Commitment is a Revolving Credit Commitment, an Extended Revolving Credit Commitment (of the same Extension Series), a Term Loan Commitment or an Incremental Term Loan Commitment (of the same tranche).

“Closing Date” means the date of this Agreement.

“Closing Date Convertible Debt” means the Convertible Debt of the Borrower outstanding on the Closing Date.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collateral” means the collateral security for the Secured Obligations pledged or granted pursuant to the Security Documents. For the avoidance of doubt, the Collateral shall not include the Excluded Assets (as defined in the Security Documents).  

“Collateral Agreement” means the collateral agreement dated as of September 30, 2014 herewith executed by the Credit Parties in favor of the Administrative Agent, for the benefit of the Secured Parties.

“Commitment Fee” has the meaning assigned thereto in Section 5.3(a).

“Commitment Percentage” means, as to any Lender, such Lender’s Revolving Credit Commitment Percentage or Term Loan Percentage, as applicable.

“Commitments” means, with respect to each Lender (to the extent applicable), such Lender’s Revolving Credit Commitment, Extended Revolving Credit Commitment, Term Loan Commitment or Incremental Term Loan Commitment.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

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

11

 

 

 

“Consolidated” means, when used with reference to financial statements or financial statement items of any Person, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP.

“Consolidated EBITDA” means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for the Borrower and its Restricted Subsidiaries in accordance with GAAP:  (a) Consolidated Net Income for such period plus (b) the sum of the following, without duplication, to the extent deducted in determining Consolidated Net Income for such period:  (i) income and franchise taxes accrued during such period, (ii) Consolidated Interest Expense for such period, (iii) amortization and depreciation for such period, (iv) charges to operating expenses during such period in connection with earn-outs and other contingent consideration obligations with respect to acquisitions consummated prior to the Closing Date and Permitted Acquisitions, (v) other non‑cash charges and any other non-cash items decreasing Consolidated Net Income for such period (except to the extent that such non-cash charges are reserved for cash charges to be taken in the future), including the non-cash portion of net periodic defined benefit, defined contribution and compensation costs, bad debt expense net of cash recoveries, deferred rent, amortization of debt financing costs and asset retirement obligations, (vi) extraordinary, unusual and non-recurring charges or losses during such period, (vii) Transaction Costs during such period and out-of-pocket cash costs in respect of Permitted Acquisitions, (viii) Indebtedness-related fees during such period, including commitment fees, agency fees, the write-off of deferred financing fees and the payment of any prepayment or redemption premium in respect of any Indebtedness, (ix) restructuring charges or reserves and severance, retention and relocation expenses during such period in an aggregate amount not to exceed, when taken together with amounts added back pursuant to clause (x) below, 1530% of Consolidated EBITDA for such period, (x) integration costs during such period for Permitted Acquisitions (including any bonus, retention or success payments) and other Investments in an aggregate amount not to exceed, when taken together with amounts added back pursuant to clause (ix) above, 1530% of Consolidated EBITDA for such period, (xi) losses from the early extinguishment of Indebtedness during such period or from any Permitted A/R Financing and (xii) equity or equity-based non-cash expenses associated with the stock plans and similar arrangements of the Borrower and its Restricted Subsidiaries, less (c) (i) interest income during such period, (ii) any extraordinary gains during such period, (iii) non-cash gains or non-cash items increasing Consolidated Net Income during such period and (iv) gains or income from the early extinguishment of Indebtedness during such period or from any Permitted A/R Financing.  For purposes of this Agreement, Consolidated EBITDA shall be adjusted on a Pro Forma Basis in connection with Specified Transactions as set forth in the definition of Pro Forma Basis.

“Consolidated Interest Coverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of four consecutive Fiscal Quarters ending on or immediately prior to such date to (b) Consolidated Interest Expense for the period of four consecutive Fiscal Quarters ending on or immediately prior to such date.  

“Consolidated Interest Expense” means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for the Borrower and its Restricted Subsidiaries in accordance with GAAP, interest expense (including interest expense attributable to Capital Lease Obligations and all net payment obligations pursuant to Hedge Agreements) for such period.

12

 

 

 

“Consolidated Net Income” means, for any period, the net income (or loss) of the Borrower and its Restricted Subsidiaries for such period, determined on a Consolidated basis, without duplication, in accordance with GAAP; provided that in calculating Consolidated Net Income of the Borrower and its Restricted Subsidiaries for any period, there shall be excluded:

(a)

the net income (or loss) of any Person (other than a Non-Credit Party that shall be subject to clause (c) below), in which the Borrower or any of its Restricted Subsidiaries has a joint interest with a third party, except to the extent such net income is actually paid in cash to the Borrower or any of its Restricted Subsidiaries by dividend or other distribution during such period;

(b)

the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary of the Borrower or any of its Restricted Subsidiaries or is merged into or consolidated with the Borrower or any of its Restricted Subsidiaries or that Person’s assets are acquired by the Borrower or any of its Restricted Subsidiaries, except to the extent included pursuant to the foregoing clause (a); and

(c)

the net income (if positive), of any Non-Credit Party to the extent that the declaration or payment of dividends or similar distributions by such Non-Credit Party to a Credit Party of such net income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Non-Credit Party.

“Consolidated Total Indebtedness” means, as of any date of determination with respect to the Borrower and its Restricted Subsidiaries on a Consolidated basis without duplication, the sum of all Indebtedness of the Borrower and its Restricted Subsidiaries and excluding Indebtedness incurred in a Permitted A/R Financing solely to the extent such Indebtedness is non-recourse to any Credit Party.

“Consolidated Total Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Total Indebtedness on such date to (b) Consolidated EBITDA for the period of four consecutive Fiscal Quarters ending on or immediately prior to such date.  

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

“Control Agreement” means a control agreement among the Borrower or a Subsidiary Guarantor, a depository bank, a securities intermediary or a commodity intermediary, as the case may be, and the Administrative Agent, in form and substance reasonably acceptable to the Administrative Agent.

“Convertible Debt” has the meaning assigned thereto in Section 12.22, and shall include Closing Date Convertible Debt.

“Convertible Debt and Related Instruments” has the meaning assigned thereto in Section 12.22.  

13

 

 

 

“Convertible Related Derivatives” has the meaning assigned thereto in Section 12.22.

“Credit Facility” means, collectively, the Revolving Credit Facility, the Term Loan Facility, if any, the Swingline Facility and the L/C Facility.

“Credit Parties” means, collectively, the Borrower and the Subsidiary Guarantors.

“Debt Issuance” means the issuance of any Indebtedness for borrowed money by any Credit Party or any of its Restricted Subsidiaries.

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.

“Default” means any event specified in Section 10.1 that after notice or passage of time, or both, would constitute an Event of Default.

“Defaulting Lender” means, subject to Section 5.15(b), any Lender that (a) has failed to (i) fund all or any portion of the Revolving Credit Loans, any Term Loan, participations in L/C Obligations or participations in Swingline Loans required to be funded by it hereunder within two Business Days of the date such Loans or participations were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, any Issuing Lender, the Swingline Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swingline Loans) within two Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent, any Issuing Lender or the Swingline Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the FDIC or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-in Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such

14

 

 

 

ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.  Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 5.15(b)) upon delivery of written notice of such determination to the Borrower, each Issuing Lender, the Swingline Lender and each Lender.

“Disqualified Equity Interests” means any Equity Interests that, by their terms (or by the terms of any security or other Equity Interest into which they are convertible or for which they are exchangeable) or upon the happening of any event or condition, (a) mature or are mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments), (b) are redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests) (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments), in whole or in part, (c) provide for the scheduled payment of dividends in cash or (d) are or become convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Latest Maturity Date; provided that if such Equity Interests are issued pursuant to a plan, agreement or similar arrangement for the benefit of the Borrower or its Restricted Subsidiaries or by any such plan, agreement or similar arrangement to officers, directors, employees or consultants, such Equity Interests shall not constitute Disqualified Equity Interests solely because they may be required to be repurchased by the Borrower or its Restricted Subsidiaries in order to satisfy applicable statutory or regulatory obligations or upon a change in control or termination of employment or service.

“Dollars” or “$” means, unless otherwise qualified, dollars in lawful currency of the United States.

“Domestic Subsidiary” means any Restricted Subsidiary organized under the laws of any political subdivision of the United States that is not a Subsidiary of a Foreign Subsidiary.

“Early Opt-in Election” means the occurrence of:

(a)

(i) a determination by the Administrative Agent or (ii) a notification by the Required Lenders to the Administrative Agent (with a copy to the Borrower) that the Required Lenders have determined that U.S. dollar-denominated syndicated credit facilities being executed at such time, or that include language similar to that contained in Section 5.8(c) are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace LIBOR, and

15

 

 

 

(b)

(i) the election by the Administrative Agent or (ii) the election by the Required Lenders to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Administrative Agent of written notice of such election to the Borrower and the Lenders or by the Required Lenders of written notice of such election to the Administrative Agent.

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.  

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 12.9(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 12.9(b)(iii)).

“Employee Benefit Plan” means (a) any employee benefit plan within the meaning of Section 3(3) of ERISA that is maintained for employees of any Credit Party or any ERISA Affiliate or (b) any Pension Plan or Multiemployer Plan that has at any time within the preceding seven years been maintained, funded or administered for the employees of any Credit Party or any current or former ERISA Affiliate.

“Environmental Claims” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, accusations, allegations, orders, notices of noncompliance, violation, liability or potential liability, investigations (other than internal reports prepared by any Person in the ordinary course of business and not in response to any third party action or request of any kind) or proceedings relating in any way to any actual or alleged violation of or liability under any Environmental Law or relating to any permit issued,  any approval given or any notice provided or other Governmental Approval, under any such Environmental Law, including any and all claims, orders, directives, notices or actions by Governmental Authorities for enforcement, cleanup, removal, response, remedial, investigation, monitoring, mitigation, management or other actions or damages, natural resource damages, contribution, indemnification, cost recovery, compensation or injunctive relief relating to Hazardous Materials or arising from alleged injury or threat of injury to human health and safety (with respect to Hazardous Materials) or the environment.

“Environmental Laws” means any and all current and future international, federal, foreign, state, provincial, regional and local laws, common law, statutes, ordinances, codes, rules, standards and regulations, permits, licenses, approvals, binding agency guidance, binding interpretations and orders of courts or Governmental Authorities, relating to (i) the protection of

16

 

 

 

human health and safety (with respect to Hazardous Materials) or the environment, (ii) liability for or costs of other actual or threatened danger to human health and safety (with respect to Hazardous Materials) or the environment, (iii) requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials, or (iv)imposing conditions or requirements in connection with permits or other authorization for lawful activity with respect to the protection of human health and safety (with respect to Hazardous Materials) or the environment, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, 42 USC Sections 9601 to 9675, as amended.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt securities that are convertible into, or exchangeable for, Capital Stock).

“ERISA” means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower or any Subsidiary, is treated as a single employer under Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 or 430 of the Code or Section 302 or 303 of ERISA).

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Pension Plan (other than an event for which the 30-day notice period is waived); (b) the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, with respect to any Pension Plan; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan, the failure to make by its due date a required installment of a material amount under Section 430(j) of the IRC with respect to any Pension Plan or the failure to make any required contribution of a material amount to a Multiemployer Plan; (d) the incurrence by the Borrower or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Pension Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Pension Plan or Pension Plans or to appoint a trustee to administer any Pension Plan; (f) the incurrence by the Borrower or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal of the Borrower or any ERISA Affiliate from any Pension Plan or Multiemployer Plan; (g) the determination that a Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the IRC or Sections 303, 304 and 305 of ERISA or (h) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition upon the Borrower or any ERISA Affiliate of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.  

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor thereto), as in effect from time to time.  

17

 

 

 

“Eurodollar Reserve Percentage” means, for any day, the percentage which is in effect for such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including any basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve System in New York City.

“Event of Default” means any of the events specified in Section 10.1; provided that any requirement for passage of time, giving of notice, or any other condition, has been satisfied.

“Exchange Act” means the Securities Exchange Act of 1934.

“Excluded Subsidiary” means (a) any Domestic Subsidiary that is not a Wholly-Owned Subsidiary, (b) any Immaterial Domestic Subsidiary and any Receivables SPV, (c) any Foreign Subsidiary Holdco, (d) any Domestic Subsidiary that is owned directly or indirectly by a “controlled foreign corporation” within the meaning of Section 957 of the Code, (e) any Foreign Subsidiary, (f) any Unrestricted Subsidiary and (g) any other Domestic Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent and the Borrower, the burden or cost of making such Subsidiary a Subsidiary Guarantor outweighs the benefits to the Lenders (including as a result of adverse tax consequences) of the attendant Guarantee.  

“Excluded Swap Obligation” means, with respect to any Credit Party, any Swap Obligation if, and to the extent that, all or a portion of the liability of such Credit Party for or the guarantee of such Credit Party of, or the grant by such Credit Party of a security interest to secure, such Swap Obligation (or any liability or guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Credit Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the liability for or the guarantee of such Credit Party or the grant of such security interest becomes effective with respect to such Swap Obligation.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal for the reasons identified in the immediately preceding sentence of this definition.

“Excluded Taxes” means 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, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, United States federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 5.12(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 5.11, amounts with respect to such

18

 

 

 

Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 5.11(g) and (d) any United States federal withholding Taxes imposed under FATCA.

“Existing Class” means any Existing Term Loan Class and any Existing Revolving Credit Class.

“Existing Credit Agreement” has the meaning assigned thereto in the Statement of Purpose.

“Existing Revolving Credit Class” has the meaning assigned thereto in Section 5.16(b).  

“Existing Revolving Credit Commitment” has the meaning assigned thereto in Section 5.16(b).  

“Existing Revolving Credit Loans” has the meaning assigned thereto in Section 5.16(b).  

“Existing Term Loan Class” has the meaning assigned thereto in Section 5.16(a).  

“Extended Revolving Credit Commitments” has the meaning assigned thereto in Section 5.16(b).

“Extended Revolving Credit Loans” has the meaning assigned thereto in Section 5.16(b).

“Extended Term Loans” has the meaning assigned thereto in Section 5.16(a).  

“Extending Lender” has the meaning assigned thereto in Section 5.16(c).

“Extension Amendment” has the meaning assigned thereto in Section 5.16(d).

“Extension Date” has the meaning assigned thereto in Section 5.16(e).

“Extension Election” has the meaning assigned thereto in Section 5.16(c).

“Extension Series” means all Extended Term Loans or Extended Revolving Credit Commitments that are established pursuant to the same Extension Amendment (or any subsequent Extension Amendment to the extent such Extension Amendment expressly provides that the Extended Term Loans or Extended Revolving Credit Commitments, as applicable, provided for therein are intended to be a part of any previously established Extension Series) and that provide for the same interest margins and amortization schedule.

“Extensions of Credit” means, as to any Lender at any time, (a) an amount equal to the sum of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, (ii) such Lender’s Revolving Credit Commitment Percentage of the L/C Obligations then outstanding, (iii) such Lender’s Revolving Credit Commitment Percentage of the Swingline Loans then outstanding and (iv) the aggregate principal amount of the Term Loans

19

 

 

 

made by such Lender then outstanding, or (b) the making of any Loan or participation in any Letter of Credit by such Lender, as the context requires.

“Fair Market Value” means, with respect to any asset or property, the sale value that would be obtained in an arm’s‑length free‑market Transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the principal executive officer, the principal financial officer or principal accounting officer of the Borrower.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to such intergovernmental agreement.

“FDIC” means the Federal Deposit Insurance Corporation.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System on such day (or, if such day is not a Business Day, for the immediately preceding Business Day), as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that if such rate is not so published for any day which is a Business Day, the average of the quotation for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by the Administrative Agent.

“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.

“Fee Letter” means, collectively, (a) the feeengagement letter agreement dated August 9, 2017 amongbetween the Borrower, Wells Fargo and the Arranger, (b) the engagement letter dated January 9, 2020 between the Borrower and the Arranger and (c) any other fee letter, engagement letter, mandate letter or commitment letter executed by the Borrower, the Administrative Agent and/or the Arranger in connection with this Agreement.  

“Fiscal Quarter” means each fiscal quarter of the Borrower and its Restricted Subsidiaries ending on the last Saturday of each March, June, September and December.  

“Fiscal Year” means the fiscal year of the Borrower and its Restricted Subsidiaries ending on the last Saturday in June.  

“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) 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.

20

 

 

 

“Foreign Pledge Agreement” means a pledge agreement, charge agreement or similar agreement in form and substance reasonably acceptable to the Administrative Agent executed by the Borrower or a Subsidiary Guarantor with respect to a pledge (or equivalent thereof) of Equity Interests of a Foreign Subsidiary required by the terms of this Agreement

“Foreign Subsidiary” means any Restricted Subsidiary that is not a Domestic Subsidiary.

“Foreign Subsidiary Holdco” means any Domestic Subsidiary (a) that is disregarded as separate from its owner for United States federal income tax purposes and that owns Equity Interests of one or more Foreign Subsidiaries and/or other Foreign Subsidiary Holdcos or (b) all or substantially all of the assets of which consist of Equity Interests of one or more Foreign Subsidiaries and/or other Foreign Subsidiary Holdcos.  

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to any Issuing Lender, such Defaulting Lender’s Revolving Credit Commitment Percentage of the outstanding L/C Obligations with respect to Letters of Credit issued by such Issuing Lender, other than such L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof and (b) with respect to the Swingline Lender, such Defaulting Lender’s Revolving Credit Commitment Percentage of outstanding Swingline Loans other than Swingline Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.

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

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

“Governmental Approvals” means all authorizations, consents, approvals, permits, licenses and exemptions of, and all registrations and filings with or issued by, any Governmental Authorities.

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

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any

21

 

 

 

Indebtedness 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 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 of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness, (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or (e) for the purpose of assuming in any other manner the obligee in respect of such Indebtedness of the payment or performance thereof or to protect such obligee against loss in respect thereof (whether in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be the lesser of (i) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or (ii) the maximum amount for which the guarantor may be liable pursuant to the terms of the instrument evidencing such Guarantee, unless the amount of the primary obligation or the maximum amount for which such guarantor may be liable are not stated or determinable, in which case the amount of such Guarantee shall be the guarantor’s maximum reasonably anticipated liability in respect thereof as reasonably determined by the Borrower in good faith.

“Hazardous Materials” means any substances or materials (a) which are or become defined, listed or otherwise classified as hazardous wastes, hazardous substances, extremely hazardous wastes, or words of similar meaning or regulatory effect, pollutants, contaminants or toxic substances under any Environmental Law, (b) which are toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human health and safety or the environment and are or become regulated by any Governmental Authority, (c) the presence or potential presence of which require or may require investigation or remediation under any Environmental Law, (d) the discharge or emission or release of which requires a permit, approval, notice or license under any Environmental Law or other Governmental Approval, or (e) which contain, without limitation, asbestos, lead, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.

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

22

 

 

 

from time to time (including the foreign currency transaction(s) entered into by the Borrower on or about the Closing Date).

“Hedge Bank” means any Person that, (a) at the time it enters into a Hedge Agreement with a Credit Party permitted under Article IX, is a Lender, an Affiliate of a Lender, the Administrative Agent or an Affiliate of the Administrative Agent or (b) at the time it (or its Affiliate) becomes a Lender (including on the Closing Date), is a party to a Hedge Agreement with a Credit Party, in each case in its capacity as a party to such Hedge Agreement.

“Hedge Termination Value” means, in respect of any one or more Hedge Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedge Agreements, (a) for any date on or after the date such Hedge Agreements 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 Hedge Agreements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedge Agreements (which may include a Lender or any Affiliate of a Lender).

“Immaterial Domestic Subsidiary” means, as of any date of determination, any Domestic Subsidiary that has (a) less than $10,000,000 in tangible assets and owned intellectual property (valued at the greater of book value or Fair Market Value) and (b) less than $10,000,000 in revenues (excluding intercompany revenues) for the period of four consecutive Fiscal Quarters most recently ended for which financial statements have been delivered pursuant to Section 8.1(a) or 8.1(b); provided that any such Subsidiary that is initially an Immaterial Domestic Subsidiary shall cease to be an Immaterial Domestic Subsidiary from and after the date such Subsidiary has (x) tangible assets and owned intellectual property (valued at the greater of book value or Fair Market Value) equal to or greater than $10,000,000 or (y) revenues (excluding intercompany revenues) equal to or greater than $10,000,000 for the period of four consecutive Fiscal Quarters most recently ended for which financial statements have been delivered pursuant to Section 8.1(a) or 8.1(b).  

“Immaterial Foreign Subsidiary” means, as of any date of determination, any Foreign Subsidiary that, together with its Subsidiaries on a Consolidated basis, has (a) less than $10,000,000 in tangible assets and owned intellectual property (valued at the greater of book value or Fair Market Value) and (b) less than $10,000,000 in revenues (excluding intercompany revenues) for the period of four consecutive Fiscal Quarters most recently ended for which financial statements financial statements have been delivered pursuant to Section 8.1(a) or 8.1(b); provided that any such Subsidiary that is initially an Immaterial Foreign Subsidiary shall cease to be an Immaterial Foreign Subsidiary from and after the date such Subsidiary, together with its Subsidiaries on a Consolidated basis, has (x) tangible assets and owned intellectual property (valued at the greater of book value or Fair Market Value) equal to or greater than $10,000,000 or (y) revenues (excluding intercompany revenues) equal to or greater than $10,000,000 for the period of four consecutive Fiscal Quarters most recently ended for which financial statements have been delivered pursuant to Section 8.1(a) or 8.1(b).  

“Increased Amount Date” has the meaning assigned thereto in Section 5.13(a).

23

 

 

 

“Incremental Lender” has the meaning assigned thereto in Section 5.13(a).

“Incremental Loan Commitments” has the meaning assigned thereto in Section 5.13(a)(ii).

“Incremental Loans” has the meaning assigned thereto in Section 5.13(a)(ii).

“Incremental Revolving Credit Commitment” has the meaning assigned thereto in Section 5.13(a)(ii).

“Incremental Revolving Credit Increase” has the meaning assigned thereto in Section 5.13(a)(ii).

“Incremental Term Loan” has the meaning assigned thereto in Section 5.13(a)(i).

“Incremental Term Loan Commitment” has the meaning assigned thereto in Section 5.13(a)(i).

“Incremental Term Loan Maturity Date” means the date on which an Incremental Term Loan matures.  

“Incur” means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become directly or indirectly liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness (and “Incurrence” and “Incurred” will have meanings correlative to the foregoing); provided that any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary will be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary.  

“Indebtedness” means, with respect to any Person at any date and without duplication, the sum of the following:

(a)

all liabilities, obligations and indebtedness for borrowed money including obligations evidenced by bonds, debentures, notes or other similar instruments of any such Person;

(b)

all obligations to pay the deferred purchase price of property or services of any such Person (including all obligations under non-competition, purchase price adjustments, earn-out or similar agreements entered in connection with a Permitted Acquisition), except trade payables arising in the ordinary course of business and repayable in accordance with customary trade practices, or that are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided for on the books of such Person;

(c)

the Attributable Indebtedness of such Person with respect to such Person’s Capital Lease Obligations and Synthetic Leases (regardless of whether accounted for as indebtedness under GAAP);

24

 

 

 

(d)

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

(e)

all Indebtedness of any other Person secured by a Lien on any asset owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements except trade payables arising in the ordinary course of business), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse (but if not assumed, limited to the lesser of such Indebtedness or the value of the assets subject to such Lien);

(f)

all obligations, contingent or otherwise, of any such Person relative to the face amount of letters of credit, whether or not drawn, including any Reimbursement Obligation, and banker’s acceptances issued for the account of any such Person;

(g)

all obligations of any such Person in respect of Disqualified Equity Interests;

(h)

all net obligations of such Person under any Hedge Agreements (excluding any Convertible Related Derivatives), unless constituting interest expense (other than with respect to rate swaps); and

(i)

all Guarantees of any such Person with respect to any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is non-recourse to such Person.  The amount of any net obligation under any Hedge Agreement on any date shall be deemed to be the Hedge Termination Value thereof as of such date.

Notwithstanding the foregoing, Indebtedness shall not include any indebtedness that has been defeased in accordance with GAAP or defeased pursuant to the deposit of cash, U.S. government obligations and Cash Equivalents (sufficient to satisfy all obligations relating thereto at maturity or redemption, as applicable) in a trust or account created or pledged for the sole benefit of the holders of such indebtedness, in accordance with the terms of the instruments governing such indebtedness.

The amount of any Indebtedness outstanding as of any date will be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation.  The amount of any Indebtedness described in clause (a) above will be:

(1)

the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and

(2)

the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

25

 

 

 

For purposes of determining any particular amount of Indebtedness, Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

“Initial Issuing Lender” means Wells Fargo.  

“Initial Term Loan” means the term loan made, or to be made, to the Borrower by the Term Loan Lenders pursuant to Section 4.1.  There shall be no Initial Term Loans.

“Insurance and Condemnation Event” means the receipt by any Credit Party or any of its Restricted Subsidiaries of any cash insurance proceeds or condemnation award in excess of $2,000,000 payable by reason of theft, loss, physical destruction or damage, taking or similar event with respect to any of their respective Property.

“Interest Period” means, as to each LIBOR Rate Loan, the period commencing on the date such LIBOR Rate Loan is disbursed or converted to or continued as a LIBOR Rate Loan and ending on the date one, two, three or six months or, if agreed by all of the relevant Lenders 12 months thereafter, in each case as selected by the Borrower in its Notice of Borrowing or Notice of Conversion/Continuation and subject to availability; provided that:

(a)

the Interest Period shall commence on the date of advance of or conversion to any LIBOR Rate Loan and, in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the date on which the immediately preceding Interest Period expires;

(b)

if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that if any Interest Period with respect to a LIBOR Rate Loan would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day;

(c)

any Interest Period with respect to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month at the end of such Interest Period;

(d)

no Interest Period shall extend beyond the Revolving Credit Maturity Date or the Term Loan Maturity Date, as applicable, and Interest Periods shall be selected by the Borrower so as to permit the Borrower to make the quarterly principal installment payments pursuant to Section 4.3 without payment of any amounts pursuant to Section 5.9; and

(e)

there shall be no more than ten Interest Periods in effect at any time.  

“IRS” means the United States Internal Revenue Service.

26

 

 

 

“ISP98” means the International Standby Practices (1998 Revision, effective January 1, 1999), International Chamber of Commerce Publication No. 590.

“Issuing Lender” means (a) the Initial Issuing Lender and (b) any other Revolving Credit Lender to the extent it has agreed in its sole discretion to act as an “Issuing Lender” hereunder and has been approved in writing by the Borrower and the Administrative Agent (such approval by the Administrative Agent not to be unreasonably delayed or withheld) as an “Issuing Lender” hereunder, in each case in its capacity as issuer of any Letter of Credit.  

“Latest Maturity Date” means the latest maturity date of any Class of Loan or Commitment hereunder.  

“L/C Commitment” means, as to any Issuing Lender, the obligation of such Issuing Lender to issue Letters of Credit for the account of the Borrower or one or more of its Restricted Subsidiaries from time to time in an aggregate amount equal to (a) for the Initial Issuing Lender, $20,000,000 and (b) for any other Issuing Lender becoming an Issuing Lender after the Closing Date, such amount as separately agreed to in a written agreement between the Borrower and such Issuing Lender (which such agreement shall be promptly delivered to the Administrative Agent upon execution), in each case of clauses (a) and (b) above, any such amount may be changed after the Closing Date in a written agreement between the Borrower and such Issuing Lender (which such agreement shall be promptly delivered to the Administrative Agent upon execution).  

“L/C Facility” means the letter of credit facility established pursuant to Article III.

“L/C Obligations” means at any time, an amount equal to the sum of (a) the aggregate undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit that have not then been reimbursed pursuant to Section 3.5.

“L/C Participants” means, with respect to any Letter of Credit, the collective reference to all the Revolving Credit Lenders other than the applicable Issuing Lender.

“L/C Sublimit” means the lesser of (a) $20,000,000 and (b) the Revolving Credit Commitment.  The L/C Sublimit is a part of, and not in addition to, the Revolving Credit Commitment.  

“Lender” means each Person executing this Agreement as a Lender on the Closing Date and any other Person that shall have become a party to this Agreement as a Lender pursuant to an Assignment and Assumption or pursuant to Section 5.13, other than any Person that ceases to be a party hereto as a Lender pursuant to an Assignment and Assumption.  Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender.

“Lender Joinder Agreement” means a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent delivered in connection with Section 5.13.

“Lending Office” means, with respect to any Lender, the office of such Lender maintaining such Lender’s Extensions of Credit.

27

 

 

 

“Letter of Credit Application” means an application, in the form specified by the applicable Issuing Lender from time to time, requesting such Issuing Lender to issue a Letter of Credit.

“Letters of Credit” means the collective reference to letters of credit issued pursuant to Section 3.1.  Notwithstanding anything to the contrary contained herein, a letter of credit issued by any Issuing Lender (other than Wells Fargo at any time it is also acting as Administrative Agent) shall not be a “Letter of Credit” for purposes of the Loan Documents until such time as the Administrative Agent has been notified in writing of the issuance thereof by the applicable Issuing Lender.

“Letter of Credit Expiration Date” means the date that is 30 days prior to the Revolving Credit Maturity Date (or if such day is not a Business Day, the next preceding Business Day).  

“LIBOR” means, subject to the implementation of a Benchmark Replacement in accordance with Section 5.8(c):

(a)       for any interest rate calculation with respect to a LIBOR Rate Loan, the rate of interest per annum determined on the basis of the rate for deposits in Dollars for a period equal to the applicable Interest Period which appears on Reuters Screen LIBOR01 Page (or any applicable successor page)as published by the ICE Benchmark Administration Limited, a United Kingdom company, or a comparable or successor rate, which rate isquoting service approved by the Administrative Agent, at approximately 11:00 a.m. (London time) two London Banking Days prior to the first day of the applicable Interest Period.  If, for any reason, such rate doesis not appear on Reuters Screen LIBOR01 Page (or any applicable successor page),so published then “LIBOR” shall be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) two London Banking Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period.

(b)       for any interest rate calculation with respect to a Base Rate Loan, the rate of interest per annum determined on the basis of the rate for deposits in Dollars for an Interest Period equal to one month (commencing on the date of determination of such interest rate) which appears on the Reuters Screen LIBOR01 Page (or any applicable successor page)as published by ICE Benchmark Administration Limited, a United Kingdom company, or a comparable or successor rate, which rate isquoting service approved by the Administrative Agent, at approximately 11:00 a.m. (London time) on such date of determination, or, if such date is not a Business Day, then the immediately preceding Business Day.  If, for any reason, such rate doesis not appear on Reuters Screen LIBOR01 Page (or any applicable successor page)so published then “LIBOR” for such Base Rate Loan shall be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) on such date of determination for a period equal to one month commencing on such date of determination.

28

 

 

 

Each calculation by the Administrative Agent of LIBOR shall be conclusive and binding for all purposes, absent manifest error. To the extent a comparable or successor rate is approved by the Administrative Agent in connection herewith, the approved rate shall be applied to the then applicable Interest Period in a manner consistent with market practice as reasonably determined by the Administrative Agent (upon consultation with the Borrower); provided that if such market practice is reasonably determined by the Administrative Agent to not be administratively feasible, such approved rate shall be applied in a manner reasonably determined by the Administrative Agent (upon consultation with the Borrower). Each calculation by the Administrative Agent of LIBOR shall be conclusive and binding for all purposes, absent manifest error.

Notwithstanding the foregoing, (x) if LIBOR (including any Benchmark Replacement with respect thereto) is less than 0%, such rate will be deemed 0% for purposes of this Agreement and (y) unless otherwise specified in any amendment to this Agreement entered into in accordance with Section 5.8(c), in the event that a Benchmark Replacement with respect to LIBOR is implemented then all references herein to LIBOR shall be deemed references to such Benchmark Replacement.

“LIBOR Rate” means a rate per annum determined by the Administrative Agent pursuant to the following formula:

LIBOR Rate =

LIBOR

 

1.00-Eurodollar Reserve Percentage

 

Notwithstanding the foregoing, if the LIBOR Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“LIBOR Rate Loan” means any Loan bearing interest at a rate based upon the LIBOR Rate as provided in Section 5.1(a).

“Lien” means, with respect to any asset, any mortgage, leasehold mortgage, lien, pledge, charge, security interest, hypothecation or encumbrance of any kind in respect of such asset.

“Loan Documents” means, collectively, this Agreement, each Note, the Letter of Credit Applications, the Security Documents, the Subsidiary Guaranty Agreement, the Fee Letter and the Amendment and Restatement Agreement, all as may be amended, restated, supplemented or otherwise modified from time to time, but for the avoidance of doubt excluding any Secured Hedge Agreement and any Secured Cash Management Agreement.

“Loans” means the collective reference to the Revolving Credit Loans, the Term Loans and the Swingline Loans (including any Initial Term Loans, any Incremental Loans, any Extended Term Loans and any Extended Revolving Credit Loans) and “Loan” means any of such Loans.

“London Banking Day” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank Eurodollar market.

29

 

 

 

“Material Acquisition” means a Permitted Acquisition the aggregate consideration for which equals or exceeds $150,000,000, other than the Specified Acquisition.

“Material Adverse Effect” means, with respect to the Borrower and its Restricted Subsidiaries, (a) a material adverse effect on the operations, business, assets, properties, liabilities (actual or contingent) or financial condition of such Persons, taken as a whole, (b) a material impairment of the ability of such Persons, taken as a whole, to perform their material obligations under the Loan Documents, (c) a material impairment of the rights and remedies of the Administrative Agent or any Lender under the Loan Documents, taken as a whole or (d) a material adverse effect on the legality, validity, binding effect or enforceability against any Credit Party of any material Loan Document to which it is a party.

“Material Contract” means any “material contracts” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) with respect to the Borrower or any of its Subsidiaries.

“Material First Tier Foreign Subsidiary” means any Foreign Subsidiary that is (a) directly owned by a Credit Party and (b) not an Immaterial Foreign Subsidiary.  On the Closing Date, Synaptics GmbH is the only Material First Tier Foreign Subsidiary.

“Maturity Date” means the Term Loan Maturity Date, the Incremental Term Loan Maturity Date or the Revolving Credit Maturity Date, as applicable.

“Minimum Collateral Amount” means, at any time, (a) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to 103% of the sum of (i) the Fronting Exposure of each applicable Issuing Lender with respect to Letters of Credit issued and outstanding at such time and (ii) the Fronting Exposure of the Swingline Lender with respect to all Swingline Loans outstanding at such time and (b) otherwise, an amount reasonably determined by the Administrative Agent and each of the applicable Issuing Lenders that is entitled to Cash Collateral hereunder.

“MNPI” means material non-public information within the meaning of the United States federal securities laws.

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which any Credit Party or any ERISA Affiliate is making, or is accruing an obligation to make, or has accrued an obligation to make contributions within the preceding seven years.

“Net Cash Proceeds” means, as applicable, (a) with respect to any Asset Disposition or Insurance and Condemnation Event, the gross proceeds received by any Credit Party or any of its Restricted Subsidiaries therefrom (including any cash, Cash Equivalents, deferred payment pursuant to, or by monetization of, a note receivable or otherwise, as and when received) less the sum of (i) in the case of an Asset Disposition, all income taxes and other taxes assessed by, or reasonably estimated to be payable to, a Governmental Authority as a result of such transaction (provided that if such estimated taxes exceed the amount of actual taxes required to be paid in cash in respect of such Asset Disposition, the amount of such excess shall constitute Net Cash

30

 

 

 

Proceeds), (ii) all reasonable and customary out-of-pocket fees and expenses incurred in connection with such transaction or event and (iii) the principal amount of, premium, if any, and interest on any Indebtedness secured by a Lien on the asset (or a portion thereof) disposed of, which Indebtedness is required to be repaid in connection with such transaction or event, and (b) with respect to any Debt Issuance or equity issuance, the gross cash proceeds received by any Credit Party or any of its Restricted Subsidiaries therefrom less all reasonable and customary out-of-pocket legal, underwriting and other fees and expenses incurred in connection therewith.

“Non-Consenting Lender” means any Lender that does not approve any consent, waiver, amendment, modification or termination that (a) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 12.2 and (b) has been approved by the Required Lenders.

“Non-Credit Party” means any Restricted Subsidiary of the Borrower that is not a Subsidiary Guarantor.

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

“Non-Pledged Subsidiaries” means, at any time, (i) all Immaterial Domestic Subsidiaries who are not Subsidiary Guarantors and (ii) all Immaterial Foreign Subsidiaries that are directly owned by a Credit Party who are not Pledged Foreign Subsidiaries.  

“Notes” means the collective reference to the Revolving Credit Notes, the Swingline Note and the Term Loan Notes.

“Notice of Account Designation” has the meaning assigned thereto in Section 2.3(b).

“Notice of Borrowing” has the meaning assigned thereto in Section 2.3(a).

“Notice of Conversion/Continuation” has the meaning assigned thereto in Section 5.2.

“Notice of Prepayment” has the meaning assigned thereto in Section 2.4(c).

“Obligations” means, in each case, whether now in existence or hereafter arising:  (a) the principal of and interest on (including interest accruing after the filing of any bankruptcy or similar petition) the Loans, (b) the L/C Obligations and (c) all other fees and commissions (including attorneys’ fees), charges, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Credit Parties to the Lenders, the Issuing Lenders or the Administrative Agent, in each case under any Loan Document, with respect to any Loan or Letter of Credit of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note and including interest and fees that accrue after the commencement by or against any Credit Party of any proceeding under any Debtor Relief Laws, naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

31

 

 

 

“Officer’s Compliance Certificate” means a certificate of the chief executive officer, controller, chief financial officer or the treasurer of the Borrower substantially in the form attached as Exhibit F.  

“Operating Lease” means, as to any Person, any lease of Property (whether real, personal or mixed) by such Person as lessee that is not a Capital Lease.

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

“Other Taxes” means all present or future stamp, court, 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 5.12).

“Participant” has the meaning assigned thereto in Section 12.9(d).

“Participant Register” has the meaning assigned thereto in Section 12.9(d).

“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (a) is maintained, funded or administered for the employees of any Credit Party or any ERISA Affiliate or (b) has at any time within the preceding seven years been maintained, funded or administered for the employees of any Credit Party or any current or former ERISA Affiliates.

“Permitted Acquisition” means any acquisition by the Borrower or any Restricted Subsidiary in the form of the acquisition of all or substantially all of the assets, business or a line of business, or at least a majority of the outstanding Equity Interests which have the ordinary voting power for the election of directors of the Board of Directors (whether through purchase, merger or otherwise), of any other Person if each such acquisition meets all of the following requirements:

(a)

no less than five Business Days (or such shorter period as shall be permitted by the Administrative Agent in its sole discretion) prior to the proposed closing date of such acquisition, the Borrower shall have delivered written notice of such acquisition to the Administrative Agent and the Lenders, which notice shall include the proposed closing date of such acquisition (but such acquisition is not required to close on such date);

32

 

 

 

(b)

the Borrower shall have certified in writing on or before the closing date of such acquisition that such acquisition has been approved by the Board of Directors of the Person to be acquired;

(c)

the Person or business to be acquired shall be in a line of business permitted pursuant to Section 9.11 or, in the case of an acquisition of assets, assets useful in the business of the Borrower and its Subsidiaries;

(d)

the Borrower shall have delivered to the Administrative Agent all documents required to be delivered pursuant to, and in accordance with, Section 8.13;

(e)

for an acquisition (other than the Specified Acquisition) the consideration for which is greater than $50,000,000, no later than three Business Days (or such shorter period as shall be permitted by the Administrative Agent in its sole discretion) prior to the proposed closing date of such acquisition, the Borrower shall have delivered to the Administrative Agent an Officer’s Compliance Certificate for the most recent Fiscal Quarter end preceding such acquisition for which financial statements have been delivered pursuant to Section 8.1(a) or 8.1(b) demonstrating, in form and substance reasonably satisfactory to the Administrative Agent, that the Borrower is in compliance on a Pro Forma Basis (as of the date of the acquisition and after giving effect thereto and any Indebtedness Incurred in connection therewith) with each covenant contained in Section 9.15;

(f)

no Event of Default under Section 10.1(a), (b), (i) or (j) shall have occurred and be continuing both before and after giving effect to such acquisition and any Indebtedness Incurred in connection therewith; and  

(g)

for an acquisition the consideration for which is greater than $50,000,000, the Borrower shall have (i) delivered to the Administrative Agent a certificate of a Responsible Officer certifying that all of the requirements set forth above have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition and (ii) provided such other documents and other information as may be reasonably requested by the Administrative Agent in connection with such purchase or acquisition.

“Permitted Acquisition Documents” means with respect to any acquisition proposed by the Borrower, any Subsidiary Guarantor or any Pledged Foreign Subsidiary, final copies or substantially final drafts if not executed at the required time of delivery of the purchase agreement, sale agreement, merger agreement or other agreement evidencing such acquisition, including all legal opinions and each other document executed, delivered, contemplated by or prepared in connection therewith and any amendment, modification or supplement to any of the foregoing.

“Permitted A/R Financing” means a financing of a Credit Party’s accounts receivable (including by way of advance, sale or other means, and either directly or through a special purpose vehicle of a Credit Party) with an unaffiliated third party on an arm’s length basis that is consummated no fewer than 85 days since the date of any prior Permitted A/R Financing, provided that (x) the aggregate unpaid amount of accounts receivable transferred in connection with all Permitted A/R Financings in any Fiscal Quarter shall not exceed $50,000,000, (y) any

33

 

 

 

Liens incurred in a Permitted A/R Financing shall not encumber the Property of any Credit Party (other than customary precautionary fall-back Liens covering only the accounts receivable and Related Assets subject to such Permitted A/R Financing) and (z) no such financing shall be consummated during the continuance of a Default or Event of Default.  

“Permitted Liens” means the Liens permitted pursuant to Section 9.2.

“Permitted Stock Repurchase” means any repurchase of the Qualified Equity Interests of the Borrower permitted under Section 9.6(d).

“Person” means any individual, natural person, company, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization or other business entity (including a division or series of any of the foregoing) or government or any agency or political subdivision thereof.

“Platform” has the meaning assigned thereto in Section 8.2.

“Pledged Foreign Subsidiary” means a Foreign Subsidiary of the Borrower or any Subsidiary Guarantor for which the Administrative Agent has received a Foreign Pledge Agreement from the Borrower or such Subsidiary Guarantor, as applicable, with respect to 65% of the total outstanding voting Equity Interests (and 100% of the non-voting Equity Interests) of such Foreign Subsidiary and such Foreign Pledge Agreement is in full force and effect and the Borrower or such Subsidiary Guarantor, as applicable, shall have satisfied all actions and requirements related to such Foreign Pledge Agreement (including delivery of stock certificates, where applicable).

“Prime Rate” means, at any time, the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate.  Each change in the Prime Rate shall be effective as of the opening of business on the day such change in such prime rate occurs.  The parties hereto acknowledge that the rate announced publicly by the Administrative Agent as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks.

“Pro Forma Basis” means with respect to any determination of the Consolidated Total Leverage Ratio, the Consolidated Interest Coverage Ratio or Consolidated EBITDA (including, in each case, component definitions thereof) that all Specified Transactions and the following transactions in connection therewith shall be deemed to have occurred as of the first day of the applicable period with respect to any test or covenant for which such calculation is being made: (a) income statement items (whether positive or negative) attributable to the property or Person subject to such Specified Transaction, (i) in the case of a Specified Disposition or any designation of a Restricted Subsidiary as an Unrestricted Subsidiary, shall be excluded, and (ii) in the case of a Permitted Acquisition or designation of an Unrestricted Subsidiary as a Restricted Subsidiary described in the definition of the term “Specified Transaction”, shall be included, (b) any retirement or repayment of Indebtedness (other than normal fluctuations in revolving Indebtedness Incurred for working capital purposes) and (c) any Indebtedness Incurred or assumed by the Borrower or any of its Restricted Subsidiaries in connection therewith, provided that, (x) if such Indebtedness has a floating or formula rate, such Indebtedness shall

34

 

 

 

have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate that is or would be in effect with respect to such Indebtedness at the relevant date of determination (taking into account any interest hedging arrangements applicable to such Indebtedness), (y) interest on any obligations with respect to Capital Leases shall be deemed to accrue at an interest rate reasonably determined by a Responsible Officer of the Borrower to be the rate of interest implicit in such obligation in accordance with GAAP and (z) interest on any Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a Eurocurrency interbank offered rate or other rate shall be determined to have been based upon the rate actually chosen, or if none, then based upon such optional rate chosen as the Borrower or such Restricted Subsidiary may designate.   Any calculation of the Consolidated Total Leverage Ratio on a Pro Forma Basis shall be made using Consolidated Total Indebtedness as of such date of calculation, and Consolidated EBITDA for the four consecutive Fiscal Quarter period most recently ended for which the Borrower has delivered financial statements pursuant to Section 8.1(a) or 8.1(b).  

“Property” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including Equity Interests.

“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

“Public Lenders” has the meaning assigned thereto in Section 8.2.

“Qualified Equity Interests” means any Equity Interests that are not Disqualified Equity Interests.

“Rating Agencies” means (a) S&P and Moody’s and (b) any other nationally recognized U.S. rating agency or agencies, as the case may be, approved by the Borrower.

“Reaffirmation of Foreign Pledge Agreement” means that certain Reaffirmation of Foreign Pledge Agreement, dated as of September 27, 2017 by and between Synaptics International, Inc. and the Administrative Agent.

“Receivables SPV” means a special purpose vehicle formed by a Credit Party for the exclusive purpose of effecting a Permitted A/R Financing, which entity has no assets other than those necessary to effect such Permitted A/R Financing.

“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) any Issuing Lender, as applicable.

“Register” has the meaning assigned thereto in Section 12.9(c).

“Reimbursement Obligation” means the obligation of the Borrower to reimburse any Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit issued by such Issuing Lender.

“Related Assets” means any assets that are customarily sold, transferred and/or pledged or in respect of which security interests are customarily granted in connection with accounts

35

 

 

 

receivable securitizations or accounts receivables purchase or factoring transactions and any collections or proceeds of any of the foregoing (including guaranties, collateral security, lock-boxes, deposit accounts, records in respect of accounts receivable and collections in respect of accounts receivable).

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

“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

“Required Lenders” means, at any time, Lenders having Total Credit Exposures representing more than 50% of the Total Credit Exposures of all Lenders.  The Total Credit Exposure of any Defaulting Lender shall be disregarded in determining Required Lenders at any time.  Notwithstanding the foregoing, Required Lenders shall comprise no less than two such Lenders that are not Affiliates of one another, unless (x) all Lenders that are not Defaulting Lenders are Affiliates of one another or (y) there is only one Lender that is not a Defaulting Lender, at such time.  

“Required Revolving Credit Lenders” means, at any date, any combination of Revolving Credit Lenders holding more than 50% of the sum of the aggregate amount of the Revolving Credit Commitment or, if the Revolving Credit Commitment has been terminated, any combination of Revolving Credit Lenders holding more than 50% of the aggregate Extensions of Credit under the Revolving Credit Facility; provided that the Revolving Credit Commitment of, and the portion of the Extensions of Credit under the Revolving Credit Facility, as applicable, held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Revolving Credit Lenders.  Notwithstanding the foregoing, Required Revolving Credit Lenders shall comprise no less than two such Revolving Credit Lenders that are not Affiliates of one another, unless (x) all Revolving Credit Lenders that are not Defaulting Lenders are Affiliates of one another or (y) there is only one Revolving Credit Lender that is not a Defaulting Lender, at such time.

“Responsible Officer” means, as to any Person, the chief executive officer, president, vice president, chief financial officer, secretary or assistant secretary, controller, treasurer or assistant treasurer of such Person or any other officer of such Person designated in writing by the Borrower and reasonably acceptable to the Administrative Agent.  Any document delivered hereunder or under any other Loan Document that is signed by a Responsible Officer of a Person shall be conclusively presumed to have been authorized by all necessary corporate, limited liability company, partnership and/or other action on the part of such Person and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Person.

“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

“Restricted Payment” has the meaning assigned thereto in Section 9.6.

36

 

 

 

“Restricted Subsidiary” means any Subsidiary of the Borrower that is not an Unrestricted Subsidiary.

“Revolving Credit Commitment” means (a) as to any Revolving Credit Lender, the obligation of such Revolving Credit Lender to make Revolving Credit Loans to, and to purchase participations in L/C Obligations and Swingline Loans for the account of, the Borrower hereunder in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Revolving Credit Lender’s name on the Register, as such amount may be modified at any time or from time to time pursuant to the terms hereof (including Section 5.13) and (b) as to all Revolving Credit Lenders, the aggregate commitment of all Revolving Credit Lenders to make Revolving Credit Loans, as such amount may be modified at any time or from time to time pursuant to the terms hereof (including Section 5.13).  The aggregate Revolving Credit Commitment of all the Revolving Credit Lenders on the Closing Date is $200,000,000.  The initial Revolving Credit Commitment of each Revolving Credit Lender is set forth opposite the name of such Lender on Schedule 1.1.

“Revolving Credit Commitment Percentage” means, with respect to any Revolving Credit Lender at any time, the percentage of the total Revolving Credit Commitments of all the Revolving Credit Lenders represented by such Revolving Credit Lender’s Revolving Credit Commitment.  If the Revolving Credit Commitments have terminated or expired, the Revolving Credit Commitment Percentages shall be determined based upon the Revolving Credit Commitments most recently in effect, giving effect to any assignments.  The initial Revolving Credit Commitment Percentage of each Revolving Credit Lender is set forth opposite the name of such Lender on Schedule 1.1.

“Revolving Credit Exposure” means, as to any Revolving Credit Lender at any time, the aggregate principal amount at such time of its outstanding Revolving Credit Loans and such Revolving Credit Lender’s participation in L/C Obligations and Swingline Loans at such time.

“Revolving Credit Extension Request” has the meaning assigned thereto in Section 5.16(b).  

“Revolving Credit Facility” means the revolving credit facility established pursuant to Article II (including any increase in such revolving credit facility established pursuant to Section 5.13 and each Extension Series of Extended Revolving Credit Commitments).  

“Revolving Credit Lenders” means, collectively, all of the Lenders with a Revolving Credit Commitment.

“Revolving Credit Loan” means any revolving loan made to the Borrower pursuant to Section 2.1 (including any Extended Revolving Credit Loans), and all such revolving loans collectively as the context requires.

“Revolving Credit Maturity Date” means (a) for any Revolving Credit Loans that are not Extended Revolving Credit Loans, the earlier of (i) September 27, 2022 and (ii) the date 91 days prior to the then existing maturity date of the Closing Date Convertible Debt if such Convertible Debt is still outstanding on such date,Springing Maturity Date and (b) the final maturity date as

37

 

 

 

specified in the applicable Extension Amendment for any tranche of Extended Revolving Credit Loans.  

“Revolving Credit Note” means a promissory note made by the Borrower in favor of a Revolving Credit Lender evidencing the Revolving Credit Loans made by such Revolving Credit Lender, substantially in the form attached as Exhibit A-1, and any amendments, supplements and modifications thereto, and any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.

“Revolving Credit Outstandings” means the sum of (a) with respect to Revolving Credit Loans and Swingline Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Revolving Credit Loans and Swingline Loans, as the case may be, occurring on such date; plus (b) with respect to any L/C Obligations on any date, the aggregate outstanding amount thereof on such date after giving effect to any Extensions of Credit occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date.

“S&P” means Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial and any successor thereto.

“Sanctioned Country” means a country subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx, or as otherwise published from time to time.

“Sanctioned Person” means (a) a Person named on the “Specially Designated Nationals List” maintained by OFAC available at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx, or as otherwise published from time to time, (b) a Person named on the sanctions lists maintained by the United Nations Security Council available at http://www.un.org/sc/committees/list_compend.shtml, or as otherwise published from time to time, (c) a Person named on the lists maintained by the European Union available at http://eeas.europa.eu/cfsp/sanctions/consol-list_en.htm, or as otherwise published from time to time, (d) a Person named on the lists maintained by Her Majesty’s Treasury available at http://www.hm-treasury.gov.uk/fin_sanctions_index.htm, or as otherwise published from time to time, or (e) to the extent explicitly or implicitly covered by a sanctions program administered by OFAC, (i) an agency of the government of a Sanctioned Country, (ii) an organization controlled by a Sanctioned Country, or (iii) a person resident in a Sanctioned Country.  

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

“Secured Cash Management Agreement” means any Cash Management Agreement between or among any Credit Party and any Cash Management Bank.

“Secured Hedge Agreement” means any Hedge Agreement between or among any Credit Party and any Hedge Bank.

38

 

 

 

“Secured Obligations” means, collectively, (a) the Obligations and (b) all existing or future payment and other obligations owing by any Credit Party under (i) any Secured Hedge Agreement (other than an Excluded Swap Obligation) and (ii) any Secured Cash Management Agreement.

“Secured Parties” means, collectively, the Administrative Agent, the Lenders, the Issuing Lenders, the Swingline Lender, the Hedge Banks that are parties to Secured Hedge Agreements, the Cash Management Banks that are parties to Secured Cash Management Agreements, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 11.5, any other holder from time to time of any of any Secured Obligations and, in each case, their respective successors and permitted assigns.

“Security Documents” means the collective reference to the Collateral Agreement, each Foreign Pledge Agreement, each Control Agreement and each other agreement or writing pursuant to which any Credit Party pledges or grants a security interest in any Property or assets securing the Secured Obligations.

“SOFR” with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the sum of the debt and liabilities (including contingent liabilities) of the Person and its Subsidiaries, taken as a whole, does not exceed the present fair saleable value of the assets (at a fair valuation) of the Person and its Subsidiaries, taken as a whole; (b) the capital of the Person and its Subsidiaries, taken as a whole, is not unreasonably small in relation to the business of the Person and its Subsidiaries, taken as a whole, contemplated as of the date hereof; and (c) the Person and its Subsidiaries, taken as a whole, do not intend to incur, or believe that they will incur, debts or liabilities including current obligations beyond their ability to pay such debt as they come due.  For the purposes hereof, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

“Specified Disposition” means any disposition of all or substantially all of the assets or Equity Interests of any Restricted Subsidiary of the Borrower or any division, business unit, product line or line of business.

“Specified Leverage” means 2.25:1.00.

“Specified Representations” means the representations and warranties made by the Credit Parties in Section 7.1, Section 7.2(b) (solely with respect to Liens (i) in the Equity Interests of any Domestic Subsidiary of the Borrower and (ii) in other assets with respect to which a Lien may be perfected by the filing of a financing statement under the Uniform Commercial Code or the filing of a security agreement with the United States Copyright Office or the United States

39

 

 

 

Patent and Trademark Office), Section 7.3, Section 7.4(a), Section 7.4(b), Section 7.10, Section 7.11, Section 7.15 and Section 7.18.  

“Specified Transactions” means (a) any Specified Disposition, (b) any Permitted Acquisition, (c) the Transactions, (d) any designation of a Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary and (e) any other event that by the terms of the Loan Documents requires pro forma compliance with a test or covenant hereunder or requires such test or covenant to be calculated on a Pro Forma Basis.  

“Springing Maturity Calculation Date” means the date 120 days prior to the then existing maturity date of the Closing Date Convertible Debt.

“Springing Maturity Date” means, so long as the Closing Date Convertible Debt is still outstanding on such date, the date 91 days prior to the then existing maturity date of the Closing Date Convertible Debt; provided that the Springing Maturity Date shall not apply if (x) on the Springing Maturity Calculation Date, (A) the sum of (1) the aggregate amount of unrestricted cash and Cash Equivalents of the Credit Parties plus (2) the unused portion of the aggregate Revolving Credit Commitment available to be drawn is equal to or greater than (B) the aggregate outstanding principal amount of the Closing Date Convertible Debt (excluding the outstanding principal amount of any such Closing Date Convertible Debt that has been called for redemption and the redemption price for which has been deposited with the indenture trustee), (y) on the Springing Maturity Calculation Date, the ratio of (1) Consolidated Total Indebtedness on such date to (b) Consolidated EBITDA for the four consecutive Fiscal Quarter period most recently ended for which the Borrower has delivered financial statements pursuant to Section 8.1(a) or 8.1(b) is less than 3.50:1.00 and (z) within ten Business Days after the Springing Maturity Calculation Date, the Borrower shall have provided to the Administrative Agent and the Lenders a certificate signed by the chief financial officer of the Borrower (including reasonably detailed calculations) with respect to compliance with the conditions described in the preceding clauses (x) and (y) as of the Springing Maturity Calculation Date.

“Subordinated Indebtedness” means the collective reference to any Indebtedness Incurred by the Borrower or any of its Restricted Subsidiaries that is subordinated in right and time of payment to the Obligations on terms and conditions reasonably satisfactory to the Administrative Agent.

“Subsidiary” means as to any Person, any corporation, partnership, limited liability company or other entity of which more than 50% of the outstanding Equity Interests having ordinary voting power to elect a majority of the Board of Directors or other managers of such corporation, partnership, limited liability company or other entity is at the time owned by (directly or indirectly) or the management is otherwise controlled by (directly or indirectly) such Person (irrespective of whether, at the time, Equity Interests of any other class or classes of such corporation, partnership, limited liability company or other entity shall have or might have voting power by reason of the happening of any contingency).  Unless otherwise qualified, references to “Subsidiary” or “Subsidiaries” herein shall refer to those of the Borrower.

40

 

 

 

“Subsidiary Guarantors” means, collectively, all direct and indirect Domestic Subsidiaries of the Borrower (other than Excluded Subsidiaries) in existence on the Closing Date or which become a party to the Subsidiary Guaranty Agreement pursuant to Section 8.13.

“Subsidiary Guaranty Agreement” means the unconditional guaranty agreement dated as of September 30, 2014 executed by the Subsidiary Guarantors in favor of the Administrative Agent, for the benefit and the Secured Parties.

“Swap Obligation” means, with respect to any Subsidiary Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

“Swingline Commitment” means the lesser of (a) $20,000,000 and (b) the Revolving Credit Commitment.

“Swingline Facility” means the swingline facility established pursuant to Section 2.2.

“Swingline Lender” means Wells Fargo in its capacity as swingline lender hereunder or any successor thereto.

“Swingline Loan” means any swingline loan made by the Swingline Lender to the Borrower pursuant to Section 2.2, and all such swingline loans collectively as the context requires.

“Swingline Maturity Date” means the date that is five Business Days prior to the Revolving Credit Maturity Date.

“Swingline Note” means a promissory note made by the Borrower in favor of the Swingline Lender evidencing the Swingline Loans made by the Swingline Lender, substantially in the form attached as Exhibit A-2, and any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.

“Synaptics GmbH” means Synaptics Holding GmbH, a Swiss Gesellschaft mit beschränkter Haftung.  

“Synthetic Lease” means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease in accordance with GAAP.

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

“Term Loan Commitment” means (a) as to any Term Loan Lender, the obligation of such Term Loan Lender to make a portion of the Initial Term Loan and/or Incremental Term Loans, as applicable, to the account of the Borrower hereunder on the Closing Date (in the case of the

41

 

 

 

Initial Term Loan) or the applicable borrowing date (in the case of any Incremental Term Loan) in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on the Register, as such amount may be increased, reduced or otherwise modified at any time or from time to time pursuant to the terms hereof and (b) as to all Term Loan Lenders, the aggregate commitment of all Term Loan Lenders to make such Term Loans.  The aggregate Term Loan Commitment with respect to the Initial Term Loan of all Term Loan Lenders on the Closing Date is $0, as there are no Commitments to make Term Loans hereunder and none are permitted.  

“Term Loan Extension Request” has the meaning assigned thereto in Section 5.16(b).  

“Term Loan Facility” means any term loan facility established pursuant to Article IV (including any new term loan facility established pursuant to Section 5.13).

“Term Loan Installment Date” means the last Business Day of each Fiscal Quarter.  

“Term Loan Lender” means any Lender with a Term Loan Commitment and/or outstanding Term Loans.

“Term Loan Maturity Date” shall have no meaning hereunder and shall be disregarded where it appears.  

“Term Loan Note” means a promissory note made by the Borrower in favor of a Term Loan Lender evidencing the portion of the Term Loans made by such Term Loan Lender, substantially in the form attached as Exhibit A-3, and any amendments, supplements and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.

“Term Loan Percentage” means, with respect to any Term Loan Lender at any time, the percentage of the total outstanding principal balance of the Term Loans represented by the outstanding principal balance of such Term Loan Lender’s Term Loans.  

“Term Loans” means the Initial Term Loans and, if applicable, the Incremental Term Loans and Extended Term Loans and “Term Loan” means any of such Term Loans.

“Term SOFR” means the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.  

“Threshold Amount” means $50,000,000.

“Total Credit Exposure” means, as to any Lender at any time, the unused Commitments, Revolving Credit Exposure and outstanding Term Loans of such Lender at such time.

“Transaction Costs” means all transaction fees, charges, premiums and other amounts related to (a) the Transactions, (b) any Permitted Acquisitions or (c) other Investments, Asset Dispositions, issuances of Equity Interests or incurrences of Indebtedness, in each case under this clause (c) if in excess of the Threshold Amount (including any financing fees, merger and acquisition fees, legal fees and expenses, due diligence fees or any other fees and expenses in

42

 

 

 

connection therewith), in each case to the extent paid within one year of the Closing Date or closing of the relevant transaction and, in each case, regardless of whether or not such transaction was actually consummated if such transaction would have been permitted under this Agreement.  

“Transactions” means, collectively, (a) the transactions contemplated by the Amendment and Restatement Agreement, (b) the initial Extensions of Credit, and (c) the payment of the Transaction Costs incurred in connection with the foregoing.

“UCC” means the Uniform Commercial Code as in effect in the State of New York.

“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person subject to IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

“Uniform Customs” means the Uniform Customs and Practice for Documentary Credits (2007 Revision), effective July, 2007 International Chamber of Commerce Publication No. 600.

“United States” means the United States of America.

“Unrestricted Subsidiary” means any Subsidiary of the Borrower designated by the Borrower as an Unrestricted Subsidiary pursuant to Section 8.14 subsequent to the Closing Date.

“U.S. Borrower” means any Borrower that is a U.S. Person.

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

“U.S. Tax Compliance Certificate” has the meaning assigned thereto in Section 5.11(g).

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association.

“Wholly-Owned Subsidiary” means, with respect to any specified Person, a Restricted Subsidiary of such Person all of the outstanding Equity Interests of which (other than directors’ qualifying shares) are, directly or indirectly, owned or controlled by such Person or by one or more Wholly Owned Subsidiaries of such Person.

43

 

 

 

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Agent” means any Credit Party and the Administrative Agent.

“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

SECTION 1.2.Other Definitions and Provisions

.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:  (a) the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined, (b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms, (c) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (d) the word “will” shall be construed to have the same meaning and effect as the word “shall”, (e) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (f) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (g) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (h) 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, (i) the term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form, (j) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”, and (k) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

SECTION 1.3.Accounting Terms

.

(a)All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with GAAP, applied on a consistent basis, as in effect from time to time and in a manner consistent with that used in preparing the audited financial statements required by

44

 

 

 

Section 8.1(a), except as otherwise specifically prescribed herein.  Notwithstanding the foregoing, (x) for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Borrower and its Restricted 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 and (y) upon and following the acquisition of any business or new Restricted Subsidiary in accordance with this Agreement, in each case that would not constitute a “significant subsidiary” for purposes of Regulation S-X, financial items and information with respect to such newly-acquired business or Restricted Subsidiary that are required to be included in determining any financial calculations and other financial ratios contained herein for any period prior to such acquisition shall not be required to be in accordance with GAAP so long as the Borrower is able to reasonably estimate pro forma adjustments in respect of such acquisition for such prior periods, and in each case such estimates are made in good faith and are factually supportable.  

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

SECTION 1.4.UCC Terms

.  Terms defined in the UCC in effect on the Closing Date and not otherwise defined herein shall, unless the context otherwise indicates, have the meanings provided by those definitions.  Subject to the foregoing, the term “UCC” refers, as of any date of determination, to the UCC then in effect.

SECTION 1.5.Rounding

.  Any financial ratios required to be maintained pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio or percentage is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

SECTION 1.6.References to Agreement and Laws

.  Unless otherwise expressly provided herein, (a) any definition or reference to formation documents, governing documents, agreements (including the Loan Documents) and other contractual documents or instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) any definition or reference to any Applicable Law, including the Code, the Commodity Exchange Act, ERISA, the Exchange Act, the PATRIOT Act, the Securities Act of 1933, the UCC, the Investment Company Act of 1940, the Interstate Commerce Act, the Trading with the Enemy Act of the United States or any of the foreign assets control regulations of the United

45

 

 

 

States Treasury Department, shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Applicable Law.

SECTION 1.7.Times of Day

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

SECTION 1.8.Letter of Credit Amounts

.  Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit or the Letter of Credit Application therefor (at the time specified therefor in such applicable Letter of Credit or Letter of Credit Application and as such amount may be reduced by (a) any permanent reduction of such Letter of Credit or (b) any amount which is drawn, reimbursed and no longer available under such Letter of Credit).

SECTION 1.9.Guarantees

.  Unless otherwise specified, the amount of any Guarantee shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guarantee.

SECTION 1.10.Covenant Compliance Generally

.  For purposes of determining compliance under Sections 9.1, 9.2, 9.3, 9.5 and 9.6, any amount in a currency other than Dollars will be converted to Dollars in a manner consistent with that used in the preparation of the most recent annual financial statements of the Borrower and its Restricted Subsidiaries delivered pursuant to Section 8.1(a).  Notwithstanding the foregoing, for purposes of determining compliance with Sections 9.1, 9.2, 9.3, 9.5 and 9.6, with respect to any amount of Indebtedness, Investment, Asset Disposition or Restricted Payment in a currency other than Dollars, (i) no breach of any basket contained in such sections shall be deemed to have occurred solely as a result of changes in rates of exchange occurring after the time such Indebtedness, Investment, Asset Disposition or Restricted Payment is incurred and (ii) the Dollar equivalent of such amount shall be determined at the time such event occurs and shall not vary as a result of changes in rates of exchange occurring after the time such Indebtedness, Investment, Asset Disposition or Restricted Payment is made or incurred.

SECTION 1.11.Available Amount Transactions

.  If more than one action occurs on any given date the permissibility of the taking of which is determined hereunder by reference to the amount of the Available Amount immediately prior to the taking of such action, the permissibility of the taking of each such action shall be determined independently and in no event may any two or more such actions be treated as occurring simultaneously.

SECTION 1.12.Rates

.  The Administrative Agent does not warrant or accept responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to the rates in the definition of “LIBOR” or with respect to any rate that is an alternative or replacement for or successor to any such rate (including, without limitation, any Benchmark Replacement) or the effect of any of the foregoing, or of any Benchmark Replacement Conforming Changes.

46

 

 

 

SECTION 1.13.Divisions

.  For all purposes under the Loan Documents, in connection with any division, plan of division or establishment of any series under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time and (c) each division and series of any Person shall be treated as a separate Person hereunder.

ARTICLE II

REVOLVING CREDIT FACILITY

SECTION 2.1.Revolving Credit Loans

.  Subject to the terms and conditions of this Agreement and the other Loan Documents, and in reliance upon the representations and warranties set forth in this Agreement and the other Loan Documents, each Revolving Credit Lender severally agrees to make Revolving Credit Loans to the Borrower from time to time from the Closing Date until, but not including, the Revolving Credit Maturity Date as requested by the Borrower in accordance with the terms of Section 2.3; provided that (a) the Revolving Credit Outstandings shall not exceed the Revolving Credit Commitment and (b) the Revolving Credit Exposure of any Revolving Credit Lender shall not at any time exceed such Revolving Credit Lender’s Revolving Credit Commitment.  Each Revolving Credit Loan by a Revolving Credit Lender shall be in a principal amount equal to such Revolving Credit Lender’s Revolving Credit Commitment Percentage of the aggregate principal amount of Revolving Credit Loans requested on such occasion.  Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder until the Revolving Credit Maturity Date.

SECTION 2.2.Swingline Loans

.

(a)Availability.  Subject to the terms and conditions of this Agreement and the other Loan Documents, including Section 6.2(e), and in reliance upon the representations and warranties set forth in this Agreement and the other Loan Documents, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time from the Closing Date until, but not including, the Swingline Maturity Date; provided that (a) after giving effect to any amount requested, the Revolving Credit Outstandings shall not exceed the Revolving Credit Commitment and (b) the aggregate principal amount of all outstanding Swingline Loans (after giving effect to any amount requested) shall not exceed the Swingline Commitment.

(b)Refunding.

(i)Swingline Loans shall be refunded by the Revolving Credit Lenders on demand by the Swingline Lender.  Such refundings shall be made by the Revolving Credit Lenders in accordance with their respective Revolving Credit Commitment Percentages and shall thereafter be reflected as Revolving Credit Loans of the Revolving Credit Lenders on the books and records of the Administrative Agent.  Each Revolving Credit Lender shall fund its respective Revolving Credit Commitment Percentage of Revolving Credit Loans as required to repay Swingline Loans outstanding to the

47

 

 

 

Swingline Lender upon written demand by the Swingline Lender but in no event later than 2:00 p.m. on the next succeeding Business Day after such demand is made.  No Revolving Credit Lender’s obligation to fund its respective Revolving Credit Commitment Percentage of a Swingline Loan shall be affected by any other Revolving Credit Lender’s failure to fund its Revolving Credit Commitment Percentage of a Swingline Loan, nor shall any Revolving Credit Lender’s Revolving Credit Commitment Percentage be increased as a result of any such failure of any other Revolving Credit Lender to fund its Revolving Credit Commitment Percentage of a Swingline Loan.

(ii)The Borrower shall pay to the Swingline Lender upon written demand but in no event later than 12:00 p.m. on the next Business Day after such demand is made (but not less frequently than weekly) the amount of such Swingline Loans to the extent amounts received from the Revolving Credit Lenders are not sufficient to repay in full the outstanding Swingline Loans requested or required to be refunded.  In addition, the Borrower hereby authorizes the Administrative Agent to charge any account maintained by the Borrower with the Swingline Lender (up to the amount available therein) in order to immediately pay the Swingline Lender the amount of such Swingline Loans to the extent amounts received from the Revolving Credit Lenders are not sufficient to repay in full the outstanding Swingline Loans requested or required to be refunded.  If any portion of any such amount paid to the Swingline Lender shall be recovered by or on behalf of the Borrower from the Swingline Lender in bankruptcy or otherwise, the loss of the amount so recovered shall be ratably shared among all the Revolving Credit Lenders in accordance with their respective Revolving Credit Commitment Percentages (unless the amounts so recovered by or on behalf of the Borrower pertain to a Swingline Loan extended after the occurrence and during the continuance of an Event of Default of which the Administrative Agent has received notice in the manner required pursuant to Section 11.3 and which such Event of Default has not been waived by the Required Lenders or the Lenders, as applicable).

(iii)Each Revolving Credit Lender acknowledges and agrees that its obligation to refund Swingline Loans in accordance with the terms of this Section is absolute and unconditional and shall not be affected by any circumstance whatsoever, including non-satisfaction of the conditions set forth in Article VI.  Further, each Revolving Credit Lender agrees and acknowledges that if prior to the refunding of any outstanding Swingline Loans pursuant to this Section, one of the events described in Section 10.1(i) or (j) shall have occurred, each Revolving Credit Lender will, on the date the applicable Revolving Credit Loan would have been made, purchase an undivided participating interest in the Swingline Loan to be refunded in an amount equal to its Revolving Credit Commitment Percentage of the aggregate amount of such Swingline Loan.  Each Revolving Credit Lender will immediately transfer to the Swingline Lender, in immediately available funds, the amount of its participation and upon receipt thereof the Swingline Lender will deliver to such Revolving Credit Lender a certificate evidencing such participation dated the date of receipt of such funds and for such amount.  Whenever, at any time after the Swingline Lender has received from any Revolving Credit Lender such Revolving Credit Lender’s participating interest in a Swingline Loan, the Swingline Lender receives any payment on account thereof, the Swingline Lender will distribute to such Revolving Credit Lender its participating interest in such amount

48

 

 

 

(appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Revolving Credit Lender’s participating interest was outstanding and funded).

(c)Defaulting Lenders.  Notwithstanding anything to the contrary contained in this Agreement, this Section 2.2 shall be subject to the terms and conditions of Section 5.14 and Section 5.15.

SECTION 2.3.Procedure for Advances of Revolving Credit Loans and Swingline Loans

.

(a)Requests for Borrowing.  The Borrower shall give the Administrative Agent irrevocable prior written notice substantially in the form of Exhibit B (a “Notice of Borrowing”) not later than 12:00 p.m. (i) on the same Business Day as each Base Rate Loan and each Swingline Loan, and (ii) at least three Business Days before each LIBOR Rate Loan, of its intention to borrow, specifying (A) the date of such borrowing, which shall be a Business Day, (B) the amount of such borrowing, which shall be, (x) with respect to Base Rate Loans (other than Swingline Loans) in an aggregate principal amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof, (y) with respect to LIBOR Rate Loans in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (z) with respect to Swingline Loans in an aggregate principal amount of $500,000 or a whole multiple of $100,000 in excess thereof, (C) whether such Loan is to be a Revolving Credit Loan or Swingline Loan, (D) in the case of a Revolving Credit Loan whether the Loans are to be LIBOR Rate Loans or Base Rate Loans, and (E) in the case of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto; provided that if the Borrower wishes to request LIBOR Rate Loans having an Interest Period of twelve months in duration, such notice must be received by the Administrative Agent not later than 12:00 p.m. four Business Days prior to the requested date of such borrowing, whereupon the Administrative Agent shall give prompt notice to the Revolving Credit Lenders of such request and determine whether the requested Interest Period is acceptable to all of them.  If the Borrower fails to specify a type of Loan in a Notice of Borrowing, then the applicable Loans shall be made as Base Rate Loans.  If the Borrower requests a Borrowing of LIBOR Rate Loans in any such Notice of Borrowing, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.  A Notice of Borrowing received after 12:00 p.m. shall be deemed received on the next Business Day.  The Administrative Agent shall promptly notify the Revolving Credit Lenders of each Notice of Borrowing.

(b)Disbursement of Revolving Credit and Swingline Loans.  Not later than 2:00 p.m. on the proposed borrowing date, (i) each Revolving Credit Lender will make available to the Administrative Agent, for the account of the Borrower, at the office of the Administrative Agent in funds immediately available to the Administrative Agent, such Revolving Credit Lender’s Revolving Credit Commitment Percentage of the Revolving Credit Loans to be made on such borrowing date and (ii) the Swingline Lender will make available to the Administrative Agent, for the account of the Borrower, at the office of the Administrative Agent in funds immediately available to the Administrative Agent, the Swingline Loans to be made on such borrowing date.  The Borrower hereby irrevocably authorizes the Administrative Agent to disburse the proceeds of each borrowing requested pursuant to this Section in immediately available funds (x) on the

49

 

 

 

Closing Date, by wire transfer to such Person or Persons as may be designated by the Borrower in writing and (y) at any time after the Closing Date, by crediting or wiring such proceeds to the deposit account of the Borrower identified in the most recent notice substantially in the form attached as Exhibit C (a “Notice of Account Designation”) delivered by the Borrower to the Administrative Agent or as may be otherwise agreed upon by the Borrower and the Administrative Agent from time to time.  Subject to Section 5.7 hereof, the Administrative Agent shall not be obligated to disburse the portion of the proceeds of any Revolving Credit Loan requested pursuant to this Section to the extent that any Revolving Credit Lender has not made available to the Administrative Agent its Revolving Credit Commitment Percentage of such Loan.  Revolving Credit Loans to be made for the purpose of refunding Swingline Loans shall be made by the Revolving Credit Lenders as provided in Section 2.2(b).

SECTION 2.4.Repayment and Prepayment of Revolving Credit and Swingline Loans.

(a)Repayment on Termination Date.  The Borrower hereby agrees to repay the outstanding principal amount of (i) all Revolving Credit Loans in full on the Revolving Credit Maturity Date, and (ii) all Swingline Loans in accordance with Section 2.2(b) (but, in any event, no later than the Swingline Maturity Date), together, in each case, with all accrued but unpaid interest thereon.

(b)Mandatory Prepayments.  If at any time the Revolving Credit Outstandings exceed the Revolving Credit Commitment, the Borrower agrees to repay immediately upon written notice from the Administrative Agent but in no event later than 12:00 p.m. on the next Business Day after such notice is made, by payment to the Administrative Agent for the account of the Revolving Credit Lenders, Extensions of Credit in an amount equal to such excess with each such repayment applied first, to the principal amount of outstanding Swingline Loans, second to the principal amount of outstanding Revolving Credit Loans and third, with respect to any Letters of Credit then outstanding, a payment of Cash Collateral into a Cash Collateral account opened by the Administrative Agent, for the benefit of the Revolving Credit Lenders, in an amount equal to such excess (such Cash Collateral to be applied in accordance with Section 10.2(b)).

(c)Optional Prepayments.  The Borrower may at any time and from time to time prepay Revolving Credit Loans and Swingline Loans, in whole or in part, without premium or penalty, with irrevocable prior written notice to the Administrative Agent substantially in the form attached as Exhibit D (a “Notice of Prepayment”) given not later than 12:00 p.m. (i) on the same Business Day as the prepayment of a Base Rate Loan and a Swingline Loan and (ii) at least three Business Days before the prepayment of a LIBOR Rate Loan, specifying the date and amount of prepayment and whether the prepayment is of LIBOR Rate Loans, Base Rate Loans, Swingline Loans or a combination thereof, and, if a combination thereof, the amount allocable to each.  Upon receipt of such notice, the Administrative Agent shall promptly notify each Revolving Credit Lender.  If any such notice is given, the amount specified in such notice shall be due and payable on the date set forth in such notice.  Partial prepayments shall be in an aggregate amount of $1,000,000 or a whole multiple of $500,000 in excess thereof with respect to Base Rate Loans (other than Swingline Loans), $3,000,000 or a whole multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans and $500,000 or a whole multiple of $100,000 in excess thereof with respect to Swingline Loans.  A Notice of Prepayment received

50

 

 

 

after 12:00 p.m. shall be deemed received on the next Business Day. Each such repayment shall be accompanied by any amount required to be paid pursuant to Section 5.9 hereof.  Notwithstanding the foregoing, any Notice of a Prepayment delivered in connection with any refinancing of all or any portion of the Revolving Credit Facility or Swingline Facility with the proceeds of such refinancing or of any Incurrence of Indebtedness or the receipt of Net Cash Proceeds of any Asset Disposition, may be, if expressly so stated to be, contingent upon the consummation of such refinancing, Incurrence or receipt and may be revoked by the Borrower in the event such refinancing is not consummated or such Net Cash Proceeds are not received (provided that the failure of such contingency shall not relieve the Borrower from its obligations in respect thereof under Section 5.9).  

(d)Limitation on Prepayment of LIBOR Rate Loans.  The Borrower may not prepay any LIBOR Rate Loan on any day other than on the last day of the Interest Period applicable thereto unless such prepayment is accompanied by any amount required to be paid pursuant to Section 5.9 hereof.

(e)Hedge Agreements.  No repayment or prepayment of the Loans pursuant to this Section shall affect any of the Borrower’s obligations under any Hedge Agreement entered into with respect to the Loans.

SECTION 2.5.Permanent Reduction of the Revolving Credit Commitment.

(a)The Borrower shall have the right at any time and from time to time, upon at least three Business Days prior irrevocable written notice to the Administrative Agent, to permanently terminate or reduce, without premium or penalty, the Revolving Credit Commitments in whole or in part, provided that (a) any such reduction shall apply proportionately and permanently to reduce the Revolving Credit Commitment of each of the Lenders of any applicable Class, except that notwithstanding the foregoing, in connection with the establishment on any date of any Extended Revolving Credit Commitments pursuant to Section 5.16(d), the Revolving Credit Commitments of any one or more Lenders providing any such Extended Revolving Credit Commitments on such date shall be reduced in an amount equal to the amount of the Revolving Credit Commitments of such Lender so extended on such date (provided that (x) after giving effect to any such reduction and to the repayment of any Revolving Credit Loans made on such date, the Revolving Credit Exposure of any such Lender does not exceed the Revolving Credit Commitment thereof and (y) for the avoidance of doubt, any such repayment of Revolving Credit Loans contemplated by the preceding clause shall be made in compliance with the requirements of Section 5.4 with respect to the ratable allocation of payments hereunder, with such allocation being determined after giving effect to any conversion pursuant to Section 5.16(d) of Revolving Credit Commitments and Revolving Credit Loans into Extended Revolving Credit Commitments and Extended Revolving Credit Loans pursuant to Section 5.16(d) prior to any reduction being made to the Revolving Credit Commitment of any other Lender), (b) any partial reduction pursuant to this Section 2.5(a) shall be in the amount of at least $3,000,000 or any whole multiple of $1,000,000 in excess thereof and (c) after giving effect to such termination or reduction and to any prepayments of the Loans made on the date thereof in accordance with this Agreement, the aggregate amount of the Lenders’ Revolving Credit Exposures shall not exceed the Total Revolving Credit Commitment and the aggregate amount of the Lenders’

51

 

 

 

Revolving Credit Exposures in respect of any Class shall not exceed the aggregate Revolving Credit Commitment of such Class

(b)Corresponding Payment.  Each permanent reduction permitted pursuant to this Section shall be accompanied by a payment, without premium or penalty, of principal sufficient to reduce the aggregate outstanding Revolving Credit Loans, Swingline Loans and L/C Obligations, as applicable, to not more than the Revolving Credit Commitment as so reduced, and if the aggregate amount of all outstanding Letters of Credit exceeds the Revolving Credit Commitment as so reduced, the Borrower shall be required to deposit Cash Collateral in a Cash Collateral account opened by the Administrative Agent in an amount equal to such excess.  Such Cash Collateral shall be applied in accordance with Section 10.2(b).  Any reduction of the Revolving Credit Commitment to zero shall be accompanied by payment of all outstanding Revolving Credit Loans and Swingline Loans (and furnishing of Cash Collateral satisfactory to the Administrative Agent for all L/C Obligations) and shall result in the termination of the Revolving Credit Commitment and the Swingline Commitment and the Revolving Credit Facility.  If the reduction of the Revolving Credit Commitment requires the repayment of any LIBOR Rate Loan, such repayment shall be accompanied by any amount required to be paid pursuant to Section 5.9 hereof.

SECTION 2.6.Termination of Revolving Credit Facility; Swingline Facility

.  The Revolving Credit Facility and the Revolving Credit Commitments shall terminate on the Revolving Credit Maturity Date.  The Swingline Facility and Swingline Commitment shall terminate on the Swingline Maturity Date.  

ARTICLE III

LETTER OF CREDIT FACILITY

SECTION 3.1.L/C Facility

.

(a)Availability.  Subject to the terms and conditions hereof, each Issuing Lender, in reliance on the agreements of the Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue standby or commercial Letters of Credit in an aggregate amount not to exceed its L/C Commitment for the account of the Borrower or, subject to Section 3.9, any Restricted Subsidiary thereof, Letters of Credit may be issued on any Business Day from the Closing Date up to but not including the Letter of Credit Expiration Date in such form as may be approved from time to time by the applicable Issuing Lender; provided that no Issuing Lender shall issue any Letter of Credit if, after giving effect to such issuance, (a) the L/C Obligations would exceed the L/C Sublimit or (b) the Revolving Credit Outstandings would exceed the Revolving Credit Commitment.  Each Letter of Credit shall (i) be denominated in Dollars in a minimum amount of $25,000, in the case of a commercial Letter of Credit, or $50,000, in the case of a standby Letter of Credit (or such lesser amount as agreed to by the applicable Issuing Lender and the Administrative Agent), (ii) expire on a date no more than twelve months after the date of issuance or last renewal of such Letter of Credit (subject to automatic renewal for additional one year periods pursuant to the terms of the Letter of Credit Application or other documentation acceptable to the applicable Issuing Lender), which date shall be no later than the Letter of Credit Expiration Date and (iii) be subject to the Uniform Customs, in the case of a commercial

52

 

 

 

Letter of Credit, or ISP98, in the case of a standby Letter of Credit, in each case as set forth in the Letter of Credit Application or as determined by the applicable Issuing Lender and, to the extent not inconsistent therewith, the laws of the State of New York.  No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder if (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Lender from issuing such Letter of Credit, or any Applicable Law applicable to such Issuing Lender or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuing Lender shall prohibit, or request that such Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Lender with respect to letters of credit generally or such Letter of Credit in particular any restriction or reserve or capital requirement (for which such Issuing Lender is not otherwise compensated) not in effect on the Closing Date, or any unreimbursed loss, cost or expense that was not applicable, in effect or known to such Issuing Lender as of the Closing Date and that such Issuing Lender in good faith deems material to it, or (C) the conditions set forth in Section 6.2 are not satisfied.  References herein to “issue” and derivations thereof with respect to Letters of Credit shall also include extensions or modifications of any outstanding Letters of Credit, unless the context otherwise requires.  

(b)Defaulting Lenders.  Notwithstanding anything to the contrary contained in this Agreement, Article III shall be subject to the terms and conditions of Section 5.14 and Section 5.15.

SECTION 3.2.Procedure for Issuance of Letters of Credit

.  The Borrower may from time to time request that any Issuing Lender issue a Letter of Credit by delivering to such Issuing Lender at its applicable office (with a copy to the Administrative Agent at the Administrative Agent’s Office) a Letter of Credit Application therefor, completed to the reasonable satisfaction of such Issuing Lender, and such other certificates, documents and other papers and information as such Issuing Lender or the Administrative Agent may reasonably request.  Upon receipt of any Letter of Credit Application, the applicable Issuing Lender shall process such Letter of Credit Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall, subject to Section 3.1 and Article VI, promptly issue the Letter of Credit requested thereby (but in no event shall such Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Letter of Credit Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by such Issuing Lender and the Borrower.  The applicable Issuing Lender shall promptly furnish to the Borrower and the Administrative Agent a copy of such Letter of Credit and the Administrative Agent shall promptly notify each Revolving Credit Lender of the issuance and upon request by any Lender, furnish to such Revolving Credit Lender a copy of such Letter of Credit and the amount of such Revolving Credit Lender’s participation therein.

SECTION 3.3.Commissions and Other Charges

.

(a)Letter of Credit Commissions.  Subject to Section 5.15(a)(iii)(B), the Borrower shall pay to the Administrative Agent, for the account of the applicable Issuing Lender and the L/C Participants, a letter of credit commission with respect to each Letter of Credit in the amount

53

 

 

 

equal to the daily amount available to be drawn under such Letter of Credit times the Applicable Margin with respect to Revolving Credit Loans that are LIBOR Rate Loans (determined on a per annum basis).  Such commission shall be payable quarterly in arrears on the last Business Day of each calendar quarter, on the Revolving Credit Maturity Date and thereafter on demand of the Administrative Agent.  The Administrative Agent shall, promptly following its receipt thereof, distribute to the applicable Issuing Lender and the L/C Participants all commissions received pursuant to this Section 3.3(a) in accordance with their respective Revolving Credit Commitment Percentages.

(b)Issuance Fee.  In addition to the foregoing commission, the Borrower shall pay directly to the applicable Issuing Lender, for its own account, an issuance fee with respect to each Letter of Credit issued by such Issuing Lender as set forth in the fee letter agreement executed by such Issuing Lender.  Such issuance fee shall be payable quarterly in arrears on the last Business Day of each calendar quarter commencing with the first such date to occur after the issuance of such Letter of Credit, on the Revolving Credit Maturity Date and thereafter on demand of the applicable Issuing Lender.

(c)Other Fees, Costs, Charges and Expenses.  In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse each Issuing Lender for such normal and customary fees, costs, charges and expenses as are incurred or charged by such Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit issued by it.

SECTION 3.4.L/C Participations

.

(a)Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce each Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from each Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant’s own account and risk an undivided interest equal to such L/C Participant’s Revolving Credit Commitment Percentage in each Issuing Lender’s obligations and rights under and in respect of each Letter of Credit issued by it hereunder and the amount of each draft paid by such Issuing Lender thereunder.  Each L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit issued by such Issuing Lender for which such Issuing Lender is not reimbursed in full by the Borrower through a Revolving Credit Loan or otherwise in accordance with the terms of this Agreement, such L/C Participant shall pay to such Issuing Lender upon demand at such Issuing Lender’s address for notices specified herein an amount equal to such L/C Participant’s Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed.

(b)Upon becoming aware of any amount required to be paid by any L/C Participant to any Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by such Issuing Lender under any Letter of Credit, issued by it, such Issuing Lender shall notify the Administrative Agent of such unreimbursed amount and the Administrative Agent shall notify each L/C Participant (with a copy to the applicable Issuing Lender) of the amount and due date of such required payment and such L/C Participant shall pay to the Administrative Agent (which, in turn shall pay such Issuing Lender) the amount specified

54

 

 

 

on the applicable due date.  If any such amount is paid to such Issuing Lender after the date such payment is due, such L/C Participant shall pay to such Issuing Lender on demand, in addition to such amount, the product of (i) such amount, times (ii) the daily average Federal Funds Rate as determined by the Administrative Agent during the period from and including the date such payment is due to the date on which such payment is immediately available to such Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360.  A certificate of such Issuing Lender with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.  With respect to payment to such Issuing Lender of the unreimbursed amounts described in this Section, if the L/C Participants receive notice that any such payment is due (A) prior to 12:00 p.m. on any Business Day, such payment shall be due that Business Day, and (B) after 12:00 p.m. on any Business Day, such payment shall be due on the following Business Day.

(c)Whenever, at any time after any Issuing Lender has made payment under any Letter of Credit issued by it and has received from any L/C Participant its Revolving Credit Commitment Percentage of such payment in accordance with this Section, such Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise), or any payment of interest on account thereof, such Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided that in the event that any such payment received by such Issuing Lender shall be required to be returned by such Issuing Lender, such L/C Participant shall return to such Issuing Lender the portion thereof previously distributed by such Issuing Lender to it.

SECTION 3.5.Reimbursement Obligation of the Borrower

.  In the event of any drawing under any Letter of Credit, the Borrower agrees to reimburse (either with the proceeds of a Revolving Credit Loan as provided for in this Section or with funds from other sources), in same day funds, the applicable Issuing Lender on each date on which such Issuing Lender notifies the Borrower of the date and amount of a draft paid by it under any Letter of Credit for the amount of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by such Issuing Lender in connection with such payment.  Unless the Borrower shall immediately notify such Issuing Lender that the Borrower intends to reimburse such Issuing Lender for such drawing from other sources or funds, the Borrower shall be deemed to have timely given a Notice of Borrowing to the Administrative Agent requesting that the Revolving Credit Lenders make a Revolving Credit Loan bearing interest at the Base Rate on the applicable repayment date in the amount of (i) such draft so paid and (ii) any amounts referred to in Section 3.3(c) incurred by such Issuing Lender in connection with such payment, and the Revolving Credit Lenders shall make a Revolving Credit Loan bearing interest at the Base Rate in such amount, the proceeds of which shall be applied to reimburse such Issuing Lender for the amount of the related drawing and such fees and expenses.  Each Revolving Credit Lender acknowledges and agrees that its obligation to fund a Revolving Credit Loan in accordance with this Section to reimburse such Issuing Lender for any draft paid under a Letter of Credit issued by it is absolute and unconditional and shall not be affected by any circumstance whatsoever, including non-satisfaction of the conditions set forth in Section 2.3(a) or Article VI.  If the Borrower has elected to pay the amount of such drawing with funds from other sources and shall fail to reimburse such Issuing Lender as provided above, the unreimbursed amount of such drawing shall bear interest at the rate which would be payable on any outstanding Base Rate Loans which

55

 

 

 

were then overdue from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full.

SECTION 3.6.Obligations Absolute

.  The Borrower’s obligations under this Article III (including the Reimbursement Obligation) shall be absolute and unconditional under any and all circumstances and irrespective of any set off, counterclaim or defense to payment which the Borrower may have or have had against the applicable Issuing Lender or any beneficiary of a Letter of Credit or any other Person.  The Borrower also agrees that the applicable Issuing Lender and the L/C Participants shall not be responsible for, and the Borrower’s Reimbursement Obligation under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee.  No Issuing Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit issued by it, except for errors or omissions caused by such Issuing Lender’s gross negligence or willful misconduct, as determined by a court of competent jurisdiction by final nonappealable judgment.  The Borrower agrees that any action taken or omitted by any Issuing Lender under or in connection with any Letter of Credit issued by it or the related drafts or documents, if done in the absence of gross negligence, willful misconduct or a material breach in bad faith of its obligations under the Loan Documents shall be binding on the Borrower and shall not result in any liability of such Issuing Lender or any L/C Participant to the Borrower.  The responsibility of any Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit issued to it shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment substantially conforms to the requirements under such Letter of Credit.

SECTION 3.7.Effect of Letter of Credit Application

.  To the extent that any provision of any Letter of Credit Application related to any Letter of Credit is inconsistent with the provisions of this Article III, the provisions of this Article III shall apply.

SECTION 3.8.Reporting of Letter of Credit Information and L/C Commitment

.  At any time that there is an Issuing Lender that is not also the financial institution acting as Administrative Agent, then (a) on the last Business Day of each calendar month, (b) on each date that a Letter of Credit is amended, terminated or otherwise expires, (c) on each date that a Letter of Credit is issued or the expiry date of a Letter of Credit is extended, and (d) upon the request of the Administrative Agent, each Issuing Lender (or, in the case of clauses (b), (c) or (d) of this Section, the applicable Issuing Lender) shall deliver to the Administrative Agent a report setting forth in form and detail reasonably satisfactory to the Administrative Agent information (including with respect to any reimbursement, Cash Collateral or termination in respect of Letters of Credit issued by such Issuing Lender) with respect to each Letter of Credit issued by such Issuing Lender that is outstanding hereunder.  In addition, each Issuing Lender shall provide notice to the Administrative Agent of its L/C Commitment, or any change thereto, promptly upon it becoming an Issuing Lender or making any change to its L/C Commitment.  No failure

56

 

 

 

on the part of any Issuing Lender to provide such information pursuant to this Section 3.8 shall limit the obligations of the Borrower or any Revolving Credit Lender hereunder with respect to its reimbursement and participation obligations hereunder.

SECTION 3.9.Letters of Credit Issued for Restricted Subsidiaries

.  Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Restricted Subsidiary, the Borrower shall be obligated to reimburse, or to cause the applicable Restricted Subsidiary to reimburse, the applicable Issuing Lender hereunder for any and all drawings under such Letter of Credit.  The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of any of its Restricted Subsidiaries inures to the benefit of the Borrower and that the Borrower’s business derives substantial benefits from the businesses of such Restricted Subsidiaries.  

SECTION 3.10.Provisions Related to Extended Revolving Credit Commitments

.  If the Letter of Credit Expiration Date in respect of any tranche of Revolving Credit Commitments occurs prior to the expiry date of any Letter of Credit, then (a) if one or more other tranches of Revolving Credit Commitments in respect of which the Letter of Credit Expiration Date shall not have so occurred are then in effect, such Letters of Credit shall, to the extent such Letters of Credit could have been issued under such other tranches, automatically be deemed to have been issued (including for purposes of the obligations of the Revolving Credit Lenders to purchase participations therein and to make Revolving Credit Loans and payments in respect thereof pursuant to Section 3.4 and 3.5) under (and ratably participated in by Lenders pursuant to) the Revolving Credit Commitments in respect of such non-terminating tranches up to an aggregate amount not to exceed the aggregate principal amount of the unutilized Revolving Credit Commitments thereunder at such time (it being understood that no partial face amount of any Letter of Credit may be so reallocated) and (b) to the extent not reallocated pursuant to the immediately preceding clause (a), the Borrower shall Cash Collateralize any such Letter of Credit.  Commencing with the maturity date of any tranche of Revolving Credit Commitments, the sublimit for Letters of Credit shall be agreed solely with each applicable Issuing Lender.

ARTICLE IV

TERM LOAN FACILITY

The following Article IV shall be disregarded in its entirety:

SECTION 4.1.Initial Term Loan

.  Subject to the terms and conditions of this Agreement and the other Loan Documents, and in reliance upon the representations and warranties set forth in this Agreement and the other Loan Documents, each Term Loan Lender severally agrees to make the Initial Term Loan to the Borrower in a principal amount equal to such Lender’s Term Loan Commitment.

SECTION 4.2.Procedure for Advance of Term Loan

.

(a)Initial Term Loan.  The Borrower shall give the Administrative Agent an irrevocable Notice of Borrowing prior to 12:00 p.m. on the date of borrowing requesting that the Term Loan Lenders make the Initial Term Loan as a Base Rate Loan on such date (provided that

57

 

 

 

the Borrower may request, no later than three Business Days prior to such date, that the Lenders make the Initial Term Loan as a LIBOR Rate Loan if the Borrower has delivered to the Administrative Agent a letter in form and substance reasonably satisfactory to the Administrative Agent indemnifying the Lenders in the manner set forth in Section 5.9 of this Agreement); notwithstanding the foregoing, the Borrower may give such irrevocable notice to the Administrative Agent by telephone, provided that such telephonic notice by the Borrower must be promptly confirmed by delivery to the Administrative Agent of a Notice of Borrowing.  Upon receipt of such Notice of Borrowing from the Borrower, the Administrative Agent shall promptly notify each Term Loan Lender thereof.  Not later than 2:00 p.m. on the Closing Date, each Term Loan Lender will make available to the Administrative Agent for the account of the Borrower, at the Administrative Agent’s Office in immediately available funds, the amount of such Initial Term Loan to be made by such Term Loan Lender on such date.  The Borrower hereby irrevocably authorizes the Administrative Agent to disburse the proceeds of the Initial Term Loan in immediately available funds by wire transfer to such Person or Persons as may be designated by the Borrower in writing.

(b)Incremental Term Loans.  Any Incremental Term Loans shall be borrowed pursuant to, and in accordance with Section 5.13.

SECTION 4.3.Repayment of Term Loans

.

(a)Initial Term Loan.  The Borrower shall repay the aggregate outstanding principal amount of the Initial Term Loan in consecutive quarterly installments on each Term Loan Installment Date as set forth below, except as the amounts of individual installments may be adjusted pursuant to Section 4.4 hereof:

Term Loan Installment Date

Quarterly Principal Installment

The first four Term Loan Installment Dates

$0

Each Term Loan Installment Date thereafter

$0

 

If not sooner paid, the Initial Term Loan shall be paid in full, together with accrued interest thereon, on the Term Loan Maturity Date.

(b)Incremental Term Loans.  The Borrower shall repay the aggregate outstanding principal amount of each Incremental Term Loan (if any) as determined pursuant to, and in accordance with, Section 5.13.  

(c)Extended Term Loans.  Notwithstanding the foregoing, the Borrower shall repay the aggregate outstanding principal amount of each Extended Term Loan (if any) as determined pursuant to, and in accordance with, Section 5.16.  

SECTION 4.4.Prepayments of Term Loans

.

(a)Optional Prepayments.  The Borrower shall have the right at any time and from time to time, without premium or penalty, to prepay the Term Loans, in whole or in part, upon

58

 

 

 

delivery to the Administrative Agent of a Notice of Prepayment not later than 12:00 p.m. (i) on the same Business Day as the prepayment of a Base Rate Loan and (ii) at least three Business Days before the prepayment of a LIBOR Rate Loan, specifying the date and amount of repayment, whether the repayment is of LIBOR Rate Loans or Base Rate Loans or a combination thereof, and if a combination thereof, the amount allocable to each and whether the repayment is of the Initial Term Loan, an Incremental Term Loan or a combination thereof, and if a combination thereof, the amount allocable to each.  Each optional prepayment of any Class of Term Loans hereunder shall be in an aggregate principal amount of at least $1,000,000 or any whole multiple of $500,000 in excess thereof and shall be applied to the outstanding principal installments of the Initial Term Loan and, if applicable, any Incremental Term Loans as directed by the Borrower, provided that in the absence of such direction, optional prepayment shall be applied to outstanding principal installments in direct order of maturity.  Each repayment shall be accompanied by any amount required to be paid pursuant to Section 5.9 hereof.  A Notice of Prepayment received after 12:00 p.m. shall be deemed received on the next Business Day.  The Administrative Agent shall promptly notify the applicable Term Loan Lenders of each Notice of Prepayment.  Notwithstanding the foregoing, (x) any Notice of Prepayment delivered in connection with any refinancing of all or any portion of the Term Loan Facility with the proceeds of such refinancing or of any other Incurrence of Indebtedness or the receipt of Net Cash Proceeds of Asset Disposition may be, if expressly so stated to be, contingent upon the consummation of such refinancing, Incurrence or receipt and may be revoked by the Borrower in the event such refinancing is not consummated or such Net Cash Proceeds are not received; provided that the delay or failure of such contingency shall not relieve the Borrower from its obligations in respect thereof under Section 5.9 and (y) the Borrower may not repay Extended Term Loans of any Extension Series unless such prepayment is accompanied by a pro rata (or greater) repayment of Term Loans of the Existing Term Loan Class from which such Extended Term Loans were converted (or such Term Loans of the Existing Term Loan Class have otherwise been repaid in full).

(b)Mandatory Prepayments.

(i)Debt Issuances.  The Borrower shall make mandatory principal prepayments of the Loans in the manner set forth in clause (iv) below in an amount equal to 100% of the aggregate Net Cash Proceeds from any Debt Issuance not otherwise permitted pursuant to Section 9.1.  Such prepayment shall be made within five Business Days after the date of receipt of the Net Cash Proceeds of any such Debt Issuance.

(ii)Asset Dispositions.  The Borrower shall make mandatory principal prepayments of the Loans in the manner set forth in clause (iv) below in amounts equal to 100% of the aggregate Net Cash Proceeds from any Asset Disposition (other than any Asset Disposition permitted pursuant to, and in accordance with, clauses (a) through (e) and clause (g) of Section 9.5) to the extent that the aggregate amount of such Net Cash Proceeds not reinvested as set forth below exceeds $25,000,000 during any Fiscal Year.  Such prepayments shall be made within three Business Days after the date of receipt of the Net Cash Proceeds of any such Asset Disposition by such Credit Party or any of its Restricted Subsidiaries; provided that, (A) no prepayment shall be required under this Section 4.4(b)(ii) to the extent that such Net Cash Proceeds are committed to be reinvested pursuant to a legally binding agreement in assets used or useful in the business

59

 

 

 

of the Borrower and its Restricted Subsidiaries within twelve months after receipt of such Net Cash Proceeds and are thereafter actually reinvested in assets used or useful in the business of the Borrower and its Restricted Subsidiaries within six months; provided further that any portion of such Net Cash Proceeds not committed to be reinvested pursuant to a legally binding agreement within such twelve month period or actually reinvested within such six month period shall be prepaid in accordance with this Section 4.4(b)(ii) immediately after the expiration of such twelve or six month period, as applicable and (B) no prepayment shall be required under this Section 4.4(b)(ii) to the extent such Net Cash Proceeds are attributable to an Asset Disposition of a Foreign Subsidiary so long as the Consolidated Total Leverage Ratio calculated on a Pro Forma Basis (after giving effect to such Asset Disposition) is less than the Specified Leverage.

(iii)Insurance and Condemnation Events.  The Borrower shall make mandatory principal prepayments of the Loans in the manner set forth in clause (iv) below in an amount equal to 100% of the aggregate Net Cash Proceeds from any Insurance and Condemnation Event to the extent that the aggregate amount of such Net Cash Proceeds not reinvested as set forth below exceeds $25,000,000 during any Fiscal Year.  Such prepayments shall be made within three Business Days after the date of receipt of Net Cash Proceeds of any such Insurance and Condemnation Event by such Credit Party or such Restricted Subsidiary; provided that, (A) no prepayment shall be required under this Section 4.4(b)(iii) to the extent that such Net Cash Proceeds are committed to be reinvested pursuant to a legally binding agreement in assets used or useful in the business of the Borrower and its Restricted Subsidiaries within twelve months after receipt of such Net Cash Proceeds and are thereafter actually reinvested in assets used or useful in the business of the Borrower within six months; provided further that any portion of the Net Cash Proceeds not committed to be reinvested pursuant to a legally binding agreement within such twelve month period or actually reinvested within such six month period shall be prepaid in accordance with this Section 4.4(b)(iv) immediately after the expiration of such twelve or six month period, as applicable and (B) no prepayment shall be required under this Section 4.4(b)(iii) to the extent such Net Cash Proceeds are attributable to an Insurance and Condemnation Event of a Foreign Subsidiary so long as the Consolidated Leverage Ratio calculated on a Pro Forma Basis (after giving effect to such Insurance and Condemnation Event) is less than the Specified Leverage.

(iv)Notice; Manner of Payment.  Upon the occurrence of any event triggering the prepayment requirement under clauses (i) through and including (iii) above, the Borrower shall promptly deliver a Notice of Prepayment to the Administrative Agent and upon receipt of such notice, the Administrative Agent shall promptly so notify the Lenders.  Each prepayment of the Loans under this Section shall be applied as follows:  except as otherwise provided in any Extension Amendment or otherwise agreed by the Borrower and the applicable Incremental Term Loan Lenders, ratably between each Class of Term Loans then outstanding (with prepayments applied to reduce up to the next eight remaining scheduled principal installments of each Class of Term Loans in direct order of maturity and thereafter to the remaining scheduled principal installments on a pro rata basis).  For the avoidance of doubt and notwithstanding the foregoing, no mandatory

60

 

 

 

prepayments shall be required under this Section 4.4(b), so long as no Term Loans exist hereunder.

(v)No Reborrowings.  Amounts prepaid under the Term Loan pursuant to this Section may not be reborrowed.  Each prepayment shall be accompanied by any amount required to be paid pursuant to Section 5.9.

ARTICLE V

GENERAL LOAN PROVISIONS

SECTION 5.1.Interest

.

(a)Interest Rate Options.  Subject to the provisions of this Section, at the election of the Borrower, (i) Revolving Credit Loans and the Term Loans shall bear interest at (A) the Base Rate plus the Applicable Margin or (B) the LIBOR Rate plus the Applicable Margin and (ii) any Swingline Loan shall bear interest at the Base Rate plus the Applicable Margin.  The Borrower shall select the rate of interest and Interest Period, if any, applicable to any Loan at the time a Notice of Borrowing is given or at the time a Notice of Conversion/Continuation is given pursuant to Section 5.2.

(b)Default Rate. Subject to Section 10.3, (i) immediately upon the occurrence and during the continuance of an Event of Default under Section 10.1(a), (b), (i) or (j), or (ii) at the election of the Required Lenders, upon the occurrence and during the continuance of any other Event of Default, (A)  all outstanding LIBOR Rate Loans shall bear interest at a rate per annum of 2% in excess of the rate (including the Applicable Margin) then applicable to LIBOR Rate Loans until the end of the applicable Interest Period, (B) all outstanding Base Rate Loans and other Obligations arising hereunder or under any other Loan Document shall bear interest at a rate per annum equal to 2% in excess of the rate (including the Applicable Margin) then applicable to Base Rate Loans or such other Obligations arising hereunder or under any other Loan Document and (C) all accrued and unpaid interest shall be due and payable on demand of the Administrative Agent.  Interest shall continue to accrue on the Obligations after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any Debtor Relief Law.

(c)Interest Payment and Computation.  Interest on each Base Rate Loan shall be due and payable in arrears on the last Business Day of each calendar quarter commencing with December 31, 2017; and interest on each LIBOR Rate Loan shall be due and payable on the last day of each Interest Period applicable thereto, and if such Interest Period extends over three months, at the end of each three month interval during such Interest Period.  All computations of interest for Base Rate Loans when the Base Rate is determined by the Prime Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest provided hereunder shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365/366-day year).

61

 

 

 

(d)Maximum Rate.  In no contingency or event whatsoever shall the aggregate of all amounts deemed interest under this Agreement charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such a court determines that the Lenders have charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law and the Lenders shall at the Administrative Agent’s option (i) promptly refund to the Borrower any interest received by the Lenders in excess of the maximum lawful rate or (ii) apply such excess to the principal balance of the Obligations on a pro rata basis.  It is the intent hereof that the Borrower not pay or contract to pay, and that neither the Administrative Agent nor any Lender receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrower under Applicable Law.

SECTION 5.2.Notice and Manner of Conversion or Continuation of Loans

.  Provided that no Default or Event of Default has occurred and is then continuing, the Borrower shall have the option to (a) convert at any time all or any portion of any outstanding Base Rate Loans (other than Swingline Loans) in a principal amount equal to $5,000,000 or any whole multiple of $1,000,000 in excess thereof into one or more LIBOR Rate Loans and (b) upon the expiration of any Interest Period, (i) convert all or any part of its outstanding LIBOR Rate Loans in a principal amount equal to $3,000,000 or a whole multiple of $1,000,000 in excess thereof into Base Rate Loans (other than Swingline Loans) or (ii) continue such LIBOR Rate Loans as LIBOR Rate Loans.  Whenever the Borrower desires to convert or continue Loans as provided above, the Borrower shall give the Administrative Agent irrevocable prior written notice in the form attached as Exhibit E (a “Notice of Conversion/Continuation”); provided that such irrevocable notice may be given to the Administrative Agent by telephone, provided, further, that such telephonic notice by the Borrower must be promptly confirmed by delivery to the Administrative Agent of a Notice of Conversion/Continuation not later than 12:00 p.m. three Business Days before the day on which a proposed conversion or continuation of such Loan is to be effective specifying (A) the Loans to be converted or continued, and, in the case of any LIBOR Rate Loan to be converted or continued, the last day of the Interest Period therefor, (B) the effective date of such conversion or continuation (which shall be a Business Day), (C) the principal amount of such Loans to be converted or continued, and (D) the Interest Period to be applicable to such converted or continued LIBOR Rate Loan; provided that if the Borrower wishes to request LIBOR Rate Loans having an Interest Period of twelve months in duration, such notice must be received by the Administrative Agent not later than 12:00 p.m. four Business Days prior to the requested date of such conversion or continuation, whereupon the Administrative Agent shall give prompt notice to the applicable Lenders of such request and determine whether the requested Interest Period is acceptable to all of them.  If the Borrower fails to give a timely Notice of Conversion/Continuation prior to the end of the Interest Period for any LIBOR Rate Loan, then the applicable LIBOR Rate Loan shall be converted to a Base Rate Loan.  Any such automatic conversion to a Base Rate Loan shall be effective as of the last day of the Interest Period then in effect with respect to the applicable LIBOR Rate Loan.  If the Borrower requests a conversion to, or continuation of, LIBOR Rate Loans, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.  Notwithstanding anything to the contrary herein, a Swingline Loan may not be converted to a LIBOR Rate Loan.  The

62

 

 

 

Administrative Agent shall promptly notify the affected Lenders of such Notice of Conversion/Continuation.

SECTION 5.3.Fees

.

(a)Commitment Fee.  Commencing on the Closing Date, subject to Section 5.15(a)(iii)(A), the Borrower shall pay to the Administrative Agent, for the account of the Revolving Credit Lenders, a non-refundable commitment fee (the “Commitment Fee”) at a rate per annum equal to the Applicable Margin on the average daily unused portion of the Revolving Credit Commitment of the Revolving Credit Lenders (other than the Defaulting Lenders, if any); provided that the amount of outstanding Swingline Loans shall not be considered usage of the Revolving Credit Commitment for the purpose of calculating the Commitment Fee.  The Commitment Fee shall be payable in arrears on the last Business Day of each calendar quarter during the term of this Agreement commencing with December 31, 2017 and ending on the date upon which all Obligations (other than contingent indemnification obligations not then due) arising under the Revolving Credit Facility shall have been indefeasibly and irrevocably paid and satisfied in full, all Letters of Credit have been terminated or expired (or been Cash Collateralized) and the Revolving Credit Commitment has been terminated.  The Commitment Fee shall be distributed by the Administrative Agent to the Revolving Credit Lenders (other than any Defaulting Lender) pro rata in accordance with such Revolving Credit Lenders’ respective Revolving Credit Commitment Percentages.

(b)Other Fees.  The Borrower shall pay to the Arranger and the Administrative Agent for their own respective accounts fees in the amounts and at the times specified in the Fee Letter.  The Borrower shall pay to the Lenders such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified.

SECTION 5.4.Manner of Payment

.  Each payment by the Borrower on account of the principal of or interest on the Loans or of any fee, commission or other amounts (including the Reimbursement Obligation) payable to the Lenders under this Agreement shall be made not later than 4:00 p.m. on the date specified for payment under this Agreement to the Administrative Agent at the Administrative Agent’s Office for the account of the Lenders entitled to such payment in Dollars, in immediately available funds and shall be made without any set off, counterclaim or deduction whatsoever.  Any payment received after such time shall be deemed a payment on such date for the purposes of Section 10.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day.  Upon receipt by the Administrative Agent of each such payment, the Administrative Agent shall distribute to each such Lender at its address for notices set forth herein its Commitment Percentage in respect of the relevant Credit Facility (or other applicable share as provided herein) of such payment and shall wire advice of the amount of such credit to each Lender.  Each payment to the Administrative Agent on account of the principal of or interest on the Swingline Loans or of any fee, commission or other amounts payable to the Swingline Lender shall be made in like manner, but for the account of the Swingline Lender.  Each payment to the Administrative Agent of any Issuing Lender’s fees or L/C Participants’ commissions shall be made in like manner, but for the account of such Issuing Lender or the L/C Participants, as the case may be.  Each payment to the Administrative Agent of the Administrative Agent’s fees or expenses shall be made for the account of the Administrative Agent and any amount payable to any Lender under Sections 5.9, 5.10, 5.11 or

63

 

 

 

12.3 shall be paid to the Administrative Agent for the account of the applicable Lender.  Subject to the definition of Interest Period, if any payment under this Agreement shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing any interest if payable along with such payment.  Notwithstanding the foregoing, if there exists a Defaulting Lender, each payment by the Borrower to such Defaulting Lender hereunder shall be applied in accordance with Section 5.15(a)(ii).

SECTION 5.5.Evidence of Indebtedness

.

(a)Extensions of Credit.  The Extensions of Credit made by each Lender and each Issuing Lender shall be evidenced by one or more accounts or records maintained by such Lender or such Issuing Lender and by the Administrative Agent in the ordinary course of business.  The accounts or records maintained by the Administrative Agent (including the Register maintained pursuant to Section 12.9(c)) shall be conclusive absent manifest error of the amount of the Extensions of Credit made by the Lenders or such Issuing Lender to the Borrower and its Restricted Subsidiaries and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the Register and the corresponding accounts and records of the Administrative Agent (including the Register maintained pursuant to Section 12.9(c)) shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Revolving Credit Note, Term Loan Note and/or Swingline Note, as applicable, which shall evidence such Lender’s Revolving Credit Loans, Term Loans and/or Swingline Loans, as applicable, in addition to such accounts or records.  Each Lender may attach schedules to its Notes and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.

(b)Participations.  In addition to the accounts and records referred to in subsection (a), each Revolving Credit Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Revolving Credit Lender of participations in Letters of Credit and Swingline Loans.  In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Revolving Credit Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

SECTION 5.6.Sharing of Payments by Lenders

.  If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, 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 (other than pursuant to Sections 5.9, 5.10, 5.11 or 12.3) greater than its pro rata share thereof as provided herein, 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

64

 

 

 

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, without interest, and

(ii)the provisions of this paragraph shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), (B) the application of Cash Collateral provided for in Section 5.14 or (C) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in Swingline Loans and Letters of Credit to any assignee or participant, including any buy back of the Term Loans by the Borrower pursuant to Section 12.9(e) but excluding any other assignment or participation to the Borrower or any of its Subsidiaries or Affiliates (as to which the provisions of this paragraph shall apply).  

Each Credit 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 Credit Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Credit Party in the amount of such participation.

SECTION 5.7.Administrative Agent’s Clawback

.

(a)Funding by Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have received notice from a Lender (i) in the case of Base Rate Loans, not later than 12:00 p.m. on the date of any proposed borrowing and (ii) otherwise, prior to the proposed date of any borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Sections 2.3(b) and 4.2 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable borrowing 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 (A) in the case of a payment to be made by such Lender, the greater of the daily average Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans.  If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period.  If such Lender pays its share of the applicable borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such borrowing.  Any payment by the Borrower shall be without prejudice to any claim the

65

 

 

 

Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

(b)Payments by the Borrower; Presumptions by Administrative Agent.  Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders, the Issuing Lenders or the Swingline 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, the Issuing Lenders or the Swingline 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, the Issuing Lenders or the Swingline Lender, as the case maybe, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender, Issuing Lender or the Swingline 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 Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(c)Nature of Obligations of Lenders Regarding Extensions of Credit.  The obligations of the Lenders under this Agreement to make the Loans and issue or participate in Letters of Credit are several and are not joint or joint and several.  The failure of any Lender to make available its Commitment Percentage of any Loan requested by the Borrower shall not relieve it or any other Lender of its obligation, if any, hereunder to make its Commitment Percentage of such Loan available on the borrowing date, but no Lender shall be responsible for the failure of any other Lender to make its Commitment Percentage of such Loan available on the borrowing date.

SECTION 5.8.Changed Circumstances

.

(a)Circumstances Affecting LIBOR Rate Availability.  InUnless and until a Benchmark Replacement is implemented in accordance with clause (c) below, in connection with any request for a LIBOR Rate Loan or a conversion to or continuation thereof, if for any reason (i) the Administrative Agent shall determine (which determination shall be conclusive and binding absent manifest error) that Dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable amount and Interest Period of such Loan, (ii) the Administrative Agent shall determine in good faith (which determination shall be conclusive and binding absent manifest error) that reasonable and adequate means do not exist for the ascertaining the LIBOR Rate for such Interest Period with respect to a proposed LIBOR Rate Loan or (iii) the Required Lenders shall determine (which determination shall be conclusive and binding absent manifest error) that the LIBOR Rate does not adequately and fairly reflect the cost to such Lenders of making or maintaining such Loans during such Interest Period, then the Administrative Agent shall promptly give written notice thereof to the Borrower as to such determination and the basis therefor.  Thereafter, the obligation of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Loan to or continue any Loan as a LIBOR Rate Loan shall be suspended (until such time as the conditions or events described in clauses (i) through (iii) of the preceding sentence and specified in the written notice described in the preceding sentence shall no longer exist or shall have otherwise been remedied, at which

66

 

 

 

time, the Administrative Agent shall revoke the foregoing written notice), and the Borrower shall, upon receipt of such written notice and for so long as the same has not been revoked by the Administrative Agent, either (A) repay in full (or cause to be repaid in full) the then outstanding principal amount of each such LIBOR Rate Loan together with accrued interest thereon (subject to Section 5.1(d)), on the last day of the then current Interest Period applicable to such LIBOR Rate Loan; or (B) convert the then outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period.

(b)Laws Affecting LIBOR Rate Availability.  If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, shall make it unlawful or impossible for any of the Lenders (or any of their respective Lending Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate Loan, such Lender shall promptly give notice thereof to the Administrative Agent and the Administrative Agent shall promptly give written notice to the Borrower and the other Lenders as to such circumstances and the basis therefor.  Thereafter, until the Administrative Agent notifies the Borrower that such circumstances specified in the written notice described in the preceding sentence no longer exist or have otherwise been remedied, (i) the obligations of the Lenders to make LIBOR Rate Loans, and the right of the Borrower to convert any Loan to a LIBOR Rate Loan or continue any Loan as a LIBOR Rate Loan shall be suspended and thereafter the Borrower may select only Base Rate Loans and (ii) if any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to the end of the then current Interest Period applicable thereto, the applicable Loan shall immediately be converted to a Base Rate Loan for the remainder of such Interest Period.

(c)Effect of Benchmark Transition Event.

(i)Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, the Administrative Agent and the Borrower may amend this Agreement to replace LIBOR with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after the Administrative Agent has posted such proposed amendment to all Lenders and the Borrower so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders. Any such amendment with respect to an Early Opt-in Election will become effective on the date that Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders accept such amendment. No replacement of LIBOR with a Benchmark Replacement pursuant to this Section 5.8(c) will occur prior to the applicable Benchmark Transition Start Date.

(ii)Benchmark Replacement Conforming Changes. In connection with the implementation of a Benchmark Replacement, the Administrative Agent will have the

67

 

 

 

right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.

(iii)Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (A) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date and Benchmark Transition Start Date, (B) the implementation of any Benchmark Replacement, (C) the effectiveness of any Benchmark Replacement Conforming Changes and (D) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or Lenders pursuant to this Section 5.8(c), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 5.8(c).

(iv)Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any request for a LIBOR Rate Loan of, conversion to or continuation of LIBOR Rate Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Base Rate Loans. During any Benchmark Unavailability Period, the component of the Base Rate based upon LIBOR will not be used in any determination of the Base Rate.

SECTION 5.9.Indemnity

.  Upon demand from time to time of any Lender and receipt by the Borrower of written notice thereof from the Administrative Agent, the Borrower shall indemnify each of the Lenders against any actual loss or expense (including any actual loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain a LIBOR Rate Loan or from fees payable to terminate the deposits from which such funds were obtained, but not any loss of anticipated profits) which may arise or be attributable to each Lender’s obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain any Loan (a) as a consequence of any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to make any payment when due of any amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the Borrower (for a reason other than the failure of such Lender to make a Loan) to borrow, continue or convert on a date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation or (c) due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date other than the last day of the Interest Period therefor or the day specified for payment in any notice required hereunder.  A certificate of such Lender setting forth in reasonable detail the factual basis for, and calculations used in, determining such amount or amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be presumed to be correct save for manifest error.

68

 

 

 

SECTION 5.10.Increased Costs.  

(a)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 advances, loans or other credit extended or participated in by, any Lender (except any reserve requirement reflected in the LIBOR Rate) or any Issuing Lender;

(ii)subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its Loans, Letter of Credit, Loan Commitments, or other Obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

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

and the result of any of the foregoing shall be to increase the cost to such Lender, the applicable Issuing 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, such 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, such Issuing Lender or such other Recipient hereunder (whether of principal, interest or any other amount) then, upon written request of such Lender, such Issuing Lender or other Recipient, the Borrower shall, within 30 days pay to any such Lender, such Issuing Lender or other Recipient, as the case may be, such additional amount or amounts necessary to compensate such Lender, such Issuing Lender or other Recipient, as the case may be, for such additional costs incurred or reduction suffered, as set forth in such certificate (absent manifest error).  

(b)Capital Requirements.  If any Lender or any Issuing Lender determines that any Change in Law affecting such Lender or such Issuing Lender or any lending office of such Lender or such Lender’s or such 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 such Issuing Lender’s capital or on the capital of such Lender’s or such Issuing Lender’s holding company, if any, as a consequence of this Agreement, the Revolving Credit Commitment of such Lender or the Loans made by, or participations in Letters of Credit or Swingline Loans held by, such Lender, or the Letters of Credit issued by such Issuing Lender, to a level below that which such Lender or such Issuing Lender or such Lender’s or such Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Lender’s policies and the policies of such Lender’s or such Issuing Lender’s holding company with respect to capital adequacy), then from time to time upon written request of such Lender or such Issuing Lender the Borrower shall, within 30 days, pay to such Lender or such Issuing Lender, as the case may be, such additional amount or

69

 

 

 

amounts necessary to compensate such Lender or such Issuing Lender or such Lender’s or such Issuing Lender’s holding company for any such reduction suffered, as set forth in such certificate (absent manifest error).  

(c)Certificates for Reimbursement.  A certificate of a Lender, or an Issuing Lender or such other Recipient setting forth in reasonable detail the factual basis for, and calculations used in determining such amount or amounts necessary to compensate such Lender or such Issuing Lender, such other Recipient or any of their respective holding companies, as the case may be, as specified in paragraph (a) or (b) of this Section and delivered to the Borrower, shall be conclusive absent manifest error.  The Borrower shall pay such Lender or such Issuing Lender or such other Recipient, as the case may be, the amount shown as due on any such certificate within 30 days after receipt thereof.

(d)Delay in Requests.  Failure or delay on the part of any Lender or any Issuing Lender or such other Recipient to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or such Issuing Lender’s or such other Recipient’s right to demand such compensation; provided that the Borrower shall not be required to compensate any Lender or an Issuing Lender or any other Recipient pursuant to this Section for any increased costs Incurred or reductions suffered more than 180 days prior to the date that such Lender or such Issuing Lender or such other Recipient, 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 such Issuing Lender’s or such other Recipient’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 180 day period referred to above shall be extended to include the period of retroactive effect thereof).

SECTION 5.11.Taxes.  

(a)Defined Terms.  For purposes of this Section 5.11, the term “Lender” includes any Issuing Lender and the term “Applicable Law” includes FATCA.

(b)Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Credit Parties under any Loan Document shall be made 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 Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Credit Party shall be increased as necessary so that, after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section), the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(c)Payment of Other Taxes by the Credit Parties.  The Credit Parties shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

70

 

 

 

(d)Indemnification by the Credit Parties.  The Credit Parties shall jointly and severally indemnify each Recipient, within 10 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) 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 Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Borrower by a Recipient (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Recipient, shall be conclusive absent manifest error.

(e)Indemnification by the Lenders.  Each Lender shall severally indemnify the Administrative Agent within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Credit Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Credit Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 12.9(d) 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 Governmental Authority.  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 paragraph (e).  The agreements in this paragraph (e) shall survive the resignation and/or replacement of the Administrative Agent.

(f)Evidence of Payments.  As soon as practicable after any payment of Taxes by any Credit Party to a Governmental Authority pursuant to this Section 5.11, such Credit Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(g)Status of Lenders.

(i)Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is

71

 

 

 

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 Sections 5.11(g)(ii)(A), 5.11(g)(ii)(B) and 5.11(g)(ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.  If the Administrative Agent is a U.S. Person, it shall deliver to the Borrower Agent on or prior to the date on which the Administrative Agent becomes the Administrative Agent under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Agent) an executed original of IRS Form W-9 certifying that the Administrative Agent is exempt from United States federal backup withholding tax.

(ii)Without limiting the generality of the foregoing:

(A)Any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from United States 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, or W-8BEN-E, as applicable (or any successor form), establishing an exemption from, or reduction of, United States federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN, or W-8BEN-E, as applicable (or any successor form), establishing an exemption from, or reduction of, United States 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 H-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section

72

 

 

 

881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN, or W-8BEN-E, as applicable (or any successor form); 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, or W-8BEN-E, as applicable (or any successor form), a U.S. Tax Compliance Certificate substantially in the form of Exhibit H-2 or Exhibit H-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit H-4 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 United States 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 United States 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.

73

 

 

 

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.

(h)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 5.11 (including by the payment of additional amounts pursuant to this Section 5.11), 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 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 Governmental Authority with respect to such refund).  Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(i)Survival.  Each party’s obligations under this Section 5.11 shall survive the resignation or replacement 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 under any Loan Document.

SECTION 5.12.Mitigation Obligations; Replacement of Lenders

.

(a)Designation of a Different Lending Office.  If any Lender requests compensation under Section 5.10, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.11, then such Lender shall 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 5.10 or Section 5.11, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all documented and reasonable out-of-pocket costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b)Replacement of Lenders.  If (x) any Lender requests compensation under Section 5.10, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any

74

 

 

 

Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.11, and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 5.12(a), (y) any Lender is a Defaulting Lender or a Non-Consenting Lender or (z) any Lender refuses to make an Extension Election pursuant to Section 5.16, then the Borrower may, at its sole expense and effort, 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 12.9), all of its interests, rights (other than its existing rights to payments pursuant to Section 5.10 or Section 5.11) and obligations under, and interests in, as applicable, its outstanding Loans and this Agreement and the related Loan Documents to an Eligible 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 (if any) specified in Section 12.9;

(ii)such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in Letters of Credit, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 5.9) 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 5.10 or payments required to be made pursuant to Section 5.11, such assignment will result in a reduction in such compensation or payments thereafter;

(iv)such assignment does not conflict with Applicable Law; and

(v)in the case of any assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

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 and such Lender has notified the Borrower thereof in writing.  Each Lender hereby grants to the Administrative Agent an irrevocable power of attorney (which power is coupled with an interest) to execute and deliver, on behalf of such Lender as assignor, any Assignment and Assumption necessary to effectuate any assignment of such Lender’s interests hereunder in the circumstances contemplated by this Section 5.12(b).

SECTION 5.13.Incremental Loans

.

(a)At any time, the Borrower may by written notice to the Administrative Agent elect to request the establishment of:

75

 

 

 

(i)one or more incremental term loan commitments (any such incremental term loan commitment, an “Incremental Term Loan Commitment”) to make one or more additional term loans (any such additional term loan, an “Incremental Term Loan”); or

(ii)one or more increases in the Revolving Credit Commitments or Extended Revolving Credit Commitments (any such increase, an “Incremental Revolving Credit Commitment” and, together with the Incremental Term Loan Commitments, the “Incremental Loan Commitments”) to make revolving credit loans under the Revolving Credit Facility (any such increase, an “Incremental Revolving Credit Increase” and, together with the Incremental Term Loans, the “Incremental Loans”);

provided that (1) the total aggregate principal amount for all such Incremental Loan Commitments incurred after the Closing Date shall not (as of any date of Incurrence thereof) exceed $100,000,000, (2) the total aggregate amount for each Incremental Loan Commitment (and the Incremental Loans made thereunder) shall not be less than a minimum principal amount of $10,000,000 or, if less, the remaining amount permitted pursuant to the foregoing clause (1), and (3) the aggregate Incremental Term Loan Commitments and Incremental Term Loans shall not exceed zero dollars at any time.  Each such notice shall specify the date (each, an “Increased Amount Date”) on which the Borrower proposes that any Incremental Loan Commitment shall be effective, which shall be a date not less than 5 Business Days after the date on which such notice is delivered to Administrative Agent.  The Borrower may invite any Lender, any Affiliate of any Lender and/or any Approved Fund, and/or any other Person reasonably satisfactory to the Administrative Agent, to provide an Incremental Loan Commitment (any such Person, an “Incremental Lender”).  Any proposed Incremental Lender offered or approached to provide all or a portion of any Incremental Loan Commitment may elect or decline, in its sole discretion, to provide such Incremental Loan Commitment.  Any Incremental Loan Commitment shall become effective as of such Increased Amount Date; provided that:

(A)no Default or Event of Default shall exist on such Increased Amount Date immediately before or immediately after giving effect to (1) any Incremental Loan Commitment and (2) the making of any Incremental Loans  pursuant thereto, provided that in connection with any Incremental Loan Commitment Incurred to finance a Permitted Acquisitions, this clause (A) shall apply only to any Event of Default under Section 10.1(a), (b), (i) or (j), but subject to, if agreed by the Incremental Lenders providing such Incremental Loan Commitment, customary “SunGard” protections or limited conditionality, as applicable;

(B)the Administrative Agent and the Lenders shall have received from the Borrower an Officer’s Compliance Certificate demonstrating, in form and substance reasonably satisfactory to the Administrative Agent, that the (1) Borrower is in compliance with the financial covenants set forth in Section 9.15 based on the financial statements most recently delivered pursuant to Section 8.1(a) or 8.1(b), as applicable, both before and after giving effect (on a Pro Forma Basis) to (x) any Incremental Loan Commitment, (y) the making of any Incremental Loans pursuant thereto (with any Incremental Loan Commitment

76

 

 

 

being deemed to be fully funded) and (z) any Permitted Acquisition consummated in connection therewith;

(C)each of the Specified Representations shall be true and correct in all material respects, except to the extent any such representation and warranty is qualified by materiality or reference to Material Adverse Effect, in which case, such representation and warranty shall be true, and correct in all respects, on such Increased Amount Date with the same effect as if made on and as of such date (except for any such representation and warranty that by its terms is made only as of an earlier date, which representation and warranty shall remain true and correct as of such earlier date);

(D)each Incremental Loan Commitment (and the Incremental Loans made thereunder) shall constitute Obligations of the Borrower and shall be secured and guaranteed with the other Extensions of Credit on a pari passu basis;

(E)(1)in the case of each Incremental Term Loan (the terms of which shall be set forth in the relevant Lender Joinder Agreement):

 

(x)

such Incremental Term Loan will not have a shorter weighted average life to maturity than the remaining weighted average life to maturity of the Initial Term Loan or a maturity date earlier than the Term Loan Maturity Date and shall otherwise have terms customarily associated with “term loan A loans”;

 

(y)

subject to clause (x) above, the pricing, interest rate margins, discounts, premiums, rate floors and fees and maturity and amortization schedule applicable to such Incremental Term Loan shall be determined by the Borrower and the applicable Incremental Lenders; and

 

(z)

except as provided above, all other terms and conditions applicable to such Incremental Term Loan shall, except to the extent otherwise provided in this Section 5.13, be identical to the terms and conditions applicable to the Initial Term Loan;

(2)in the case of each Incremental Revolving Credit Increase (the terms of which shall be set forth in the relevant Lender Joinder Agreement):

 

(x)

such Incremental Revolving Credit Increase shall mature on the Revolving Credit Maturity Date, shall bear interest and be entitled to fees (other than upfront fees), in each case at the rate applicable to the Revolving Credit Loans, and shall be subject to the same terms and conditions as the Revolving Credit Loans;

 

(y)

the outstanding Revolving Credit Loans and Revolving Credit Commitment Percentages of Swingline Loans and L/C Obligations will be reallocated by the Administrative Agent on the applicable

77

 

 

 

 

Increased Amount Date among the Revolving Credit Lenders (including the Incremental Lenders providing such Incremental Revolving Credit Increase) in accordance with their revised Revolving Credit Commitment Percentages (and the Revolving Credit Lenders (including the Incremental Lenders providing such Incremental Revolving Credit Increase) agree to make all payments and adjustments necessary to effect such reallocation and the Borrower shall pay any and all costs required pursuant to Section 5.9 in connection with such reallocation as if such reallocation were a repayment); and

 

(z)

except as provided above, all of the other terms and conditions applicable to such Incremental Revolving Credit Increase shall, except to the extent otherwise provided in this Section 5.13, be identical to the terms and conditions applicable to the Revolving Credit Facility;

(F)(1)any Incremental Lender making any Incremental Term Loan shall be entitled to the same voting rights as the existing Term Loan Lenders under the Term Loan Facility and each Incremental Term Loan shall receive proceeds of prepayments on the same basis as the Initial Term Loan (such prepayments to be shared pro rata on the basis of the original aggregate funded amount thereof among the Initial Term Loan and the Incremental Term Loans); and

(2)any Incremental Lender with an Incremental Revolving Credit Increase shall be entitled to the same voting rights as the existing Revolving Credit Lenders under the Revolving Credit Facility and any Extensions of Credit made in connection with each Incremental Revolving Credit Increase shall receive proceeds of prepayments on the same basis as the other Revolving Credit Loans made hereunder;

(G)such Incremental Loan Commitments shall be effected pursuant to one or more Lender Joinder Agreements executed and delivered by the Borrower, the Administrative Agent and the applicable Incremental Lenders (which Lender Joinder Agreement may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the opinion of the Administrative Agent, to effect the provisions of this Section 5.13); and

(H)the Borrower shall deliver or cause to be delivered any customary legal opinions or other documents (including a resolution duly adopted by the Board of Directors of each Credit Party authorizing such Incremental Loan and/or Incremental Term Loan Commitment) reasonably requested by the Administrative Agent in connection with any such transaction.

(b)(i)The Incremental Term Loans shall be deemed to be Term Loans; provided that such Incremental Term Loans shall be designated as a separate tranche of Term Loans for all purposes of this Agreement.

78

 

 

 

(ii)The Incremental Lenders shall be included in any determination of the Required Lenders or Required Revolving Credit Lenders, as applicable, and the Incremental Lenders will not constitute a separate voting class for any purposes under this Agreement.

(c)(i)On any Increased Amount Date on which any Incremental Term Loan Commitment becomes effective, subject to the foregoing terms and conditions, each Incremental Lender with an Incremental Term Loan Commitment shall make, or be obligated to make, an Incremental Term Loan to the Borrower in an amount equal to its Incremental Term Loan Commitment and shall become a Term Loan Lender hereunder with respect to such Incremental Term Loan Commitment and the Incremental Term Loan made pursuant thereto.

(ii)On any Increased Amount Date on which any Incremental Revolving Credit Increase becomes effective, subject to the foregoing terms and conditions, each Incremental Lender with an Incremental Revolving Credit Commitment shall become a Revolving Credit Lender hereunder with respect to such Incremental Revolving Credit Commitment.

(d)Notwithstanding anything to the contrary in this Section 5.13, the parties acknowledge and agree that to the extent that any financial maintenance covenant is added for the benefit of any Incremental Term Loan or Incremental Revolving Credit Increase, no consent shall be required from the Administrative Agent or any of the Lenders to the extent that such financial maintenance covenant is also added for the benefit of each other existing Class and tranche.  

SECTION 5.14.Cash Collateral

.  At any time that there shall exist a Defaulting Lender, within one Business Day following the written request of the Administrative Agent, any Issuing Lender (with a copy to the Administrative Agent) or the Swingline Lender (with a copy to the Administrative Agent), the Borrower shall Cash Collateralize the Fronting Exposure of such Issuing Lender and/or the Swingline Lender, as applicable, with respect to such Defaulting Lender (determined after giving effect to Section 5.15(a)(iv) and any Cash Collateral provided by such Defaulting Lender) in an amount not less than the Minimum Collateral Amount.

(a)Grant of Security Interest.  The Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to the Administrative Agent, for the benefit of each Issuing Lender and the Swingline Lender, and agrees to maintain, a first priority security interest in all such Cash Collateral as security for the Defaulting Lender’s obligation to fund participations in respect of L/C Obligations and Swingline Loans, to be applied pursuant to subsection (b) below.  If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent, each Issuing Lender and the Swingline Lender as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender).

79

 

 

 

(b)Application.  Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 5.14 or Section 5.15 in respect of Letters of Credit and Swingline Loans shall be applied to the satisfaction of the Defaulting Lender’s obligation to fund participations in respect of L/C Obligations and Swingline Loans (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.

(c)Termination of Requirement.  Cash Collateral (or the appropriate portion thereof) provided to reduce the Fronting Exposure of any Issuing Lender and/or the Swingline Lender, as applicable, shall no longer be required to be held as Cash Collateral pursuant to this Section 5.14 following (i) the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender), or (ii) the determination by the Administrative Agent, the Issuing Lenders and the Swingline Lender that there exists excess Cash Collateral; provided that, subject to Section 5.15, the Person providing Cash Collateral, the Issuing Lenders and the Swingline Lender may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure or other obligations.  

SECTION 5.15.Defaulting Lenders

.

(a)Defaulting Lender Adjustments.  Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by Applicable Law:

(i)Waivers and Amendments.  Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Required Lenders and Section 12.2.

(ii)Defaulting Lender Waterfall.  Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article X or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 12.4 shall be applied at such time or times as may be determined by the Administrative Agent as follows:  first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Lenders or the Swingline Lender hereunder; third, to Cash Collateralize the Fronting Exposure of the Issuing Lenders and the Swingline Lender with respect to such Defaulting Lender in accordance with Section 5.14; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan or funded participation in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (A) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans and funded participations under this Agreement and (B) Cash Collateralize the Issuing Lenders’ future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit and Swingline Loans issued

80

 

 

 

under this Agreement, in accordance with Section 5.14; sixth, to the payment of any amounts owing to the Lenders, the Issuing Lenders or the Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, any Issuing Lender or the Swingline Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (1) such payment is a payment of the principal amount of any Loans or funded participations in Letters of Credit or Swingline Loans in respect of which such Defaulting Lender has not fully funded its appropriate share, and (2) such Loans were made or the related Letters of Credit or Swingline Loans were issued at a time when the conditions set forth in Section 6.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and funded participations in Letters of Credit or Swingline Loans owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or funded participations in Letters of Credit or Swingline Loans owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in L/C Obligations and Swingline Loans are held by the Lenders pro rata in accordance with the Revolving Credit Commitments under the applicable Revolving Credit Facility without giving effect to Section 5.15(a)(iv).  Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 5.15(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii)Certain Fees.

(A)No Defaulting Lender shall be entitled to receive any Commitment Fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

(B)Each Defaulting Lender shall be entitled to receive letter of credit commissions pursuant to Section 3.3 for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Revolving Credit Commitment Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 5.14.

(C)With respect to any Commitment Fee or letter of credit commission not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower shall (1) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in L/C Obligations or Swingline Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (2) pay to each applicable Issuing Lender and Swingline Lender, as

81

 

 

 

applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such Issuing Lender’s or Swingline Lender’s Fronting Exposure to such Defaulting Lender, and (3) not be required to pay the remaining amount of any such fee.

(iv)Reallocation of Participations to Reduce Fronting Exposure.  All or any part of such Defaulting Lender’s participation in L/C Obligations and Swingline Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Revolving Credit Commitment Percentages (calculated without regard to such Defaulting Lender’s Revolving Credit Commitment) but only to the extent that (x) the conditions set forth in Section 6.2 are satisfied at the time of such reallocation (and, unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Revolving Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Revolving Credit Commitment.  NoSubject to Section 12.23, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

(v)Cash Collateral, Repayment of Swingline Loans.  If the reallocation described in clause (iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, (x) first, repay Swingline Loans in an amount equal to the Swingline Lenders’ Fronting Exposure and (y) second, Cash Collateralize the Issuing Lenders’ Fronting Exposure in accordance with the procedures set forth in Section 5.14.

(b)Defaulting Lender Cure.  If the Borrower, the Administrative Agent, the Issuing Lenders and the Swingline Lender agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), such Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held pro rata by the Lenders in accordance with the Commitments under the applicable Credit Facility (without giving effect to Section 5.15(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

SECTION 5.16.Extensions of Loans and Revolving Credit Commitments.  

82

 

 

 

(a)The Borrower may at any time and from time to time request that all or a portion of the Term Loans of any Class (an “Existing Term Loan Class”) be converted to extend the scheduled maturity date(s) of any payment of principal with respect to all or a portion of any principal amount of such Term Loans (any such Term Loans which have been so converted, “Extended Term Loans”) and to provide for other terms consistent with this Section 5.16.   In order to establish any Extended Term Loans, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders of the applicable Existing Term Loan Class, which such request shall be offered equally to all such Lenders) (a “Term Loan Extension Request”) setting forth the proposed terms of the Extended Term Loans to be established, which shall be identical to the Term Loans of the Existing Term Loan Class from which they are to be converted, except (x) the scheduled final maturity date shall be extended and all or any of the scheduled amortization payments of principal of the Extended Term Loans may be delayed to later dates than the scheduled amortization of principal of the Term Loans of such Existing Term Loan Class (with any such delay resulting in a corresponding adjustment to the scheduled amortization payments reflected in Section 4.3(a) or in the Lender Joinder Agreement, as the case may be, with respect to the Existing Term Loan Class from which such Extended Term Loans were converted, in each case as more particularly set forth in Section 5.16(d) below) and (y) (A) the interest margins with respect to the Extended Term Loans may be higher or lower than the interest margins for the Term Loans of such Existing Term Loan Class and/or (B) additional fees may be payable to the Lenders providing such Extended Term Loans in addition to or in lieu of any increased margins contemplated by the preceding clause (A), in each case, to the extent provided in the applicable Extension Amendment; provided that, notwithstanding anything to the contrary in this Section 5.16 or otherwise, (1) no Extended Term Loans may be optionally prepaid prior to the date on which the Existing Term Loan Class from which they were converted is repaid in full except in accordance with the last sentence of Section 4.4(a) and (2) the weighted average life to maturity of any Extended Term Loans shall be no shorter than the remaining weighted average life to maturity of any Term Loans. No Lender shall have any obligation to agree to have any of its Term Loans of any Existing Term Loan Class converted into Extended Term Loans pursuant to any Extension Request.  Any Extended Term Loans of any Extension Series shall constitute a separate Class of Term Loans from the Existing Term Loan Class form which they were converted.  

(b)The Borrower may at any time and from time to time request that all or a portion of the Revolving Credit Commitments and/or any Extended Revolving Credit Commitments, each existing at the time of such request (each, an “Existing Revolving Credit Commitment” and any related revolving credit loans thereunder, “Existing Revolving Credit Loans”; each Existing Revolving Credit Commitment and related Existing Revolving Credit Loans together being referred to as an “Existing Revolving Credit Class”), be converted to extend the termination date thereof and the scheduled maturity date(s) of any payment of principal with respect to all or a portion of any principal amount of Loans related to such Existing Revolving Credit Commitments (any such Existing Revolving Credit Commitments which have been so extended, “Extended Revolving Credit Commitments” and any related Loans, “Extended Revolving Credit Loans”) and to provide for other terms consistent with this Section 5.16(b).  In order to establish any Extended Revolving Credit Commitments, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders of the applicable Class of Existing Revolving Credit Commitments, which such request shall be offered equally to all such Lenders) (a “Revolving Credit Extension Request”) setting forth the proposed

83

 

 

 

terms of the Extended Revolving Credit Commitments to be established, which terms shall be identical to those applicable to the Existing Revolving Credit Commitments from which they are to be extended (the “Specified Existing Revolving Credit Commitment”), except all or any of the final maturity dates of such Extended Revolving Credit Commitments may be delayed to later dates than the final maturity dates of the Specified Existing Revolving Credit Commitments; provided that, notwithstanding anything to the contrary in this Section 5.16(d) or otherwise, (1) the borrowing and repayment (other than in connection with a permanent repayment and termination of commitments) of Loans with respect to any Existing Revolving Credit Commitments shall be made on a pro rata basis with all other Existing Revolving Credit Commitments and (2) assignments and participations of Extended Revolving Credit Commitments and Extended Revolving Credit Loans shall be governed by the same assignment and participation provisions applicable to Revolving Credit Commitments and the Revolving Credit Loans related to such Commitments set forth in Section 12.9.  No Lender shall have any obligation to agree to have any of its Existing Revolving Credit Loans or Existing Revolving Credit Commitments of any Existing Revolving Credit Class converted into Extended Revolving Credit Loans or Extended Revolving Credit Commitments pursuant to any Extension Request. Unless otherwise specified in the applicable Revolving Credit Extension Request, any Extended Revolving Credit Commitments of any Extension Series shall constitute a separate Class of revolving credit commitments from the Specified Existing Revolving Credit Commitments and from any other Existing Revolving Credit Commitments (together with any other Extended Revolving Credit Commitments so established on such date).

(c)The Borrower shall provide each Extension Request at least 10 Business Days (or such shorter period as the Administrative Agent may agree) prior to the date on which Lenders under the applicable Existing Class or Existing Classes are requested to respond.  Any Lender (an “Extending Lender”) wishing to have all or a portion of its Term Loans, Extended Term Loans, Incremental Term Loans, Revolving Credit Commitments or Extended Revolving Credit Commitments of the Existing Class or Existing Classes subject to such Extension Request converted into Extended Term Loans or Extended Revolving Credit Commitments, as applicable, shall notify the Administrative Agent (an “Extension Election”) on or prior to the date specified in such Extension Request of the amount of its Term Loans, Extended Term Loans, Incremental Term Loans, Revolving Credit Commitments, Incremental Revolving Credit Commitments or Extended Revolving Credit Commitments of the Existing Class or Existing Classes subject to such Extension Request that it has elected to convert into Extended Term Loans or Extended Revolving Credit Commitments, as applicable. In the event that the aggregate amount of Term Loans, Extended Term Loans, Incremental Term Loans, Revolving Credit Commitments, Incremental Revolving Credit Commitments or Extended Revolving Credit Commitments of the Existing Class or Existing Classes subject to Extension Elections exceeds the amount of Extended Term Loans or Extended Revolving Commitments, as applicable, requested pursuant to the Extension Request, Term Loans, Extended Term Loans, Incremental Term Loans, Revolving Credit Commitments, Incremental Revolving Credit Commitments or Extended Revolving Credit Commitments of the Existing Class or Existing Classes subject to Extension Elections shall be converted to Extended Term Loans or Extended Revolving Credit Commitments, as applicable, on a pro rata basis based on the amount of Term Loans, Revolving Credit Commitments, Incremental Revolving Credit Commitments or Extended Revolving Credit Commitments included in each such Extension Election. Notwithstanding the conversion of any Existing Revolving Credit Commitments into Extended Revolving Credit Commitments,

84

 

 

 

such Extended Revolving Credit Commitments shall be treated identically to all other Existing Revolving Credit Commitments for purposes of the obligations of a Revolving Credit Lender in respect of Swing Line Loans under Section 2.2 and Letters of Credit under Article III, except that the applicable Extension Amendment may provide that the Swingline Maturity Date and/or the Letter of Credit Expiration Date may be extended and the related obligations to make Swingline Loans and issue Revolving Letters of Credit may be continued so long as the Swingline Lender and/or the applicable Issuing Lender, as applicable, has consented to such extensions in its sole discretion (it being understood that no consent of any other Lender shall be required in connection with any such extension).

(d)Extended Term Loans or Extended Revolving Credit Commitments, as applicable, shall be established pursuant to an amendment (an “Extension Amendment”) to this Agreement (which, except to the extent expressly contemplated by the penultimate sentence of this Section 5.16(d) and notwithstanding anything to the contrary set forth in Section 12.2, shall not require the consent of any Lender other than the Extending Lenders with respect to the Extended Term Loans or Extended Revolving Credit Commitments, as applicable, established thereby) executed by the Credit Parties, the Administrative Agent and the Extending Lenders.  No Extension Amendment shall provide for any new Class of Extended Term Loans or Extended Revolving Credit Commitments in an aggregate principal amount that is less than $25,000,000. In addition to any terms and changes required or permitted by Section 5.16(a), each Extension Amendment (x) shall amend the scheduled amortization payments pursuant to Section 4.3 or the applicable Lender Joinder Agreement with respect to the Existing Term Loan Class from which the Extended Term Loans were converted to reduce each scheduled principal installment for the Existing Term Loan Class in the same proportion as the amount of Term Loans of the Existing Term Loan Class is to be converted pursuant to such Extension Amendment (it being understood that the amount of any scheduled principal installment payable with respect to any individual Term Loan of such Existing Term Loan Class that is not an Extended Term Loan shall not be reduced as a result thereof) and (y) may, but shall not be required to, impose additional requirements (not inconsistent with the provisions of this Agreement in effect at such time) with respect to the final maturity and weighted average life to maturity of Incremental Term Loans Incurred following the date of such Extension Amendment.  

(e)Notwithstanding anything to the contrary contained in this Agreement, (i) on any date on which any Existing Class is converted to extend the related scheduled maturity date(s) in accordance with clauses (a) and/or (b) above (an “Extension Date”), (A) in the case of the existing Term Loans of each Extending Lender, the aggregate principal amount of such existing Term Loans shall be deemed reduced by an amount equal to the aggregate principal amount of Extended Term Loans so converted by such Lender on such date, and the Extended Term Loans shall be established as a separate Class of Term Loans (together with any other Extended Term Loans so established on such date) and (B) in the case of the Specified Existing Revolving Credit Commitments of each Extending Lender, the aggregate principal amount of such Specified Existing Revolving Credit Commitments shall be deemed reduced by an amount equal to the aggregate principal amount of Extended Revolving Credit Commitments so converted by such Lender on such date, and such Extended Revolving Credit Commitments shall be established as a separate Class of revolving credit commitments from the Specified Existing Revolving Credit Commitments and from any other Existing Revolving Credit Commitments (together with any other Extended Revolving Credit Commitments so established on such date) and (B) if, on any

85

 

 

 

Extension Date, any Loans of any Extending Lender are outstanding under the applicable Specified Revolving Credit Commitments, such Loans (and any related participations) shall be deemed to be allocated as Extended Revolving Credit Loans (and related participations) and Existing Revolving Credit Loans (and related participations) in the same proportion as such Extending Lender’s Specified Existing Revolving Credit Commitments to Extended Revolving Credit Commitments.

ARTICLE VI

CONDITIONS OF CLOSING AND BORROWING

SECTION 6.1.Conditions to Closing and Initial Extensions of Credit

.  The obligation of the Lenders to close this Agreement and to make the initial Loans or issue or participate in the initial Letter of Credit, if any, is subject to the satisfaction of each of the following conditions:

(a)Executed Loan Documents.  The Amendment and Restatement Agreement, a Revolving Credit Note in favor of each Revolving Credit Lender requesting a Revolving Credit Note, a Swingline Note in favor of the Swingline Lender (in each case, if requested thereby), together with any other applicable Loan Documents to be executed on the Closing Date, shall have been duly authorized, executed and delivered to the Administrative Agent by the parties thereto and shall be in full force and effect.

(b)Legal Opinion.  The Administrative Agent shall have received a written opinion of Winston & Strawn LLP, special counsel for the Borrower and each other Credit Party, with respect to the Credit Parties, the Loan Documents and such other matters as the Administrative Agent shall reasonably request, which such opinion shall be addressed to the Administrative Agent, the Lenders and the Issuing Lenders and shall expressly permit reliance by permitted successors and assigns on customary matters).

(c)Closing Certificates; Etc.  The Administrative Agent shall have received each of the following in form and substance reasonably satisfactory to the Administrative Agent:

(i)Officer’s Certificate.  A certificate from a Responsible Officer of the Borrower to the effect that the representations and warranties contained in Article VII are true and correct in all material respects (except to the extent any such representation and warranty is qualified by materiality or reference to Material Adverse Effect, in which case, such representation and warranty shall be true and correct in all respects).

(ii) Certificate of Secretary of each Credit Party.  A certificate of a Responsible Officer of each Credit Party certifying as to the incumbency and genuineness of the signature of each officer of such Credit Party executing Loan Documents to which it is a party and certifying that attached thereto is a true, correct and complete copy of (A) the articles or certificate of incorporation or formation (or equivalent), as applicable, of such Credit Party and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation, organization or formation (or equivalent), as applicable, (B) the bylaws or other governing document of such Credit Party as in effect on the Closing Date, (C) resolutions duly adopted by the

86

 

 

 

Board of Directors of such Credit Party authorizing and approving the transactions contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, and (D) each certificate required to be delivered pursuant to Section 6.1(b)(iii).

(iii)Certificates of Good Standing.  Certificates as of a recent date of the good standing (to the extent such concept exists in the applicable jurisdiction) of each Credit Party under the laws of its jurisdiction of incorporation, organization or formation (or equivalent), as applicable.

(iv)Reaffirmation of Foreign Pledge Agreement.  The Reaffirmation of Foreign Pledge Agreement, in form and substance reasonably satisfactory to the Administrative Agent.

(d)Personal Property Collateral.

(i)Filings and Recordings.  The Administrative Agent shall have received all documents to be filed or recorded in the United States that are necessary to perfect the security interests of the Administrative Agent, on behalf of the Secured Parties, in the Collateral and the Administrative Agent shall have received evidence reasonably satisfactory to the Administrative Agent that upon such filings and recordations such security interests constitute valid and perfected first priority Liens thereon (subject to Permitted Liens).

(ii)Pledged Collateral.  The Administrative Agent shall have received (A) original stock certificates or other certificates evidencing the certificated Equity Interests pledged pursuant to the Security Documents, together with an undated stock power for each such certificate duly executed in blank by the registered owner thereof and (B) each original promissory note pledged pursuant to the Security Documents together with an undated allonge for each such promissory note duly executed in blank by the holder thereof.

(iii)Lien Search.  The Administrative Agent shall have received the results of a Lien search (including a search as to judgments, pending litigation, bankruptcy, tax and intellectual property matters), in form and substance reasonably satisfactory thereto, made against the Credit Parties under the Uniform Commercial Code (or applicable judicial docket) as in effect in each jurisdiction in which filings or recordations under the Uniform Commercial Code should be made to evidence or perfect security interests in all assets of such Credit Party, indicating among other things that the assets of each such Credit Party are free and clear of any Lien (except for Permitted Liens).

(iv)Property and Liability Insurance.  The Borrower shall have used commercially reasonable efforts to provide evidence of property, business interruption and liability insurance covering each Credit Party (with appropriate endorsements naming the Administrative Agent as lender’s loss payee (and mortgagee, as applicable) on all policies for property hazard insurance and as additional insured on all policies for liability insurance).

87

 

 

 

(e)Financial Matters.

(i)Financial Statements.  The Administrative Agent shall have received the audited Consolidated balance sheet of the Borrower and its Subsidiaries and the related audited statements of income and retained earnings and cash flows for each of the Fiscal Years ended June 27, 2015, June 25, 2016 and June 24, 2017.

(ii)Pro Forma Financial Statements.  The Administrative Agent shall have received pro forma consolidated financial statements for the Borrower and its Subsidiaries for the four-quarter period most recently ended prior to the Closing Date for which financial statements are available calculated on a Pro Forma Basis after giving effect to the Transactions, provided that such pro forma financial statements shall be in a form customary for confidential information memoranda for bank facilities of this type and shall not be required to be prepared in accordance with Regulation S-X under the Securities Act of 1933, as amended.

(iii)Financial Projections.  The Administrative Agent shall have received projections prepared by management of the Borrower, of balance sheets, income statements and cash flow statements on a quarterly basis for the remaining Fiscal Year following the Closing Date and on an annual basis for each year thereafter during the term of the Credit Facility.  

(iv)Solvency Certificate.  The Borrower shall have delivered to the Administrative Agent a certificate, in substantially the form of Exhibit J attached hereto, and certified as accurate by the chief financial officer of the Borrower.  

(v)Payment at Closing.  The Borrower shall have paid or made arrangements to pay contemporaneously with closing (A) to the Administrative Agent, the Arranger and the Lenders, the fees set forth or referenced in Section 5.3 and any other accrued and unpaid fees or commissions due hereunder, (B) all documented and reasonable fees, charges and disbursements of one primary counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent invoiced at least three days prior to the Closing Date and (C) to the Administrative Agent and any Lender, such amount as may be due pursuant to this Agreement, in each case to the extent invoiced at least three Business Days prior to the Closing Date.

(f)PATRIOT Act, etc.  The Borrower and each of the Subsidiary Guarantors shall have provided to the Administrative Agent and the Lenders the documentation and other information reasonably requested by the Administrative Agent at least ten Business Days prior to the Closing Date in order to comply with requirements of the PATRIOT Act, applicable “know your customer” and anti-money laundering rules and regulations.

Without limiting the generality of the provisions of the last paragraph of Section 11.3, for purposes of determining compliance with the conditions specified in this Section 6.1, the Administrative Agent and each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender

88

 

 

 

unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

SECTION 6.2.Conditions to All Extensions of Credit (including any Extensions of Credit on the Closing Date)

.  The obligations of the Lenders to make or participate in any Extensions of Credit (including any Extensions of Credit on the Closing Date) and/or any Issuing Lender to issue or extend any Letter of Credit are subject to the satisfaction of the following conditions precedent on the relevant borrowing, issuance or extension date: (a)

(a)Continuation of Representations and Warranties.  Except as otherwise provided in Section 5.13 with respect to Incremental Term Loans and Incremental Revolving Credit Increases, the representations and warranties contained in Article VII shall be true and correct in all material respects, except for any representation and warranty that is qualified by materiality or reference to Material Adverse Effect, which such representation and warranty shall be true and correct in all respects, on and as of such borrowing, issuance or extension date with the same effect as if made on and as of such date (except for any such representation and warranty that by its terms is made only as of an earlier date, which representation and warranty shall remain true and correct in all material respects as of such earlier date, except for any representation and warranty that is qualified by materiality or reference to Material Adverse Effect, which such representation and warranty shall be true and correct in all respects as of such earlier date), provided that on the date of the consummation of the Specified Acquisition, the only representations and warranties the truth of which shall be a condition precedent to the incurrence of Revolving Credit Loans used solely to fund the Specified Acquisition (and related fees and expenses) shall be the Specified Representations.  

(b)No Existing Default.  Except as otherwise provided in Section 5.13 with respect to Incremental Term Loans and Incremental Revolving Credit Increases, no Default or Event of Default shall have occurred and be continuing (i) on the borrowing date with respect to such Loan or after giving effect to the Loans to be made on such date or (ii) on the issuance or extension date with respect to such Letter of Credit or after giving effect to the issuance or extension of such Letter of Credit on such date.

(c)Notices.  The Administrative Agent shall have received a Notice of Borrowing or Letter of Credit Application as applicable, from the Borrower in accordance with Section 2.3(a), Section 3.2 or Section 4.2, as applicable.  The submission by the Borrower of each Notice of Borrowing and each Letter of Credit Application after the Closing Date shall be deemed to be a representation and warranty by the Borrower that each of the statements set forth in Sections 6.2(a) and 6.2(b) is true and correct as of the date of such notice.  

(d)New Swingline Loans/Letters of Credit.  So long as any Lender is a Defaulting Lender, (i) the Swingline Lender shall not be required to fund any Swingline Loans unless it is satisfied that it will have no Fronting Exposure after giving effect to such Swingline Loan and (ii) no Issuing Lender shall be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.

89

 

 

 

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES

To induce the Administrative Agent and Lenders to enter into this Agreement and to induce the Lenders to make Extensions of Credit, the Credit Parties hereby represent and warrant to the Administrative Agent and the Lenders both before and after giving effect to the Transactions and other transactions contemplated hereunder, which representations and warranties shall be deemed made on the Closing Date and as otherwise set forth in Section 6.2, that:

SECTION 7.1.Organization; Power; Qualification

.  Each Credit Party and each Restricted Subsidiary thereof (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation (to the extent such concept is applicable in the relevant jurisdiction), (b) has the power and authority to own its Properties and to carry on its business as now being and hereafter proposed to be conducted and (c) is duly qualified and authorized to do business in each jurisdiction in which the character of its Properties or the nature of its business requires such qualification and authorization except in jurisdictions where the failure to be so qualified or in good standing could not reasonably be expected to result in a Material Adverse Effect.  The jurisdictions in which each Credit Party and each Restricted Subsidiary thereof are organized as of the Closing Date are described on Schedule 7.1.

SECTION 7.2.Ownership

.  Each Restricted Subsidiary of each Credit Party as of the Closing Date is listed on Schedule 7.2.  As of the Closing Date, the capitalization of each Credit Party and its Restricted Subsidiaries consists of the number of shares, authorized, issued and outstanding, of such classes and series, with or without par value, described on Schedule 7.2.  All outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable (to the extent such concepts are applicable in the relevant jurisdiction) and not subject to any preemptive or similar rights, except as described in Schedule 7.2.  The shareholders or other owners, as applicable, of each of the Borrower’s Restricted Subsidiaries and the number of shares owned by each as of the Closing Date are described on Schedule 7.2.  As of the Closing Date, there are no outstanding stock purchase warrants, subscriptions, options, securities, instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or require the issuance of Equity Interests of any Credit Party (other than the Borrower) or any Restricted Subsidiary thereof, except as described on Schedule 7.2.

SECTION 7.3.Authorization; Enforceability

.  Each Credit Party has the right, power and authority and has taken all necessary organizational action to authorize the execution, delivery and performance of this Agreement and each of the other Loan Documents to which it is a party in accordance with their respective terms.  This Agreement and each of the other Loan Documents have been duly executed and delivered by the duly authorized officers of each Credit Party that is a party thereto, and each such document constitutes the legal, valid and binding obligation against such Credit Party, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal Debtor Relief Laws from time to time in effect which affect the enforcement of

90

 

 

 

creditors’ rights in general and the availability of equitable remedies and requirements of reasonableness, good faith and fair dealing.

SECTION 7.4.Compliance of Agreement, Loan Documents and Borrowing With Laws, Etc

.  The execution, delivery and performance by each Credit Party of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the Extensions of Credit hereunder and the transactions contemplated hereby or thereby do not (a) require any Governmental Approval that have not been obtained or violate any Applicable Law relating to any Credit Party where the failure to obtain such Governmental Approval or such violation would reasonably be expected to have a Material Adverse Effect, (b) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of any Credit Party, (c) conflict with, result in a breach of or constitute a default under any indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person, which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, or (d) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by such Person other than Permitted Liens.  

SECTION 7.5.Compliance With Law; Governmental Approvals

.  Each Credit Party and each Restricted Subsidiary thereof (a) has all material Governmental Approvals required by any Applicable Law for it to conduct its business, (b) is in compliance with each material Governmental Approval applicable to it and in material compliance with all other Applicable Laws relating to it or any of its respective properties and (c) has timely filed all material reports, documents and other materials required to be filed by it under all Applicable Laws with any Governmental Authority and has retained all material records and documents required to be retained by it under Applicable Law, except in each case of clauses (a), (b) and (c) where the failure to have, comply or file would not reasonably be expected to have a Material Adverse Effect.

SECTION 7.6.Tax Returns and Payments.  

Each Credit Party and each Restricted Subsidiary thereof has duly filed or caused to be filed all income and other tax returns required by Applicable Law to be filed (except for extensions duly obtained), and has paid, or made adequate provision for the payment of, all federal, state, local and other taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable (other than any amount the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided for on the books of the relevant Credit Party), in each case except to the extent that failure to do so would not reasonably be expected to result in a Material Adverse Effect.  As of the Closing Date, except as set forth on Schedule 7.6, there is no ongoing audit or examination or, to its knowledge, other investigation by any Governmental Authority of the tax liability of any Credit Party or any Restricted Subsidiary thereof.  No Governmental Authority has asserted any Lien or, to any Credit Party’s knowledge, other claim against any Credit Party or any Restricted Subsidiary thereof with respect to material unpaid taxes which has not been discharged or resolved (other than (a) any amount the validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in

91

 

 

 

conformity with GAAP have been provided for on the books of the relevant Credit Party and (b) Permitted Liens).  

SECTION 7.7.Intellectual Property Matters

.  Each Credit Party and each Restricted Subsidiary thereof owns or possesses rights to use all material franchises, licenses, copyrights, copyright applications, patents, patent rights or licenses, patent applications, trademarks, trademark rights, service mark, service mark rights, trade names, trade name rights, copyrights and other rights with respect to the foregoing which are reasonably necessary to conduct its business.  No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights, and no Credit Party nor any Restricted Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to any such rights as a result of its business operations, which in either case, would reasonably be expected to have a Material Adverse Effect.

SECTION 7.8.Environmental Matters

.  Except as disclosed in Schedule 7.8 or as would not reasonably be expected individually or in the aggregate, to have a Material Adverse Effect:

(a)The properties owned, leased or operated by each Credit Party and each Restricted Subsidiary thereof now or in the past do not contain, and, to its knowledge, have not previously contained, any Hazardous Materials in amounts or concentrations which constitute or constituted a violation by any Credit Party or any Restricted Subsidiary of applicable Environmental Laws or any a permit, approval, license or other Governmental Approval issued under any Environmental Law;

(b)each Credit Party and each Restricted Subsidiary and all operations conducted by any Credit Party or any Restricted Subsidiary in connection with all properties owned, leased or operated by each Credit Party and each Restricted Subsidiary are in compliance, and have been in compliance, with all applicable Environmental Laws or any a permit, approval, license or other Governmental Approval issued under any Environmental Law and any permit, approval, license or other Governmental Approval issued under any Environmental Law required in connection with all such operations have been obtained and have not expired or been revoked, appealed or cancelled;

(c)no Credit Party nor any Restricted Subsidiary thereof has received any written notice of any Environmental Claim that, if adversely determined, could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, no Environmental Claim in connection with any of the properties owned, leased or operated by each Credit Party and each Restricted Subsidiary or the operations in connection therewith is currently pending and no Credit Party or any Restricted Subsidiary thereof has knowledge or reason to believe that a notice of Environmental Claim will be received or is being threatened or that there are any conditions or operations that could reasonably be expected to form the basis of an Environmental Claim at any of the properties owned, leased or operated by each Credit Party and each Restricted Subsidiary;

(d)Hazardous Materials have not been transported or disposed of from the properties owned, leased or operated by any Credit Party or any Restricted Subsidiary thereof in violation

92

 

 

 

by any Credit Party or any Restricted Subsidiary of, or in a manner or to a location which could reasonably be expected to give rise to liability of any Credit Party or any Restricted Subsidiary under, Environmental Laws, nor have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of such properties in violation by any Credit Party or any Restricted Subsidiary of, or in a manner that could reasonably be expected to give rise to liability of any Credit Party or any Restricted Subsidiary under, any applicable Environmental Laws; and

(e)there has been no past release, nor is there any present release or threat of release, of Hazardous Materials at, on, under, in, or migrating to or from properties owned, leased or operated by any Credit Party or any Restricted Subsidiary, now or in the past, in violation of or in amounts or in a manner that could give rise to liability under applicable Environmental Laws.

SECTION 7.9.Employee Benefit Matters

.  No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, would reasonably be expected to result in a Material Adverse Effect.  There are no pending or, to the knowledge of each Credit Party and each Restricted Subsidiary thereof, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Employee Benefit Plan that would reasonably be expected to result in a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Employee Benefit Plan that has resulted or would reasonably be expected to result in a Material Adverse Effect.  Except as would not reasonably be expected to result in a Material Adverse Effect, no Credit Party or Restricted Subsidiary thereof has any liability with respect to employees or former employees for any post-retirement benefit under any “employee welfare plan” (as defined in Section 3(1) of ERISA), other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA, Section 4980B of the Code or applicable state law.

SECTION 7.10.Margin Stock

.  No Credit Party nor any Restricted Subsidiary thereof is engaged principally or as one of its activities in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” (as each such term is defined or used, directly or indirectly, in Regulation U of the Board of Governors of the Federal Reserve System).  No part of the proceeds of any of the Loans or Letters of Credit will be used for any purpose that violates the provisions of Regulation T, U or X of such Board of Governors.

SECTION 7.11.Government Regulation

.  No Credit Party nor any Restricted Subsidiary thereof is an “investment company,” as such term is defined or used in the Investment Company Act of 1940).

SECTION 7.12.Material Contracts

.  Schedule 7.12 sets forth a complete and accurate list of all Material Contracts of each Credit Party and each Restricted Subsidiary thereof in effect as of the Closing Date.  Other than as set forth in Schedule 7.12 or as would not reasonably be expected to have a Material Adverse Effect, as of the Closing Date, each such Material Contract is, and after giving effect to the consummation of the transactions contemplated by the Loan Documents will be, in full force and effect in accordance with the terms thereof.  As of the Closing Date, no Credit Party nor any Restricted Subsidiary thereof (nor, to its knowledge, any other party thereto) is in breach of or in default under any Material Contract in any respect that would reasonably be expected to have a Material Adverse Effect.  

93

 

 

 

SECTION 7.13.Financial Statements

.  The audited and unaudited financial statements delivered pursuant to Section 6.1(e)(i) fairly present, in all material respects, on a Consolidated basis the assets, liabilities and financial position of the Borrower and its Subsidiaries, taken as a whole, as at such dates, and the results of the operations and cash flow for the periods then ended (other than customary year-end adjustments for unaudited financial statements and the absence of footnotes from unaudited financial statements).  All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP (other than the absence of footnotes from unaudited financial statements).  The pro forma financial statements delivered pursuant to Section 6.1(e)(ii) and the projections delivered pursuant to Section 6.1(e)(iii) and were prepared in good faith on the basis of the assumptions stated therein, which assumptions are believed to be reasonable in light of then existing conditions except that such financial projections and statements shall be subject to normal year end closing and audit adjustments (it being recognized by the Lenders that projections are not to be viewed as facts and that the actual results during the period or periods covered by such projections may vary materially from such projections).  

SECTION 7.14.No Material Adverse Change

.  Since June 24, 2017, there has been no material adverse change in the properties, business, operations or financial condition of the Borrower and its Restricted Subsidiaries, taken as a whole, and no event has occurred or circumstance arisen, either individually or in the aggregate, that would reasonably be expected to have a Material Adverse Effect.

SECTION 7.15.Solvency

.  As of the Closing Date, after giving effect to the Transactions, the Credit Parties, on a Consolidated basis, are Solvent.

SECTION 7.16.Title to Properties

.  As of the Closing Date, the real property listed on Schedule 7.16 constitutes all of the real property that is owned, leased (to the extent, with respect to any individual property, annual lease payments exceed $1,000,000 in the aggregate) or subleased by any Credit Party or any of its Restricted Subsidiaries.  Each Credit Party and each Restricted Subsidiary thereof has such title to the real property owned or leased by it as is necessary or desirable to the conduct of its business and valid and legal title to all of its personal property and assets, except (i) those which have been disposed of by the Credit Parties and their Restricted Subsidiaries subsequent to such date which dispositions have been in the ordinary course of business or as otherwise expressly permitted hereunder and (ii) as would not reasonably be expected to have a Material Adverse Effect.

SECTION 7.17.Litigation

.   Except for matters existing on the Closing Date and set forth in Schedule 7.17, there are no material actions, suits or proceedings pending nor, to its knowledge, threatened in writing against or in any other way relating adversely to or affecting any Credit Party or any Restricted Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority that would reasonably be expected to have a Material Adverse Effect.

SECTION 7.18.Anti-Terrorism; Anti-Money Laundering; Anti-Corruption

.  No Credit Party nor any of its Restricted Subsidiaries or, to their knowledge, any of their Related Parties (i) is an “enemy” or an “ally of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act of the United States (50 U.S.C. App. §§ 1 et seq.), (ii) is in violation of (A) the

94

 

 

 

Trading with the Enemy Act, (B) any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V) or any enabling legislation or executive order relating thereto or (C) the PATRIOT Act (collectively, the “Anti-Terrorism Laws”) or (iii) is a Sanctioned Person.  No part of the proceeds of any Extension of Credit hereunder will be used by any Credit Party or any Subsidiary thereof unlawfully directly or indirectly to fund any operations in, finance any investments or activities in or make any payments to, a Sanctioned Person or a Sanctioned Country, or in any other manner that will result in any violation by any Credit Party or any Subsidiary thereof of any Anti-Terrorism Laws.  

SECTION 7.19.Senior Indebtedness Status

.  The Obligations of each Credit Party and each Restricted Subsidiary thereof under this Agreement and each of the other Loan Documents ranks and shall continue to rank at least senior in priority of payment to all Subordinated Indebtedness and all senior unsecured Indebtedness of each such Person and is designated as “Senior Indebtedness” under all instruments and documents, now or in the future, relating to all Subordinated Indebtedness and all senior unsecured Indebtedness of such Person.

SECTION 7.20.Disclosure

.  The written information furnished in writing to the Administrative Agent and the Lenders  by or on behalf of any Credit Party or any Restricted Subsidiary thereof to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) (excluding projected financial information, pro forma financial information, estimated financial information and other projected or estimated information contained in such information), taken as a whole, and after giving effect to any updates provided, does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; provided that, (x) it is understood that financial statements only contain such disclosures as are required by GAAP and (y) with respect to projected financial information, pro forma financial information, estimated financial information and other projected or estimated information (including those delivered subsequent to the Closing Date), the Borrower only represents that, such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being recognized by the Administrative Agent and the Lenders that projections are not to be viewed as facts and that the actual results during the period or periods covered by such projections may vary materially from such projections).

ARTICLE VIII

AFFIRMATIVE COVENANTS

Until all of the Obligations (other than contingent indemnification obligations not then due) have been paid and satisfied in full in cash, all Letters of Credit have been terminated or expired (or been Cash Collateralized) and the Commitments terminated, each Credit Party will, and will cause each of its Restricted Subsidiaries to:

SECTION 8.1.Financial Statements and Budgets

.  Deliver to the Administrative Agent (which shall promptly make such information available to the Lenders in accordance with its customary practice):

95

 

 

 

(a)Annual Financial Statements.  Within 90 days after the end of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2018), an audited Consolidated balance sheet of the Borrower and its Restricted Subsidiaries as of the close of such Fiscal Year and audited Consolidated statements of income, retained earnings and cash flows for such Fiscal Year and a report containing management’s discussion and analysis of such financial statements for such Fiscal Year, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures as of the end of and for the preceding Fiscal Year and prepared in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the year.  Such annual financial statements shall be audited by KPMG LLP or any other independent certified public accounting firm of recognized national standing reasonably acceptable to the Administrative Agent, and accompanied by a report and opinion thereon by such certified public accountants prepared in accordance with generally accepted auditing standards that is not subject to any “going concern,” explanatory language or exception or any qualification as to the scope of such audit (except for qualifications pertaining to debt maturities occurring within 12 months of such audit or a breach or anticipated breach of a financial covenant).  

(b)Quarterly Financial Statements.  Within 45 days after the end of the first three Fiscal Quarters of each Fiscal Year (commencing with the Fiscal Quarter ending September 30, 2017), an unaudited Consolidated balance sheet of the Borrower and its Restricted Subsidiaries as of the close of such Fiscal Quarter and unaudited Consolidated statements of income, retained earnings and cash flows for such Fiscal Quarter and a report containing management’s discussion and analysis of such financial statements for the Fiscal Quarter then ended and that portion of the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures as of the end of and for the corresponding period in the preceding Fiscal Year and prepared by the Borrower in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the period, and certified by the chief financial officer of the Borrower to present fairly in all material respects the financial condition of the Borrower and its Restricted Subsidiaries on a Consolidated basis as of their respective dates and the results of operations of the Borrower and its Restricted Subsidiaries for the respective periods then ended, subject to normal year-end adjustments and the absence of footnotes.

(c)Annual Business Plan and Budget.  Within 60 days after the end of each Fiscal Year, a projected Consolidated income statement, balance sheet and statement of cash flows of the Borrower and its Restricted Subsidiaries on a quarterly basis for the upcoming Fiscal Year.  

SECTION 8.2.Certificates; Other Reports

.  Deliver to the Administrative Agent (which shall promptly make such information available to the Lenders in accordance with its customary practice):

(a)at each time financial statements are delivered pursuant to Sections 8.1(a) or (b), a duly completed Officer’s Compliance Certificate signed by the chief executive officer, chief financial officer, treasurer or controller of the Borrower, which (i) states that no Default or Event of Default has occurred and is continuing, or, if any such Default or Event of Default has

96

 

 

 

occurred and is continuing, a statement as to the nature thereof and what action the Borrower proposes to take with respect thereto, (ii) sets forth, for the Fiscal Quarter or Fiscal Year covered by such Financial Statements or as of the last day of such Fiscal Quarter or Fiscal Year (as the case may be), the calculation of the financial ratios and tests provided in Section 9.15 (including a reconciliation to GAAP for all non-GAAP figures), (iii) sets forth, with respect to each Non-Pledged Subsidiary, the amount of (x) tangible assets and owned intellectual property (valued at the greater of book value or Fair Market Value) as of the last day of the Fiscal Quarter or Fiscal Year covered by such Financial Statements and (y) revenues (excluding intercompany revenues) for the period of four consecutive Fiscal Quarters ending on the last day of the Fiscal Quarter or Fiscal Year covered by such Financial Statements and (iv) to the extent any portion of the Available Amount was used during the Fiscal Quarter or Fiscal Year covered by such Financial Statements, sets forth reasonably detailed calculations of the Available Amount then in effect;

(b)promptly after the same are available, copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Exchange Act, or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

(c)promptly after the request therefor, such other information and documentation required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations (including the PATRIOT Act), as from time to time reasonably requested by the Administrative Agent or any Lender; and

(d)such other information regarding the operations, business affairs and financial condition of any Credit Party or any Restricted Subsidiary thereof as the Administrative Agent or any Lender may reasonably request.

Documents required to be delivered pursuant to Sections 8.1(a), 8.1(b), 8.2(b) or 8.2(c) (to the extent any such documents are included in materials otherwise filed with the SEC) or Section 8.1(c) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed in Section 12.1; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that the Borrower shall notify the Administrative Agent (by electronic mail), which upon receipt shall promptly notify each Lender, of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions of such documents. Except for such Officer’s Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arranger will make available to the Lenders and the Issuing Lenders materials and/or information provided by

97

 

 

 

or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on Debt Domain, IntraLinks, SyndTrak Online or another similar electronic system (the “Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive MNPI with respect to the Borrower or its securities) (each, a “Public Lender”).  The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, means that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Arranger, the Issuing Lenders and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 12.10); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (z) the Administrative Agent and the Arranger shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”  Notwithstanding the foregoing, the Borrower shall be under no obligation to mark any Borrower Materials “PUBLIC”.

SECTION 8.3.Notice of Litigation and Other Matters

.  Promptly notify the Administrative Agent in writing of (which shall promptly make such information available to the Lenders in accordance with its customary practice):

(a)the occurrence of any Default or Event of Default;

(b)the filing or commencement of any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority and all actions and proceedings in any court or before any arbitrator against any Credit Party or any Restricted Subsidiary thereof or any of their respective properties, assets or businesses in each case that if adversely determined would reasonably be expected to result in a Material Adverse Effect;

(c)the occurrence of any of the following, that alone or taken together with the occurrence of any event specified in this Section 8.3(c) that have occurred, would reasonably be expected to result in a Material Adverse Effect: (i) all notices received by any Credit Party or any ERISA Affiliate of the PBGC’s intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (ii) all notices received by any Credit Party or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA and (iii) the Borrower obtaining knowledge or reason to know that any Credit Party or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA; and

(d)any development that has resulted in, or would reasonably be expected to result in a Material Adverse Effect; and

98

 

 

 

(e)the failure by the Credit Parties to comply with the liquidity requirement set forth in Section 9.17 as of the end of any two week period referred to in said Section.  

Each notice pursuant to Section 8.3 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.  Each notice pursuant to Section 8.3(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

SECTION 8.4.Preservation of Corporate Existence and Related Matters

.  Except as permitted by Section 9.4, preserve and maintain its separate legal existence and all rights, franchises, licenses and privileges necessary to the conduct of its business taken as a whole in the ordinary course of business, and qualify and remain qualified as a foreign corporation or other entity and authorized to do business in each jurisdiction in which the failure to so qualify would reasonably be expected to have a Material Adverse Effect.

SECTION 8.5.Maintenance of Property and Licenses

.

(a)Protect and preserve all Properties necessary in and material to the conduct of its business, including copyrights, patents, trade names, service marks and trademarks; maintain in good working order and condition, ordinary wear and tear excepted, all buildings, equipment and other tangible real and personal property; and from time to time make or cause to be made all repairs, renewals and replacements thereof and additions to such Property necessary for the conduct of its business, in each case except as such action or inaction would not reasonably be expected to result in a Material Adverse Effect.

(b)Maintain, in full force and effect in all material respects, each license, permit, certification, qualification, approval or franchise issued by any Governmental Authority (each a “License”) required for each of them to conduct their respective businesses as presently conducted, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

SECTION 8.6.Insurance

.  Maintain insurance with financially sound and reputable insurance companies against at least such risks and in at least such amounts as are customarily maintained by similar businesses and as may be required by Applicable Law (including hazard and business interruption insurance).  All such insurance shall, (a) provide that no cancellation or material modification thereof shall be effective until at least 10 days after receipt by the Administrative Agent of written notice thereof (unless the applicable insurance company will not include such provision after the Borrower has used commercially reasonable efforts to obtain the same), (b) name the Administrative Agent as an additional insured party thereunder and (c) in the case of each casualty insurance policy, name the Administrative Agent as lender’s loss payee.  From time to time after the Closing Date deliver to the Administrative Agent upon its reasonable request information in reasonable detail as to the insurance then in effect, stating the names of the insurance companies, the amounts and rates of the insurance, the dates of the expiration thereof and the properties and risks covered thereby. Notwithstanding the foregoing, any Credit Party or any Restricted Subsidiary may self‑insure against such risks and in such amounts as are customary in the Borrower’s industry.

99

 

 

 

SECTION 8.7.Accounting Methods and Financial Records

.  Maintain a system of accounting, and keep in all material respects, proper books of record and account in which true and correct entries in all material respects in conformity, in all material respects, with GAAP and Applicable Law are made of all material dealings and material transactions in relation to its business and activities.

SECTION 8.8.Payment of Taxes and Other Obligations

.  Pay and perform (a) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its Property and (b) all other Indebtedness, obligations and liabilities in accordance with customary trade practices, except where the failure to pay or perform such items described in clauses (a) or (b) of this Section would not reasonably be expected to have a Material Adverse Effect; provided that the Borrower or such Restricted Subsidiary may contest any item described in clause (a) of this Section in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP.  

SECTION 8.9.Compliance with Laws and Approvals

.  Remain in compliance with all Applicable Laws and maintain in full force and effect all Governmental Approvals, in each case applicable to the conduct of its business except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

SECTION 8.10.Environmental Laws

.  In addition to and without limiting the generality of Section 8.9, (a) comply with, and take commercially reasonable steps to ensure such compliance by all tenants and subtenants with all applicable Environmental Laws and obtain and comply with and maintain, and take commercially reasonable steps to ensure that all tenants and subtenants, if any, obtain and comply with and maintain, any and all Governmental Approvals or other licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws and (b) conduct and complete all investigations, assessments, studies, sampling and testing, and all remedial, removal, disposal, monitoring, mitigation, reporting, management and other actions required under Environmental Laws, and promptly comply with all notices, orders and directives of any Governmental Authority regarding Environmental Laws, in each case of clauses (a) or (b), except as would not reasonably be expected to have a Material Adverse Effect.  

SECTION 8.11.Compliance with ERISA

.  In addition to and without limiting the generality of Section 8.9,  except where the failure to so comply could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) comply with applicable provisions of ERISA, the Code and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans, (ii) not take any action or fail to take action the result of which would reasonably be expected to result in a liability to the PBGC or to a Multiemployer Plan and (iii) not participate in any transaction that would result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

SECTION 8.12.Visits and Inspections

.  Permit representatives of the Administrative Agent, from time to time upon not less than five Business Days’ prior written notice and at such times during normal business hours, all at the expense of the Borrower, to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including management letters prepared by independent accountants; and discuss with its principal officers,

100

 

 

 

and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects; provided that excluding any such visits and inspections during the continuation of an Event of Default, the Administrative Agent shall not exercise such rights more often than one time during any calendar year at the Borrower’s expense; provided further that upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may do any of the foregoing during normal business hours upon not less than one Business Day’s prior written notice at the expense of the Borrower.  The Borrower acknowledges that the Administrative Agent, after exercising its rights of inspection, may prepare and distribute to the Lenders certain reports pertaining to the Borrower and its Subsidiaries’ assets for internal use by the Administrative Agent and the Lenders; provided that if any such report contains MNPI, it shall not be distributed to a Public Lender.   The Borrower and its Subsidiaries shall have no obligation to discuss or disclose to Administrative Agent, any Lender, or any of their officers, directors, employees or agents, materials protected by attorney‑client privilege (including any attorney work product) and materials that the Credit Parties or any of their Restricted Subsidiaries may not disclose without violation of a material confidentiality obligation binding upon it.  Upon the request of the Administrative Agent or the Required Lenders, participate in a meeting of the Administrative Agent and Lenders once during each Fiscal Year, which meeting will be held at the Borrower’s corporate offices (or such other location (including telephonically) as may be agreed to by the Borrower and the Administrative Agent) at such time as may be agreed by the Borrower and the Administrative Agent.  

SECTION 8.13.Additional Subsidiaries; Immaterial Subsidiaries

.

(a)Additional Domestic Subsidiaries.  Promptly after the creation or acquisition of any Domestic Subsidiary (other than an Excluded Subsidiary) or after any Excluded Subsidiary ceases to be an Excluded Subsidiary (and, in any event, within 45 days after such creation or acquisition or such date such Domestic Subsidiary ceases to be an Excluded Subsidiary, as such time period may be extended by the Administrative Agent in its sole discretion) cause such Person to (i) become a Subsidiary Guarantor by delivering to the Administrative Agent a duly executed supplement to the Subsidiary Guaranty Agreement or such other document as the Administrative Agent shall deem appropriate for such purpose, (ii) grant a security interest in all Collateral specified in the Security Documents (subject to the exceptions specified in the applicable Security Document, including with respect to Excluded Assets (as defined in the Collateral Agreement)) owned by such Subsidiary by delivering to the Administrative Agent a duly executed supplement to each applicable Security Document or such other document as the Administrative Agent shall deem appropriate for such purpose and comply with the terms of each applicable Security Document, (iii) deliver to the Administrative Agent such opinions, documents and certificates referred to in Section 6.1 as may be reasonably requested by the Administrative Agent, (iv) if the Equity Interests of such Subsidiary are certificated, deliver to the Administrative Agent such original certificated Equity Interests or other certificates and stock or other transfer powers evidencing the Equity Interests of such Subsidiary and (v) deliver to the Administrative Agent such updated Schedules to the Loan Documents as reasonably requested by the Administrative Agent with respect to such Person.  For purposes of this Section 8.13(a), compliance with applicable foreign law with respect to the grant, creation and perfection of Liens on and security interests in the Collateral will not be required.

101

 

 

 

(b)Additional Foreign Subsidiaries.  Notify the Administrative Agent promptly after any Person becomes a Material First Tier Foreign Subsidiary, and at the request of the Administrative Agent, promptly thereafter (and, in any event, within 45 days after such request, as such time period may be extended by the Administrative Agent in its sole discretion), cause (i) the applicable Credit Party to deliver to the Administrative Agent a Foreign Pledge Agreement pledging 65% of the total outstanding voting Equity Interests (and 100% of the non-voting Equity Interests) of any such new Material First Tier Foreign Subsidiary and a consent thereto executed by such new Material First Tier Foreign Subsidiary (including if applicable, original certificated Equity Interests (or the equivalent thereof pursuant to the Applicable Laws and practices of any relevant foreign jurisdiction) evidencing the Equity Interests of such new Material First Tier Foreign Subsidiary, together with an appropriate undated stock or other transfer power for each certificate duly executed in blank by the registered owner thereof), (ii) such Person to deliver to the Administrative Agent such opinions, documents and certificates referred to in Section 6.1 as may be reasonably requested by the Administrative Agent, (iii) such Person to deliver to the Administrative Agent such updated Schedules to the Loan Documents as requested by the Administrative Agent with regard to such Person and (iv) such Person to deliver to the Administrative Agent such other documents as may be reasonably requested by the Administrative Agent, all in form, content and scope reasonably satisfactory to the Administrative Agent.

(c)Merger Subsidiaries.  Notwithstanding the foregoing, to the extent any new Restricted Subsidiary is created solely for the purpose of consummating a merger transaction pursuant to a Permitted Acquisition, and such new Restricted Subsidiary at no time holds any assets or liabilities other than any merger consideration contributed to it contemporaneously with the closing of such merger transaction, such new Restricted Subsidiary shall not be required to take the actions set forth in Section 8.13(a) or (b), as applicable, until the consummation of such Permitted Acquisition (at which time, the surviving entity of the respective merger transaction shall be required to so comply with Section 8.13(a) or (b), as applicable, within 10 Business Days after the consummation of such Permitted Acquisition, as such time period may be extended by the Administrative Agent in its sole discretion).

(d)Immaterial Subsidiaries.  If on any date either (i) the aggregate amount of tangible assets and owned intellectual property (valued at the greater of book value or Fair Market Value) of all Non-Pledged Subsidiaries or (ii) the aggregate amount of revenues (excluding intercompany revenues) for the period of four consecutive Fiscal Quarters most recently ended for which financial statements have been delivered pursuant to Section 8.1(a) or 8.1(b) of all Non-Pledged Subsidiaries exceeds $50,000,000, promptly (and, in any event, within 45 days after such date, as such time period may be extended by the Administrative Agent in its sole discretion) cause one or more Non-Pledged Subsidiaries to become Subsidiary Guarantors or Pledged Foreign Subsidiaries in accordance with Section 8.13(a) or (b), as applicable, such that after giving effect thereto, the aggregate amount of tangible assets and owned intellectual property (valued at the greater of book value or Fair Market Value) and the aggregate amount of revenues (excluding intercompany revenues) for the period of four consecutive Fiscal Quarters most recently ended for which financial statements have been delivered pursuant to Section 8.1(a) or 8.1(b) of all Non-Pledged Subsidiaries is, in each case, less than $50,000,000.  

102

 

 

 

(e)Exclusions.  The provisions of this Section 8.13 shall not apply to assets where the cost or burden of obtaining a security interest therein or perfection thereof outweighs the benefit to the Lenders afforded thereby, as agreed in writing by the Borrower and the Administrative Agent.  

SECTION 8.14.Designation of Subsidiaries

.  The Board of Directors of the Borrower may at any time designate (or redesignate) any Subsidiary of the Borrower as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation, no Default or Event of Default shall have occurred and be continuing (including after giving effect to the reclassification of Investments in, Indebtedness of and Liens on the assets of, the applicable Restricted Subsidiary or Unrestricted Subsidiary), (ii) after giving effect to such designation, the Borrower shall be in compliance with financial covenants set forth in Section 9.15 (whether or not then in effect) calculated on a Pro Forma Basis as of the last day of the four consecutive Fiscal Quarter period most recently ended for which the Borrower has delivered financial statements pursuant to Section 8.1(a) or 8.1(b), prior to such designation, (iii) each Subsidiary to be designated as “unrestricted” and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender thereof has recourse to any of the assets of the Borrower or any Restricted Subsidiary, (iv) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary or if it is a Restricted Subsidiary for purposes of any Subordinated or unsecured Indebtedness and (v) no Unrestricted Subsidiary shall own any Equity Interests of any Restricted Subsidiary.  The designation of any Subsidiary of the Borrower as an Unrestricted Subsidiary shall constitute an Investment by the Borrower or its applicable Restricted Subsidiary therein at the date of designation in an amount equal to the portion of the Fair Market Value of the net assets of such Person attributable to the Borrower’s or its applicable Restricted Subsidiary’s equity interest therein as reasonably estimated by the Borrower (and such designation shall only be permitted to the extent such Investment is permitted under Section 9.3).  The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence or making at the time of designation of any Investments, Indebtedness or Liens of such Subsidiary existing at such time.  As of the Closing Date, there are no Unrestricted Subsidiaries.

SECTION 8.15.Use of Proceeds

.

(a)The Borrower shall use the proceeds of the Revolving Credit Facility (i) to refinance certain existing Indebtedness of the Borrower and (ii) for working capital and general corporate purposes of the Borrower and its Restricted Subsidiaries, including for Permitted Stock Repurchases and other Restricted Payments and Permitted Acquisitions.  

(b)The Borrower shall use the proceeds of any Incremental Term Loan and any Incremental Revolving Credit Increase as permitted pursuant to Section 5.13, as applicable.

103

 

 

 

SECTION 8.16.Further Assurances

.  Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements and other documents), which may be required under any Applicable Law, or which the Administrative Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Credit Parties.

  

SECTION 8.17.Compliance with Anti-Corruption Laws, Anti-Money Laundering Laws and Sanctions; Beneficial Ownership Regulation

.  (a) Maintain in effect and enforce policies and procedures designed to promote and achieve compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with all applicable anti-corruption laws, anti-money laundering laws and sanctions administered or enforced by OFAC, the United Nations Security Council, the European Union or Her Majesty’s Treasury, (b) notify the Administrative Agent and each Lender that previously received a Beneficial Ownership Certification (or a certification that the Borrower qualifies for an express exclusion to the “legal entity customer” definition under the Beneficial Ownership Regulation) of any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified therein (or, if applicable, the Borrower ceasing to fall within an express exclusion to the definition of “legal entity customer” under the Beneficial Ownership Regulation) and (c) promptly upon the reasonable request of the Administrative Agent or any Lender, provide the Administrative Agent or directly to such Lender, as the case may be, any information or documentation requested by it for purposes of complying with the Beneficial Ownership Regulation.

ARTICLE IX

NEGATIVE COVENANTS

Until all of the Obligations (other than contingent, indemnification obligations not then due) have been paid and satisfied in full in cash, all Letters of Credit have been terminated or expired (or been Cash Collateralized) and the Commitments terminated, the Credit Parties will not, and will not permit any of their respective Restricted Subsidiaries to.

SECTION 9.1.Indebtedness

.  Create, incur, assume or suffer to exist any Indebtedness except:

(a)the Obligations;

(b)Indebtedness and obligations owing under Hedge Agreements entered into in order to manage existing or anticipated interest rate, exchange rate or commodity price risks and not for speculative purposes;

(c)Indebtedness existing on the Closing Date and listed on Schedule 9.1, and the renewal, refinancing, extension and replacement thereof; provided that the principal amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or

104

 

 

 

extension except by an amount equal to a reasonable premium, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder;

(d)Indebtedness Incurred in connection with Capital Leases and purchase money Indebtedness in an aggregate amount not to exceed $35,000,000 at any time outstanding;

(e)Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary or assets were acquired from such Person in connection with an Investment permitted pursuant to Section 9.3, to the extent that (i) such Indebtedness was not Incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or the acquisition of such assets, (ii) neither the Borrower nor any Restricted Subsidiary thereof (other than such Person or any other Person that such Person merges with or that acquires the assets of such Person) shall have any liability or other obligation with respect to such Indebtedness and (iii) the aggregate outstanding principal amount of such Indebtedness does not exceed $35,000,000 at any time outstanding;

(f)Guaranty Obligations with respect to Indebtedness permitted pursuant to subsections (a) through (e) of this Section;

(g)unsecured intercompany Indebtedness:

(i)owed by any Credit Party to another Credit Party;

(ii)owed by any Credit Party to any Non-Credit Party (provided that such Indebtedness shall be subordinated to the Obligations in a manner reasonably satisfactory to the Administrative Agent);

(iii)owed by any Non-Credit Party to any other Non-Credit Party; and

(iv)owed by any Non-Credit Party to any Credit Party to the extent permitted pursuant to Section 9.3(a)(vi);

(h)Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or other similar instrument drawn against insufficient funds in the ordinary course of business;

(i)Subordinated Indebtedness of the Borrower and its Restricted Subsidiaries; provided that in the case of each Incurrence of such Subordinated Indebtedness, (i) no Default or Event of Default shall have occurred and be continuing or would be caused by the Incurrence of such Subordinated Indebtedness and (ii) the Administrative Agent shall have received satisfactory written evidence that the Borrower would be in compliance with the financial covenants set forth in Section 9.15 on a Pro Forma Basis immediately after giving effect to the issuance of any such Subordinated Indebtedness; provided, further that the maturity of such Subordinated Indebtedness shall be no earlier than a date that is six months after the Latest Maturity Date and such Subordinated Indebtedness shall have no principal payments prior to a date that is six months after the Latest Maturity Date;

105

 

 

 

(j)Indebtedness under performance bonds, surety bonds, release, appeal and similar bonds, statutory obligations or with respect to workers’ compensation claims, in each case Incurred in the ordinary course of business, and reimbursement obligations in respect of any of the foregoing;

(k)Indebtedness incurred in the ordinary course of business in connection with the financing of insurance premiums;

(l) Indebtedness for bank products (including cash management services and commercial credit cards and obligations under Cash Management Agreements) incurred in the ordinary course of business;

(m) obligations under take or pay contracts entered into with suppliers and manufacturers;

(n)Indebtedness of any Credit Party or any Restricted Subsidiary consisting of obligations under deferred compensation or other similar arrangements incurred by such Person in connection with any Permitted Acquisition or any Investment expressly permitted hereunder or otherwise under deferred compensation plans entered into in the ordinary course of business;

(o)Indebtedness of Foreign Subsidiaries in an aggregate principal amount not to exceed $35,000,000 at any time outstanding;

(p)Indebtedness of any Credit Party or any Restricted Subsidiary thereof not otherwise permitted pursuant to this Section in an aggregate principal amount not to exceed the greater of (i) $50,000,000 and (ii) 15% of Consolidated EBITDA for the four consecutive Fiscal Quarter period most recently ended for which the Borrower has delivered financial statements pursuant to Section 8.1(a) or 8.1(b), determined as of the date of Incurrence of such Indebtedness;

(q)Indebtedness incurred in a Permitted A/R Financing; and

(r)unsecured Indebtedness of the Borrower and its Restricted Subsidiaries; provided that in the case of each Incurrence of such Indebtedness, (i) no Default or Event of Default shall have occurred and be continuing or would be caused by the Incurrence of such Indebtedness and (ii) the Administrative Agent shall have received satisfactory written evidence that the Borrower would be in compliance with the financial covenants set forth in Section 9.15 on a Pro Forma Basis immediately after giving effect to the issuance of any such Indebtedness; provided, further that the maturity of such unsecured Indebtedness shall be no earlier than a date that is 91 days after the Latest Maturity Date and such Indebtedness shall have no principal payments prior to a date that is 91 days after the Latest Maturity Date.

SECTION 9.2.Liens

.  Create, incur, assume or suffer to exist, any Lien on or with respect to any of its Property, whether now owned or hereafter acquired, except:

(a)Liens created pursuant to the Loan Documents (including Liens in favor of the Swingline Lender and/or the Issuing Lenders, as applicable, on Cash Collateral granted pursuant to the Loan Documents);

106

 

 

 

(b)Liens in existence on the Closing Date and described on Schedule 9.2, and the replacement, renewal or extension thereof (including Liens Incurred, assumed or suffered to exist in connection with any refinancing, refunding, renewal or extension of Indebtedness pursuant to Section 9.1(c) (solely to the extent that such Liens were in existence on the Closing Date and described on Schedule 9.2)); provided that the scope of any such Lien shall not be increased, or otherwise expanded, to cover any additional property or type of asset, as applicable, beyond that in existence on the Closing Date, except for products and proceeds of the foregoing;

(c)Liens for taxes, assessments and other governmental charges or levies (i) not yet due or as to which the period of grace (not to exceed 60 days), if any, related thereto has not expired or (ii) which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP;

(d)the claims of materialmen, mechanics, carriers, warehousemen, processors, repairmen, construction contractors or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, which (i) are not overdue for a period of more than 90 days, or if more than 90 days overdue, such Liens are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP and (ii) do not, individually or in the aggregate, materially impair the use thereof in the operation of the business of the Borrower or any of its Restricted Subsidiaries;

(e)(i) deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers’ compensation, unemployment insurance and other types of social security or similar legislation, or to secure the performance of bids, earnest money,  trade contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds, payment obligations in connection with health, disability, other employee benefits or self-insurance and similar obligations and other obligations of a like nature incurred in the ordinary course of business, in each case, so long as no foreclosure sale or similar proceeding has been commenced with respect to any portion of the Collateral on account thereof and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to any Credit Party or any Restricted Subsidiary;

(f)encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property, which in the aggregate do not, in any case, materially impair the use thereof in the ordinary conduct of business;

(g)Liens arising from the filing of precautionary UCC financing statements relating solely to personal property leased pursuant to operating leases entered into in the ordinary course of business of the Borrower and its Restricted Subsidiaries;

(h)Liens securing Indebtedness permitted under Section 9.1(d); provided that (i) such Liens shall be created within 120 days of the acquisition, repair, improvement or lease, as applicable, of the related Property, (ii) such Liens do not at any time encumber any property other than the Property financed by such Indebtedness and the proceeds thereof, (iii) the amount

107

 

 

 

of Indebtedness secured thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original price for the purchase, repair improvement or lease amount (as applicable) of such Property at the time of purchase, repair, improvement or lease (as applicable);

(i)Liens securing judgments for the payment of money not constituting an Event of Default under Section 10.1(m) or securing appeal or other surety bonds relating to such judgments;

(j)(i) Liens on Property (i) of any Restricted Subsidiary which are in existence at the time that such Restricted Subsidiary is acquired pursuant to a Permitted Acquisition and (ii) of the Borrower or any of its Restricted Subsidiaries existing at the time such tangible property or tangible assets are purchased or otherwise acquired by the Borrower or such Restricted Subsidiary thereof pursuant to a transaction permitted pursuant to this Agreement; provided that, with respect to each of the foregoing clauses (i) and (ii), (A) such Liens are not incurred in connection with, or in anticipation of, such Permitted Acquisition, purchase or other acquisition, (B) such Liens are applicable only to specific Property, (C) such Liens are not “blanket” or all asset Liens, (D) such Liens do not attach to any other Property of the Borrower or any of its Restricted Subsidiaries and (E) the Indebtedness and any refinancing, renewal, extension or replacement with respect thereto secured by such Liens is permitted under Section 9.1(e) of this Agreement);

(k)Liens on assets of Foreign Subsidiaries; provided that (i) such Liens do not extend to, or encumber, assets that constitute Collateral or the Equity Interests of the Borrower or any of the Subsidiary Guarantors, and (ii) such Liens extending to the assets of any Foreign Subsidiary secure only Indebtedness Incurred by such Foreign Subsidiary pursuant to Section 9.1(c), (e), or (o);

(l)(i) Liens of a collecting bank arising in the ordinary course of business under Section 4-210 of the Uniform Commercial Code in effect in the relevant jurisdiction or similar law of a foreign jurisdiction, (ii) Liens of any depositary bank or securities intermediary in connection with statutory, common law and contractual rights of set-off and recoupment with respect to any deposit account or securities account (or assets therein) of the Borrower or any Restricted Subsidiary thereof;

(m)(i) contractual or statutory Liens of landlords to the extent relating to the property and assets relating to any lease agreements (or situated on a leased premises) with such landlord, and (ii) vendor retention of title and contractual Liens of suppliers (including sellers of goods) or customers granted in the ordinary course of business to the extent limited to the property or assets relating to such contract;

(n)any interest or title of a licensor, sublicensor, lessor or sublessor with respect to any assets under any license or lease agreement entered into in the ordinary course of business which do not (i) interfere in any material respect with the business of the Borrower or its Restricted Subsidiaries or materially detract from the value of the relevant assets of the Borrower or its Restricted Subsidiaries or (ii) secure any Indebtedness;

108

 

 

 

(o)Liens to secure Indebtedness permitted under Section 9.1(k); provided that (i) such Liens are limited to securing only the unpaid premiums under the applicable insurance policy and (ii) such Liens only encumber the proceeds of the applicable insurance policy;

(p)Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(q)Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Section 9.3(g), (n) or (o) to be applied against the purchase price for such Investment and (ii) consisting of an agreement to dispose of any property in an Asset Disposition permitted under Section 9.5, in each case, solely to the extent such Investment or Asset Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;

(r)Liens solely on any cash earnest money deposits made by any Credit Party or any Restricted Subsidiary in connection with any letter of intent or purchase agreement permitted hereunder;

(s)Liens not otherwise permitted hereunder on assets other than the Collateral securing Indebtedness or other obligations in an aggregate principal amount not to exceed the greater of $25,000,000 and 7.5% of Consolidated EBITDA for the four consecutive Fiscal Quarter period most recently ended for which the Borrower has delivered financial statements pursuant to Section 8.1(a) or 8.1(b), determined as of the date of Incurrence of such Indebtedness; and

(t)Liens incurred in a Permitted A/R Financing encumbering only the assets subject to such Permitted A/R Financing.

SECTION 9.3.Investments

.  Purchase, own, invest in or otherwise acquire (in one transaction or a series of transactions), directly or indirectly, any Equity Interests, interests in any partnership or joint venture (including the creation or capitalization of any Subsidiary), evidence of Indebtedness or other obligation or security, substantially all or a portion of the business or assets of any other Person or any other investment or interest whatsoever in any other Person, or make or permit to exist, directly or indirectly, any loans, advances or extensions of credit to, or any investment in cash or by delivery of Property in, any Person (all the foregoing, “Investments”), except:

(a)

(i)Investments existing on the Closing Date in Restricted Subsidiaries existing on the Closing Date;

(ii)Investments existing on the Closing Date (other than Investments in Restricted Subsidiaries existing on the Closing Date) and described on Schedule 9.3;

(iii)Investments made after the Closing Date by any Credit Party in any other Credit Party;

109

 

 

 

(iv)Investments made after the Closing Date by any Non-Credit Party in any other Non-Credit Party;

(v)Investments made after the Closing Date by any Non-Credit Party in any Credit Party; and

(vi)

Investments made after the Closing Date by any Credit Party in any Non-Credit Party in an aggregate amount at any time outstanding not to exceed $35,000,000 (provided that any Investments in the form of loans or advances made by any Credit Party to any Non-Credit Party pursuant to this clause (vi) shall be evidenced by a demand note in form and substance reasonably satisfactory to the Administrative Agent and shall be pledged and delivered to the Administrative Agent pursuant to the Security Documents);

(b)Investments in cash and Cash Equivalents;

(c)Investments by the Borrower or any of its Restricted Subsidiaries consisting of Capital Expenditures permitted by this Agreement;

(d)deposits made in the ordinary course of business to secure the performance of leases or other obligations as permitted by Section 9.2;

(e)Hedge Agreements permitted pursuant to Section 9.1;

(f)purchases of assets in the ordinary course of business;

(g)Investments by the Borrower or any Restricted Subsidiary thereof in the form of Permitted Acquisitions (subject to compliance with Section 8.13 in connection therewith, as applicable);

(h)Investments in the form of loans and advances to officers, directors and employees in the ordinary course of business in an aggregate amount not to exceed at any time outstanding $10,000,000 (determined without regard to any write-downs or write-offs of such loans or advances);

(i)Investments in the form of Restricted Payments permitted pursuant to Section 9.6;

(j)Guaranty Obligations permitted pursuant to Section 9.1;

(k)Investments in joint ventures; provided that the aggregate amount of all such Investments shall not at any time exceed $35,000,000;

(l)Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;

110

 

 

 

(m)Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business;

(n)Investments not otherwise permitted pursuant to this Section in an aggregate amount not to exceed $35,000,000 at any time outstanding; provided that, immediately before and immediately after giving pro forma effect to any such Investments, no Default or Event of Default shall have occurred and be continuing;

(o)any Investment that when made did not exceed the then-applicable Available Amount; and  

(p)Investments of accounts receivables and Related Assets in Receivables SPVs to effect a Permitted A/R Financing.

For purposes of determining the amount of any Investment outstanding for purposes of this Section 9.3, such amount shall be deemed to be the amount of such Investment when made, purchased or acquired (without adjustment for subsequent increases or decreases in the value of such Investment) less any amount realized in respect of such Investment upon the sale, collection or return of capital (not to exceed the original amount invested).

SECTION 9.4.Fundamental Changes

.  Merge, consolidate or enter into any similar combination with, or enter into any Asset Disposition of all or substantially all of its assets (whether in a single transaction or a series of transactions) with, any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), except:

(a)(i) any Wholly-Owned Subsidiary of the Borrower may be merged, amalgamated or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving entity), (ii) any Wholly-Owned Subsidiary of the Borrower may be merged, amalgamated or consolidated with or into any Subsidiary Guarantor (provided that the Subsidiary Guarantor shall be the continuing or surviving entity or simultaneously with such transaction, the continuing or surviving entity shall become a Subsidiary Guarantor and the Borrower shall comply with Section 8.13 in connection therewith) or (iii) any Wholly-Owned Subsidiary of the Borrower that is not a Credit Party may be merged, amalgamated or consolidated with or into any Pledged Foreign Subsidiary (provided that the Pledged Foreign Subsidiary shall be the continuing or surviving entity or simultaneously with such transaction, the continuing or surviving entity shall become a Pledged Foreign Subsidiary and the Borrower shall comply with Section 8.13 in connection therewith);

(b)(i) any Non-Credit Party that is a Pledged Foreign Subsidiary may be merged, amalgamated or consolidated with or into, or be liquidated into, any other Pledged Foreign Subsidiary, (ii) any Non-Credit Party that is a Foreign Subsidiary (other than any Pledged Foreign Subsidiary) may be merged, amalgamated or consolidated with or into, or be liquidated into, any other Non-Credit Party and (iii) any Non-Credit Party that is a Domestic Subsidiary may be merged, amalgamated or consolidated with or into, or be liquidated into, any other Non-Credit Party that is a Domestic Subsidiary;

(c)any Subsidiary may dispose of all or substantially all of its assets (upon voluntary liquidation, dissolution, winding up or otherwise) to the Borrower or any Subsidiary Guarantor;

111

 

 

 

provided that, with respect to any such disposition by any Non-Credit Party, the consideration for such disposition shall not exceed the fair value of such assets;

(d)(i) any Non-Credit Party that is a Pledged Foreign Subsidiary may dispose of all or substantially all of its assets (upon voluntary liquidation, dissolution, winding up or otherwise) to any other Pledged Foreign Subsidiary, (ii) any Non-Credit Party that is a Foreign Subsidiary (other than any Pledged Foreign Subsidiary) may dispose of all or substantially all of its assets (upon voluntary liquidation, dissolution, winding up or otherwise) to any other Non-Credit Party and (iii) any Non-Credit Party that is a Domestic Subsidiary may dispose of all or substantially all of its assets (upon voluntary liquidation, dissolution, winding up or otherwise) to any other Non-Credit Party that is a Domestic Subsidiary;

(e)any Wholly-Owned Subsidiary of the Borrower may merge with or into the Person such Wholly-Owned Subsidiary was formed to acquire in connection with any acquisition permitted hereunder (including any Permitted Acquisition permitted pursuant to Section 9.3(g)); provided that (i) in the case of any merger involving a Wholly-Owned Subsidiary that is a Domestic Subsidiary, (x) a Subsidiary Guarantor shall be the continuing or surviving entity or (y) simultaneously with such transaction, the continuing or surviving entity shall become a Subsidiary Guarantor and the Borrower shall comply with Section 8.13 in connection therewith and (ii) in the case of any merger involving a Wholly-Owned Subsidiary that is a Pledged Foreign Subsidiary, (x) the Pledged Foreign Subsidiary shall be the continuing or surviving entity or (y) simultaneously with such transaction, the continuing or surviving entity shall become a Pledged Foreign Subsidiary and the Borrower shall comply with Section 8.13 in connection therewith; and

(f)any Person may merge into the Borrower or any of its Wholly-Owned Subsidiaries in connection with a Permitted Acquisition permitted pursuant to Section 9.3(g); provided that (i) in the case of a merger involving the Borrower, a Subsidiary Guarantor or a Pledged Foreign Subsidiary, the continuing or surviving Person shall be the Borrower, such Subsidiary Guarantor or such Pledged Foreign Subsidiary and (ii) the continuing or surviving Person shall be the Borrower or a Wholly-Owned Subsidiary of the Borrower.

SECTION 9.5.Asset Dispositions

.  Make any Asset Disposition, except:

(a)the sale of obsolete, worn-out or surplus assets no longer used or usable in the business of the Borrower or any of its Restricted Subsidiaries;

(b)(i) non-exclusive licenses and sublicenses of intellectual property rights in the ordinary course of business not interfering, individually or in the aggregate, in any material respect with the conduct of the business of the Borrower and its Subsidiaries, (ii) exclusive licenses and sublicenses of intellectual property rights and other Asset Dispositions with respect to intellectual property granted or made in the ordinary course of business consistent with past practice or (iii) exclusive licenses and sublicenses, assignments of intellectual property rights and other Asset Dispositions with respect to intellectual property granted or made in the exercise of the Borrower’s reasonable business judgment, where such exclusive license, assignment or other Asset Disposition is not reasonably expected to have a Material Adverse Effect;

112

 

 

 

(c)leases, subleases, licenses or sublicenses of real or personal property granted by the Borrower or any of its Restricted Subsidiaries to others in the ordinary course of business not interfering in any material respect with the business of the Borrower or any of its Restricted Subsidiaries;

(d)Asset Dispositions in connection with Insurance and Condemnation Events; provided that the requirements of Section 4.4(b) are complied with in connection therewith;

(e)Assets Dispositions in connection with transactions expressly permitted by Section 9.4;

(f)Asset Dispositions not otherwise permitted pursuant to this Section; provided that (i) at the time of such Asset Disposition, no Event of Default shall exist or would result from such Asset Disposition and (ii) such Asset Disposition is made for Fair Market Value and the consideration received shall not be less than 75% in cash or Cash Equivalents; and

(g)Asset Dispositions of accounts receivable transferred as part of a Permitted A/R Financing.

SECTION 9.6.Restricted Payments

.  Declare or pay any dividend on, or make any payment or other distribution on account of, or purchase, redeem, retire or otherwise acquire (directly or indirectly), or set apart assets for a sinking or other analogous fund for the purchase, redemption, retirement or other acquisition of, any class of Equity Interests of any Credit Party or any Restricted Subsidiary thereof, or make any distribution of cash, property or assets to the holders of shares of any Equity Interests of any Credit Party or any Restricted Subsidiary thereof (all of the foregoing, the “Restricted Payments”); provided that:

(a)the Borrower or any of its Restricted Subsidiaries may pay dividends in shares of its own Qualified Equity Interests;

(b)any Restricted Subsidiary of the Borrower may pay cash dividends to the Borrower or any Subsidiary Guarantor;

(c)(i) any Non-Credit Party that is a Domestic Subsidiary may make Restricted Payments to any other Non-Credit Party that is a Domestic Subsidiary (and, if applicable, to other holders of its outstanding Equity Interests on a ratable basis) and (ii) any Non-Credit Party that is a Foreign Subsidiary may make Restricted Payments to any other Non-Credit Party (and, if applicable, to other holders of its outstanding Equity Interests on a ratable basis);

(d)the Borrower may make Restricted Payments on its Equity Interests to repurchase, redeem or otherwise acquire Equity Interests of the Borrower so long as all the following conditions are met as of the date of such repurchase: (A) the Consolidated Total Leverage Ratio (after giving effect to any Extension of Credit in connection with such repurchase) is less than the 3.00:1.00 on a Pro Forma Basis, (B) such repurchase does not and will not result in a violation of any of the regulations of the Federal Reserve Board, including Regulations T, U and X and (C) the actions of the Borrower in connection with any such Restricted Payment and any and all transactions entered into or consummated by the Borrower in connection with such Restricted Payment (including the purchase of the Equity Interests of the Borrower) will be and

113

 

 

 

have been consummated in accordance with Applicable Law (including the General Corporation Law of the State of Delaware and federal securities laws); and

(e)the Borrower may make any other Restricted Payment that when made does not exceed the then-applicable Available Amount.  

SECTION 9.7.Transactions With Affiliates

.  Directly or indirectly enter into any transaction, including any purchase, sale, lease or exchange of Property, the rendering of any service or the payment of any management, advisory or similar fees, with (a) any officer, director, holder of any Equity Interests in, or other Affiliate of, the Borrower or any of its Subsidiaries or (b) any Affiliate of any such officer, director or holder, except:

(i)transactions expressly permitted by Sections 9.1, 9.3, 9.4, 9.5, 9.6 and 9.13;

(ii)transactions existing on the Closing Date and described on Schedule 9.7;

(iii)transactions among the Borrower and its Restricted Subsidiaries;

(iv)other transactions in the ordinary course of business on terms as favorable as would be obtained by it on a comparable arm’s-length transaction with an independent, unrelated third party as determined in good faith by the Board of Directors of the Borrower;

(v)employment, retention, and severance and similar arrangements (including equity or equity-based incentive plans, stock ownership plans, compensation or incentive plans and arrangements and employee benefit plans and arrangements) with their respective officers, directors, employees and consultants in the ordinary course of business;

(vi)payment of customary fees and reasonable out of pocket costs to, and indemnities for the benefit of, directors, officers and employees of the Borrower and its Restricted Subsidiaries in the ordinary course of business to the extent attributable to the ownership or operation of the Borrower and its Restricted Subsidiaries;

(vii)transactions among Non-Credit Parties; and

(viii)transactions of any Person that becomes a Restricted Subsidiary pursuant to a Permitted Acquisition to the extent in existence at the time such Person becomes a Restricted Subsidiary and not in contemplation of such Person becoming a Restricted Subsidiary or such Permitted Acquisition.

SECTION 9.8.Accounting Changes; Organizational Documents

.

(a)Change its Fiscal Year end.

114

 

 

 

(b)Amend, modify or change its articles of incorporation (or corporate charter or other similar organizational documents) or amend, modify or change its bylaws (or other similar documents) in any manner materially adverse to the rights or interests of the Lenders.

SECTION 9.9.Payments and Modifications of Subordinated Indebtedness; Prepayments

.

(a)Amend, modify, waive or supplement (or permit the modification, amendment, waiver or supplement of) any of the terms or provisions of any Subordinated Indebtedness in any respect which would materially and adversely affect the rights or interests of the Administrative Agent and Lenders hereunder.

(b)Cancel, forgive, make any payment or prepayment on, or redeem or acquire for value (including (x) by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due and (y) at the maturity thereof) any Subordinated Indebtedness, except:

(i)refinancings, refundings, renewals, extensions or exchange of any Subordinated Indebtedness permitted by Section 9.1(c), (g)(ii), (i) or (p), and by any subordination provisions applicable thereto;

(ii)payments and prepayments of any Subordinated Indebtedness made solely with the proceeds of Qualified Equity Interests; and

(iii)the payment of interest, expenses and indemnities in respect of Subordinated Indebtedness Incurred under Section 9.1(c), (g)(ii), (i) or (p) (other than any such payments prohibited by any subordination provisions applicable thereto).

(c)Prepay, redeem, purchase, defease or otherwise satisfy or obligate itself to do so prior to the scheduled maturity thereof in any manner (including by the exercise of any right of setoff), or make any payment in violation of any subordination, standstill or collateral sharing terms of or governing any Indebtedness, except (i) the prepayment of Extensions of Credit in accordance with the terms of this Agreement, (ii) any prepayment, redemption, purchase, defeasance or other payment that when made does not exceed the then-applicable Available Amount and (iii) prepayments, redemptions, purchases, defeasances and other payments so long as (x) the Consolidated Total Leverage Ratio (after giving effect to such prepayment, redemption, purchase, defeasance or other payment) is less than the Specified Leverage on a Pro Forma Basis and (y) the proceeds of the Revolving Credit Facility are not used for such prepayment, redemption, purchase, defeasance or other payment.  

SECTION 9.10.No Further Negative Pledges; Restrictive Agreements

.

(a)Enter into, assume or be subject to any agreement prohibiting or otherwise restricting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or requiring the grant of any security for such obligation if security is given for some other obligation, except (i) pursuant to this Agreement and the other Loan Documents, (ii) pursuant to any document or instrument governing Indebtedness Incurred pursuant to Section 9.1(d) (provided that any such restriction contained therein relates only to the

115

 

 

 

asset or assets financed thereby), (o), (p) or (r), (iii) customary restrictions contained in the organizational documents of any Non-Credit Party as of the Closing Date and (iv) customary restrictions in connection with any Permitted Lien or any document or instrument governing any Permitted Lien (provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien).

(b)Create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Credit Party or any Restricted Subsidiary thereof to (i) pay dividends or make any other distributions to any Credit Party or any Restricted Subsidiary on its Equity Interests or with respect to any other interest or participation in, or measured by, its profits, (ii) pay any Indebtedness or other obligation owed to any Credit Party or (iii) make loans or advances to any Credit Party, except in each case for such encumbrances or restrictions existing under or by reason of (A) this Agreement and the other Loan Documents and (B) Applicable Law.

(c)Create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Credit Party or any Restricted Subsidiary thereof to (i) sell, lease or transfer any of its properties or assets to any Credit Party or (ii) act as a Credit Party pursuant to the Loan Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except in each case for such encumbrances or restrictions existing under or by reason of (A) this Agreement and the other Loan Documents, (B) Applicable Law, (C) any document or instrument governing Indebtedness Incurred pursuant to Section 9.1(d) (provided that any such restriction contained therein relates only to the asset or assets acquired in connection therewith) (o), (p) or (r), (D) any Permitted Lien or any document or instrument governing any Permitted Lien (provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien), (E) obligations that are binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary of the Borrower, so long as such obligations are not entered into in contemplation of such Person becoming a Restricted Subsidiary, (F) customary restrictions contained in an agreement related to the sale of Property (to the extent such sale is permitted pursuant to Section 9.5) that limit the transfer of such Property pending the consummation of such sale, (G) customary restrictions in leases, subleases, licenses and sublicenses or asset sale agreements otherwise permitted by this Agreement so long as such restrictions relate only to the assets subject thereto and (H) customary provisions restricting assignment of any agreement entered into in the ordinary course of business.

SECTION 9.11.Nature of Business

.  Engage in any business other than the business conducted by the Borrower and its Restricted Subsidiaries as of the Closing Date and business activities reasonably related or ancillary thereto or that are reasonable extensions thereof.

SECTION 9.12.Sanctions; Anti-Corruption

.  

(a)Use any part of the proceeds of any Extension of Credit hereunder in an unlawful manner to directly or indirectly fund any operations in, finance any investments or activities in or make any payments to, a Sanctioned Person or a Sanctioned Country, or in any other manner that will result in any violation by any Person (including any Lender, the Arranger, the

116

 

 

 

Administrative Agent, the Issuing Lenders or the Swingline Lender) of any Anti-Terrorism Laws.  

(b)Fail to conduct its business in compliance with applicable anti-corruption laws and maintain policies and procedures designed to promote and achieve compliance with such laws.  

(c)Directly or indirectly, use any Extension of Credit or the proceeds of any Extension of Credit for any purpose that would breach the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010 or comparable legislation in other jurisdictions.

SECTION 9.13.Sale Leasebacks

.  Directly or indirectly become or remain liable as lessee or as guarantor or other surety with respect to any lease, whether an operating lease or a Capital Lease, of any Property (whether real, personal or mixed), whether now owned or hereafter acquired, (a) which any Credit Party or any Restricted Subsidiary thereof has sold or transferred or is to sell or transfer to a Person which is not another Credit Party or Restricted Subsidiary of a Credit Party or (b) which any Credit Party or any Restricted Subsidiary of a Credit Party intends to use for substantially the same purpose as any other Property that has been sold or is to be sold or transferred by such Credit Party or such Restricted Subsidiary to another Person which is not another Credit Party or Restricted Subsidiary of a Credit Party in connection with such lease.

SECTION 9.14.Capital Expenditures

.  Permit the aggregate amount of all Capital Expenditures in any Fiscal Year to exceed an amount equal to (a) $60,000,000 plus (b) Capital Expenditures that when made did not exceed the then-applicable Available Amount.  Notwithstanding the foregoing, any portion of any amount in clause (a) set forth above, if not expended in the Fiscal Year for which it is permitted above, may be carried over for expenditure in the next following Fiscal Year; provided that, if any such amount is so carried over, (x) it will be deemed used in the applicable subsequent Fiscal Year after the amount in clause (a) set forth above and (y) it may not be carried over to any subsequent Fiscal Year.

SECTION 9.15.Financial Covenants

.

(a)Consolidated Total Leverage Ratio.  As of the last day of any Fiscal Quarter, permit the Consolidated Total Leverage Ratio to be greater than 3.50:1.004.75:1.00; provided that for the four Fiscal Quarters ending after the date of a Material Acquisition, such maximum Consolidated Total Leverage Ratio shall be deemed to be 3.75:1.005.00:1.00, and thereafter 3.50:1.004.75:1.00.

(b)Consolidated Interest Coverage Ratio.  As of the last day of any Fiscal Quarter, permit the Consolidated Interest Coverage Ratio to be less than 3.50 to 1.00.  

SECTION 9.16.Disposal of Subsidiary Interests

.  Permit any Domestic Subsidiary to be a non-Wholly-Owned Subsidiary except as a result of or in connection with a dissolution, merger, amalgamation, consolidation or disposition permitted by Section 9.4 or 9.5.  

SECTION 9.17.Closing Date Convertible Debt

.  As of the two week anniversary of the Springing Maturity Calculation Date and each two week anniversary thereafter until the Closing

117

 

 

 

Date Convertible Debt is no longer outstanding, permit (a) the sum of (i) the average aggregate amount of unrestricted cash and Cash Equivalents of the Credit Parties for the two week period ending on such date plus (ii) the unused portion of the aggregate Revolving Credit Commitment available to be drawn on such date to be less than (B) the aggregate outstanding principal amount of the Closing Date Convertible Debt on such date (excluding the outstanding principal amount of any such Closing Date Convertible Debt that has been called for redemption and the redemption price for which has been deposited with the indenture trustee); provided that a default under this Section 9.17 shall not occur unless the Credit Parties have failed to comply with the foregoing requirement for three consecutive two week periods.  

ARTICLE X

DEFAULT AND REMEDIES

SECTION 10.1.Events of Default

.  Each of the following shall constitute an Event of Default:

(a)Default in Payment of Principal of Loans and Reimbursement Obligations.  The Borrower shall default in any payment of principal of any Loan or Reimbursement Obligation when and as due (whether at maturity, by reason of acceleration or otherwise).

(b)Other Payment Default.  The Borrower shall default in the payment when and as due (whether at maturity, by reason of acceleration or otherwise) of interest on any Loan or Reimbursement Obligation or the payment of any other Obligation, and such default shall continue for a period of three Business Days.

(c)Misrepresentation.  Any representation or warranty made or deemed made by or on behalf of any Credit Party or any Restricted Subsidiary thereof in this Agreement, in any other Loan Document or in any document delivered in connection herewith or therewith that is subject to materiality or Material Adverse Effect qualifications, shall be incorrect in any respect when made or deemed made or any representation or warranty made or deemed made by or on behalf of any Credit Party or any Restricted Subsidiary thereof in this Agreement, any other Loan Document or in any document delivered in connection herewith or therewith that is not subject to materiality or Material Adverse Effect qualifications, shall be incorrect in any material respect when made or deemed made.

(d)Default in Performance of Certain Covenants.  Any Credit Party or any Restricted Subsidiary thereof shall default in the performance or observance of any covenant or agreement contained in (i) Sections 8.1 or 8.2(a) and such failure is not cured within 15 days after the earlier of (A) the Administrative Agent’s delivery of written notice and receipt by the Borrower thereof, and (B) the Borrower’s delivery of a written notice thereof to the Administrative Agent or (ii) Sections 8.3(a), 8.4, 8.13, 8.14, 8.15, 8.16 or Article IX.

(e)Default in Performance of Other Covenants and Conditions.  Any Credit Party or any Restricted Subsidiary thereof shall default in the performance or observance of any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for in this Section) or any other Loan Document and such default shall continue for a

118

 

 

 

period of 30 days after the earlier of (i) the Administrative Agent’s delivery of written notice thereof to the Borrower and (ii) a Responsible Officer of any Credit Party having obtained actual knowledge thereof.

(f)Indebtedness Cross-Default.  Any Credit Party or any Restricted Subsidiary thereof shall (i) default in the payment of any Indebtedness (other than the Loans or any Reimbursement Obligation) the aggregate principal amount (including undrawn committed or available amounts), or with respect to any Hedge Agreement, the Hedge Termination Value, of which is in excess of the Threshold Amount beyond the period of grace if any, provided in the instrument or agreement under which such Indebtedness was created, or (ii) default in the observance or performance of any other agreement or condition relating to any Indebtedness (other than the Loans or any Reimbursement Obligation) the aggregate principal amount (including undrawn committed or available amounts), or with respect to any Hedge Agreement, the Hedge Termination Value, of which is in excess of the Threshold Amount or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause any such Indebtedness to become redeemable, due, liquidated or otherwise payable (whether at scheduled maturity, by required prepayment, upon acceleration or otherwise) and/or to be secured by cash collateral.

(g)[Reserved].

(h)Change in Control.  Any Change in Control shall occur.

(i)Voluntary Bankruptcy Proceeding.  Any Credit Party or any Restricted Subsidiary thereof shall (i) commence a voluntary case under any Debtor Relief Laws, (ii) file a petition seeking to take advantage of any Debtor Relief Laws, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under any Debtor Relief Laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any corporate action for the purpose of authorizing any of the foregoing.

(j)Involuntary Bankruptcy Proceeding.  A case or other proceeding shall be commenced against any Credit Party or any Restricted Subsidiary thereof in any court of competent jurisdiction seeking (i) relief under any Debtor Relief Laws, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for any Credit Party or any Restricted Subsidiary thereof or for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue without dismissal or stay for a period of 60 consecutive days, or an order granting the relief requested in such case or proceeding (including an order for relief under such federal bankruptcy laws) shall be entered.

(k)Failure of Agreements.  Any material provision of this Agreement or any provision of any other Loan Document shall for any reason cease to be valid and binding on any Credit Party or any Restricted Subsidiary thereof party thereto or any such Person shall so state

119

 

 

 

in writing, or any Loan Document shall for any reason cease to create a valid and perfected first priority Lien (subject to Permitted Liens) on, or security interest in, any of the Collateral purported to be covered thereby, in each case other than in accordance with the express terms hereof or thereof.

(l)ERISA Events.  The occurrence of any ERISA Event that, together with all other ERISA Events that have occurred, would reasonably be expected to result in a Material Adverse Effect.

(m)Judgment.  A judgment or order for the payment of money which causes the aggregate amount of all such judgments or orders (net of any amounts paid or fully covered by independent third party insurance as to which the relevant insurance company does not dispute coverage) to exceed the Threshold Amount shall be entered against any Credit Party or any Restricted Subsidiary thereof by any court and such judgment or order shall continue without having been discharged, vacated or stayed for a period of 30 consecutive days after the entry thereof.  

SECTION 10.2.Remedies

.  Upon the occurrence and during the continuance of an Event of Default, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower:

(a)Acceleration; Termination of Credit Facility.  Terminate the Revolving Credit Commitment and declare the principal of and interest on the Loans and the Reimbursement Obligations at the time outstanding, and all other amounts owed to the Lenders and to the Administrative Agent under this Agreement or any of the other Loan Documents (including all L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented or shall be entitled to present the documents required thereunder) and all other Obligations, to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by each Credit Party, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrower to request borrowings or Letters of Credit thereunder; provided that upon the occurrence of an Event of Default specified in Section 10.1(i) or (j) with respect to the Borrower, the Credit Facility shall be automatically terminated and all Obligations shall automatically become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by each Credit Party, anything in this Agreement or in any other Loan Document to the contrary notwithstanding.

(b)Letters of Credit.  With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a Cash Collateral account opened by the Administrative Agent an amount equal to 103% of the aggregate then undrawn and unexpired amount of such Letters of Credit.  Amounts held in such Cash Collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay the other Secured Obligations on a pro

120

 

 

 

rata basis.  After all such Letters of Credit shall have expired or been fully drawn upon, the Reimbursement Obligation shall have been satisfied and all other Secured Obligations shall have been paid in full, the balance, if any, in such Cash Collateral account shall be returned to the Borrower.

(c)General Remedies.  Exercise on behalf of the Secured Parties all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Secured Obligations.

SECTION 10.3.Rights and Remedies Cumulative; Non-Waiver; etc

.

(a)The enumeration of the rights and remedies of the Administrative Agent and the Lenders set forth in this Agreement is not intended to be exhaustive and the exercise by the Administrative Agent and the Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the other Loan Documents or that may now or hereafter exist at law or in equity or by suit or otherwise.  No delay or failure to take action on the part of the Administrative Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default.  No course of dealing between the Borrower, the Administrative Agent and the Lenders or their respective agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default.

(b)Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 10.2 for the benefit of all the Lenders and the Issuing Lenders; provided that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) any Issuing Lender or the Swingline Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as an Issuing Lender or Swingline Lender, as the case may be) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 12.4 (subject to the terms of Section 5.6), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Credit Party under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 10.2 and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 5.6, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

121

 

 

 

SECTION 10.4.Crediting of Payments and Proceeds

.  In the event that the Obligations have been accelerated pursuant to Section 10.2 or the Administrative Agent or any Lender has exercised any remedy set forth in this Agreement or any other Loan Document, all payments received on account of the Secured Obligations and all net proceeds from the enforcement of the Secured Obligations shall be applied by the Administrative Agent as follows:

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

Second, to payment of that portion of the Secured 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;

Third, to payment of that portion of the Secured 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;

Fourth, to payment of that portion of the Secured Obligations constituting unpaid principal of the Loans, Reimbursement Obligations and payment obligations then owing under Secured Hedge Agreements and Secured Cash Management Agreements, ratably among the Lenders, the Issuing Lenders, the Hedge Banks and the Cash Management Banks in proportion to the respective amounts described in this clause Fourth payable to them;

Fifth, to the Administrative Agent for the account of the Issuing Lenders, to Cash Collateralize any L/C Obligations then outstanding; and

Last, the balance, if any, after all of the Secured Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Applicable Law.

Notwithstanding the foregoing, Secured Obligations arising under Secured Cash Management Agreements and Secured Hedge Agreements shall be excluded from the application described above if the Administrative Agent has not received written notice thereof, together with such supporting documentation as the Administrative Agent may request, from the applicable Cash Management Bank or Hedge Bank, as the case may be.  Each Cash Management Bank or Hedge Bank not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of Article XI for itself and its Affiliates as if a “Lender” party hereto.  

SECTION 10.5.Administrative Agent May File Proofs of Claim

.  In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Credit Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand

122

 

 

 

on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

(a)to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Issuing Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the Issuing Lenders and the Administrative Agent under Sections 3.3, 5.3 and 12.3) allowed in such judicial proceeding; and

(b)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and each Issuing Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 3.3, 5.3 and 12.3.

SECTION 10.6.Credit Bidding

.

(a)The Administrative Agent, on behalf of itself and the Secured Parties, shall, upon direction of the Required Lenders, have the right to credit bid and purchase (either directly or through one or more acquisition entities) for the benefit of the Administrative Agent and the Lenders all or any portion of Collateral (i) at any sale thereof conducted by the Administrative Agent at the direction of the Required Lenders under the provisions of the UCC, including pursuant to Sections 9-610 or 9-620 of the UCC, (ii) at any sale thereof conducted under the provisions of the United States Bankruptcy Code, including Section 363 thereof, or a sale under a confirmed plan of reorganization, or (iii) at any other sale or foreclosure conducted by the Administrative Agent at the direction of the Required Lenders (whether by judicial action or otherwise) in accordance with Applicable Law.

(b)Each Lender hereby agrees that, except as otherwise provided in any Loan Documents or with the written consent of the Administrative Agent and the Required Lenders, it will not take any enforcement action, accelerate obligations under any Loan Documents, or exercise any right that it might otherwise have under Applicable Law to credit bid at foreclosure sales, Uniform Commercial Code sales or other similar dispositions of Collateral.

SECTION 10.7.Exclusion of Immaterial Domestic Subsidiaries and Immaterial Foreign Subsidiaries

.  Solely for the purpose of determining whether a Default or an Event of Default has occurred under Section 10.1(i) or (j), any reference in any such clause to any Restricted Subsidiary or Credit Party shall be deemed not to include any Immaterial Domestic Subsidiary or any Immaterial Foreign Subsidiary affected by any event or circumstances referred

123

 

 

 

to in any such clause unless the Consolidated assets (valued at the greater of book value or Fair Market Value) of such Immaterial Domestic Subsidiary or Immaterial Foreign Subsidiary, as applicable, together with the Consolidated assets of all other Immaterial Domestic Subsidiaries and Immaterial Foreign Subsidiaries affected by such event or circumstance referred to in such clause, shall exceed $10,000,000.

ARTICLE XI

THE ADMINISTRATIVE AGENT

SECTION 11.1.Appointment and Authority

.

(a)Each of the Lenders and each Issuing Lender hereby irrevocably appoints Wells Fargo 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.  Except for the rights granted to any Credit Party under Sections 11.6 and 11.9 hereof, the provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Lenders, and neither the Borrower nor any Subsidiary thereof shall have rights as a third-party beneficiary of any of such provisions.  It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any Applicable Law.  Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

(b)The Administrative Agent shall also act as the “collateral agent” under the Loan Documents, and each of the Lenders (including in its capacity as a potential Hedge Bank or Cash Management Bank) and the Issuing Lenders hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of such Lender and such Issuing Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Credit Parties to secure any of the Secured Obligations, together with such powers and discretion as are reasonably incidental thereto (including to enter into additional Loan Documents or supplements to existing Loan Documents on behalf of the Secured Parties).  In this connection, the Administrative Agent, as “collateral agent” and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to this Article XI for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent), shall be entitled to the benefits of all provisions of Articles XI and XII (including Section 12.3, as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto.

(c)Without limiting the preceding clauses (a) and (b), in respect of any Foreign Pledge Agreement governed by Swiss law, the Administrative Agent shall hold the security for itself and for and on behalf of the Lenders and each Issuing Lender as a direct representative, and the Lenders and each Issuing Lender hereby appoints and authorizes the Administrative Agent to

124

 

 

 

enter into, do all actions required in connection with and enforce the security under such Foreign Pledge Agreement for itself and for and on behalf of the Lenders and each Issuing Lender as a direct representative.  By virtue of the foregoing, each of the Lenders and Issuing Lenders acknowledges that it will be a party to such Foreign Pledge Agreement.  

SECTION 11.2.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, own securities of, 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.

SECTION 11.3.Exculpatory Provisions

.

(a)The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder and thereunder shall be administrative in nature.  Without limiting the generality of the foregoing, the Administrative Agent:

(i)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;

(ii)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, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

(iii)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 Subsidiaries or Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

(b)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 Section 12.2 and Section

125

 

 

 

10.2) or (ii) in the absence of its own bad faith, gross negligence or willful misconduct as determined by a court of competent jurisdiction by final nonappealable judgment.  The Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to the Administrative Agent by the Borrower, a Lender or an Issuing Lender.

(c)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 (including any report provided to it by an Issuing Lender pursuant to Section 3.8), (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article VI or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent or (vi) the utilization of any Issuing Lender’s L/C Commitment (it being understood and agreed that each Issuing Lender shall monitor compliance with its own L/C Commitment without any further action by the Administrative Agent).

SECTION 11.4.Reliance by the 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 in good faith 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, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender or such Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender or such 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.

SECTION 11.5.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 Article 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 Facility as well as activities as Administrative Agent.  The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-

126

 

 

 

agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with bad faith, gross negligence or willful misconduct in the selection of such sub‑agents.

SECTION 11.6.Resignation of Administrative Agent

.

(a)The Administrative Agent may at any time give notice of its resignation to the Lenders, the Issuing Lenders and the Borrower.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower (such consent not to be unreasonably withheld or delayed), to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lenders and the Issuing Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above.  Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.

(b)If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by Applicable Law, by notice in writing to the Borrower and such Person, remove such Person as Administrative Agent and, with the consent of the Borrower (such consent not to be unreasonably withheld or delayed), appoint a successor.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date and the Required Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above; provided that in such circumstance, the Required Lenders shall designate a single Lender for purposes of giving to or receiving from the Borrower any notices, documents, certificates, schedules, updates or other information, written or otherwise, until a successor agent shall have been appointed pursuant to the terms hereof, and each obligation of the Borrower to deliver notices, documents, certificates, schedules, updates or other information to the Administrative Agent shall be deemed satisfied when delivered by the Borrower to such designated Lender for such period of time.

(c)With effect from the Resignation Effective Date or the Removal Effective Date (as applicable), (1) the retiring or removed 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 Lenders under any of the Loan Documents, the retiring or removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) except for any indemnity payments owed to the retiring or removed Administrative Agent, 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 each

127

 

 

 

Issuing Lender directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent (other than any rights to indemnity payments owed to the retiring or removed Administrative Agent), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (other than its duties and obligations under Section 12.10 hereof).  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 or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Section 12.3 shall continue in effect for the benefit of such retiring or removed 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 or removed Administrative Agent was acting as Administrative Agent.

(d)Any resignation by, or removal of, Wells Fargo as Administrative Agent pursuant to this Section shall also constitute its resignation as an Issuing Lender and Swingline Lender.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Issuing Lender, if in its sole discretion it elects to, and Swingline Lender, (b) the retiring Issuing Lender and Swingline Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor Issuing Lender, if in its sole discretion it elects to, shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangement satisfactory to the retiring Issuing Lender to effectively assume the obligations of the retiring Issuing Lender with respect to such Letters of Credit.

SECTION 11.7.Non-Reliance on Administrative Agent and Other Lenders

.  Each Lender and each 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 each 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.

SECTION 11.8.No Other Duties, etc

.  Anything herein to the contrary notwithstanding, none of the syndication agents, documentation agents, managing agents, co-agents, arrangers or bookrunners listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or an Issuing Lender hereunder.

128

 

 

 

SECTION 11.9.Collateral and Guaranty Matters

.

(a)Each of the Lenders (including in its or any of its Affiliate’s capacities as a potential Hedge Bank or Cash Management Bank) irrevocably authorize the Administrative Agent, at its option and in its discretion:

(i)to release any Lien on any Collateral granted to or held by the Administrative Agent, for the benefit of the Secured Parties, under any Loan Document (A) upon the termination of the Revolving Credit Commitment and payment in full of all Secured Obligations (other than (1) contingent indemnification obligations and (2) obligations and liabilities under Secured Cash Management Agreements or Secured Hedge Agreements) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the applicable Issuing Lender shall have been made), (B) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted under the Loan Documents, or (C) if approved, authorized or ratified in writing in accordance with Section 12.2;

(ii)to subordinate any Lien on any Collateral granted to or held by the Administrative Agent under any Loan Document to the holder of any Permitted Lien;

(iii)to release any Subsidiary Guarantor from its obligations under any Loan Documents if such Person ceases to be a Subsidiary or if such Person becomes an Excluded Subsidiary (other than pursuant to clause (a) of the definition thereof) as a result of a transaction permitted under the Loan Documents;

(iv)to release any Lien on any Collateral granted to or held by the Administrative Agent constituting property and assets of a Subsidiary Guarantor upon release or discharge of the Guaranty of such Subsidiary Guarantor in accordance with this Agreement and the other Loan Documents;

(v)as to the pledge of Capital Stock of Material First Tier Foreign Subsidiaries, in connection with a reorganization, change or modification of the direct or indirect ownership of such Material First Tier Foreign Subsidiaries by the Borrower or a Subsidiary Guarantor, as applicable, in compliance with this Agreement, to release any Lien granted to or held by the Administrative Agent on such Capital Stock in connection with the substitution of a pledge of 65% of the voting Capital Stock and 100% of the non‑voting Capital Stock of any one or more new or replacement Material First Tier Foreign Subsidiaries pursuant to valid Security Documents; and

(vi)to release any Lien on any Collateral granted to or held by the Administrative Agent, for the benefit of the Secured Parties, under any Loan Document and/or release any Subsidiary Guarantor from its obligations under any Loan Document, in each case, to the extent expressly permitted under this Agreement and/or any other Loan Document.  

Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular

129

 

 

 

types or items of property, or to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty Agreement pursuant to this Section 11.9.  In each case as specified in this Section 11.9, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the applicable Credit Party such documents as such Credit Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Security Documents or to subordinate its interest in such item, or to release such Subsidiary Guarantor from its obligations under the Subsidiary Guaranty Agreement, in each case in accordance with the terms of the Loan Documents and this Section 11.9.  In the case of any such sale, transfer or disposal of any property constituting Collateral in a transaction constituting an Asset Disposition permitted pursuant to Section 9.5, the Liens created by any of the Security Documents on such property shall be automatically released without need for further action by any person.

(b)The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by any Credit Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.

SECTION 11.10.Secured Hedge Agreements and Secured Cash Management Agreements

.  No Cash Management Bank or Hedge Bank that obtains the benefits of Section 10.4 or any Collateral by virtue of the provisions hereof or of any Security Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents.  Notwithstanding any other provision of this Article XI to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Secured Cash Management Agreements and Secured Hedge Agreements unless the Administrative Agent has received written notice of such Secured Cash Management Agreements and Secured Hedge Agreements, together with such supporting documentation as the Administrative Agent may request, from the applicable Cash Management Bank or Hedge Bank, as the case may be.

ARTICLE XII

MISCELLANEOUS

SECTION 12.1.Notices

.

(a)Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), 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 as follows:

 

130

 

 

 

If to the Borrower:

Synaptics Incorporated
1251 McKay Dr.
San Jose, CA 95131
Attention of:  General Counsel
Telephone No.:  (408) 904-2741
E-mail:  legal@synaptics.com

Website: www.synaptics.com

With copies to (which shall not constitute notice):

Winston & Strawn LLP
333 S. Grand Avenue

Los Angeles, CA  90071-1542
Attention of:  Eva Davis
Telephone No.:  213-615-1719
E-mail:  evadavis@winston.com

If to Wells Fargo as
Administrative
Agent:

Wells Fargo Bank, National Association
MAC D1109-019
1525 West W.T. Harris Blvd.
Charlotte, NC  28262
Attention of:  Syndication Agency Services
Telephone No.:  (704) 590-2703

E-mail:  agencyservices.requests@wellsfargo.com

With copies to:

Wells Fargo Bank, National Association

121 S. Market Street, Floor 2

San Jose, Ca 95113-2293, USA
Attention of: Jonake Bose
Telephone No.: (650) 855-6621
E-mail: Jonake.Bose@wellsfargo.com

 

If to any Lender:

To the address set forth on the Register

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received (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

131

 

 

 

business day for the recipient).  Notices delivered through electronic communications to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

(b)Electronic Communications.  Notices and other communications to the Lenders and the Issuing Lenders 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 any Issuing Lender pursuant to Article II if such Lender or such Issuing Lender, as applicable, has notified the Administrative Agent that 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), 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; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice, email or other communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

(c)Administrative Agent’s Office.  The Administrative Agent hereby designates its office located at the address set forth above, or any subsequent office which shall have been specified for such purpose by written notice to the Borrower and Lenders, as the Administrative Agent’s Office referred to herein, to which payments due are to be made and at which Loans will be disbursed and Letters of Credit requested.

(d)Change of Address, Etc.  Any party hereto may change its address number for notices and other communications hereunder by notice to the other parties hereto.

(e)Platform.

(i)Each Credit Party agrees that the Administrative Agent may, but shall not be obligated to, make the Borrower Materials available to the Issuing Lenders and the other Lenders by posting the Borrower Materials on the Platform.

(ii)The Platform is provided “as is” and “as available”.  The Agent Parties (as defined below) do not warrant the accuracy or completeness of the Borrower Materials or the adequacy of the Platform, and expressly disclaim liability for errors or omissions in the Borrower Materials.  No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Borrower Materials or the Platform.  In no event shall the Administrative Agent or any of its Related Parties (collectively, the

132

 

 

 

“Agent Parties”) have any liability to any Credit Party, any Lender or any other Person or entity for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of any Credit Party’s or the Administrative Agent’s transmission of communications through the Internet (including the Platform), except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such Agent Party; provided that in no event shall any Agent Party have any liability to any Credit Party, any Lender, any Issuing Lender or any other Person for indirect, special, incidental, consequential or punitive damages, losses or expenses (as opposed to actual damages, losses or expenses).

(f)Private Side Designation.  Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and Applicable Law, including United States federal and state securities laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain MNPI with respect to the Borrower or its securities for purposes of United States federal or state securities laws.

SECTION 12.2.Amendments, Waivers and Consents

.  Except as set forth below or as specifically provided in any Loan Document, any term, covenant, agreement or condition of this Agreement or any of the other Loan Documents may be amended or waived by the Lenders, and any consent given by the Lenders, if, but only if, such amendment, waiver or consent is in writing signed by the Required Lenders (or by the Administrative Agent with the consent of the Required Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the Borrower; provided that no amendment, waiver or consent shall:

(a)without the prior written consent of the Required Revolving Credit Lenders, amend, modify or waive (i) Section 6.2 or any other provision of this Agreement if the effect of such amendment, modification or waiver is to require the Revolving Credit Lenders (pursuant to, in the case of any such amendment to a provision hereof other than Section 6.2, any substantially concurrent request by the Borrower for a borrowing of Revolving Credit Loans) to make Revolving Credit Loans when such Revolving Credit Lenders would not otherwise be required to do so, (ii) the amount of the Swingline Commitment or (iii) the amount of the L/C Sublimit;

(b)increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 10.2) or the amount of Loans of any Lender, in any case, without the written consent of such Lender;

(c)waive, extend or postpone any date fixed by this Agreement or any other Loan Document for any payment (it being understood that a waiver of a mandatory prepayment under Section 4.4(b) shall only require the consent of the Required Lenders) of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly and adversely affected thereby;

133

 

 

 

(d)reduce the principal of, or the rate of interest specified herein on, any Loan or Reimbursement Obligation, or (subject to clause (iv) of the proviso set forth in the paragraph below) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly and adversely affected thereby; provided that only the consent of the Required Lenders shall be necessary (i) to waive any obligation of the Borrower to pay interest at the rate set forth in Section 5.1(b) during the continuance of an Event of Default, (ii) to waive any Default or Event of Default or (iii) to amend any financial covenant hereunder (or any defined term used therein) even if the effect of such amendment would be to reduce the rate of interest on any Loan or L/C Obligation or to reduce any fee payable hereunder;

(e)except as otherwise permitted by Section 5.13 or 5.16, change Section 5.6 or Section 10.4 in a manner that would alter the pro rata sharing of payments or order of application required thereby without the written consent of each Lender directly and adversely affected thereby;

(f)change Section 4.4(b)(iv) in a manner that would alter the order of application of amounts prepaid pursuant thereto without the written consent of each Lender directly and adversely affected thereby;

(g)except as otherwise permitted by Section 5.13, Section 5.16 or this Section 12.2, change any provision of this Section or reduce the percentages specified in the definitions of “Required Lenders,” or “Required Revolving Credit Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender directly affected thereby;

(h)release (i) all of the Subsidiary Guarantors or (ii) Subsidiary Guarantors comprising substantially all of the credit support for the Secured Obligations, in any case, from the Subsidiary Guaranty Agreement (other than as authorized in Section 11.9), without the written consent of each Lender; or

(i)release all or substantially all of the Collateral (other than as authorized in Section 11.9 or as otherwise specifically permitted or contemplated in this Agreement or the applicable Security Document) without the written consent of each Lender;

provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by each affected Issuing Lender in addition to the Lenders required above, affect the rights or duties of such Issuing Lender under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swingline Lender in addition to the Lenders required above, affect the rights or duties of the Swingline Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; (iv) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto, (v) each Letter of Credit Application may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto; provided that a copy of such amended Letter of Credit

134

 

 

 

Application shall be promptly delivered to the Administrative Agent upon such amendment or waiver, (vi) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of Lenders holding Loans or Commitments of a particular Class (but not the Lenders holding Loans or Commitments of any other Class) may be effected by an agreement or agreements in writing entered into by the Borrower and the requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time, and (vii) the Administrative Agent and the Borrower shall be permitted to amend any provision of the Loan Documents (and such amendment shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders to the Administrative Agent within five Business Days following receipt of notice thereof) if the Administrative Agent and the Borrower shall have jointly identified an obvious error or any error or omission of a purely technical or immaterial nature in any such provision and (viii) the Administrative Agent and the Borrower may, without the consent of any Lender, enter into amendments or modifications to this Agreement or any of the other Loan Documents or to enter into additional Loan Documents as the Administrative Agent reasonably deems appropriate in order to implement any Benchmark Replacement or any Benchmark Replacement Conforming Changes or otherwise effectuate the terms of Section 5.8(c) in accordance with the terms of Section 5.8(c).  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Revolving Credit Commitment of such Lender may not be increased or extended without the consent of such Lender.

Notwithstanding anything in this Agreement to the contrary each Lender hereby irrevocably authorizes the Administrative Agent on its behalf, and without further consent, to enter into amendments or modifications to this Agreement (including amendments to this Section 12.2) or any of the other Loan Documents or to enter into additional Loan Documents as the Administrative Agent reasonably deems appropriate in order to effectuate the terms of Section 5.13 and Section 5.16; provided that no amendment or modification shall result in any increase in the amount of any Lender’s Commitment or any increase in any Lender’s Commitment Percentage, in each case, without the written consent of such affected Lender.  

SECTION 12.3.Expenses; Indemnity.

(a)Costs and Expenses.  The Borrower and each other Credit Party, jointly and severally, shall pay (i) all reasonable and documented out of pocket expenses incurred by the Administrative Agent, the Arranger and their Affiliates (including the reasonable and documented fees, charges and disbursements of external counsel for the Administrative Agent), in connection with the syndication of the Credit Facility, 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), provided that such legal fees and expenses in respect of counsel shall be limited to one primary counsel, and one local counsel in each applicable jurisdiction, for the Administrative Agent, the Arranger and their Affiliates, taken as a whole, as to which the Administrative Agent reasonably determined local counsel is necessary, (ii) all reasonable and documented out-of-pocket expenses incurred by any Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter

135

 

 

 

of Credit or any demand for payment thereunder and (iii) all reasonable and documented out of pocket expenses incurred by the Administrative Agent, any Lender or any Issuing Lender (including the reasonable and documented fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or any 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 and documented out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit, provided that such legal fees and expenses in respect of counsel shall be limited to one primary counsel, and one local counsel in each applicable jurisdiction, for the Administrative Agent and the Lenders (selected by the Administrative Agent), taken as a whole, as to which the Administrative Agent reasonably determined local counsel is necessary, and in the case of a conflict of interest, one additional counsel in each relevant jurisdiction to each affected Lender reasonably making such determination.  

(b)Indemnification by the Borrower.  The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and each 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, and shall pay or reimburse any such Indemnitee for, any and all losses, claims (including any Environmental Claims), penalties, damages, liabilities and related expenses (including the reasonable and documented fees, charges and disbursements of counsel for any Indemnitee, provided that such fees, charges and disbursements in respect of counsel shall be limited to one primary counsel to the Indemnitees and one local counsel in each applicable jurisdiction, as to which the Indemnitee reasonably determined local counsel is necessary, and, in the case of an actual or potential conflict of interest, one additional counsel in each applicable jurisdiction to each affected Indemnitee reasonably making such determination), incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Borrower or any other Credit Party), other than such Indemnitee and its Related Parties, 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 by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby (including the Transactions), (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by any 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) any actual or alleged presence or release or threat of release of Hazardous Materials giving rise to liability under Environmental Laws on, in, at, under, to or from any property (including any improvements located thereon) owned or operated by any Credit Party or any Subsidiary thereof, or any Environmental Claim related in any way to any Credit Party or any Subsidiary, (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Credit Party or any Subsidiary thereof, and regardless of whether any Indemnitee is a party thereto, or (v) any claim (including any Environmental Claims), investigation, litigation or other proceeding (whether or not the Administrative Agent or any Lender is a party thereto) and the prosecution and defense thereof, arising out of or in any way connected with the Loans, this Agreement, any other Loan Document, or any documents contemplated by or referred to herein

136

 

 

 

or therein or the transactions contemplated hereby or thereby, including reasonable attorneys and consultant’s fees, provided that such indemnity shall not, as to any Indemnitee, be available to 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, bad faith or willful misconduct of such Indemnitee, (B) result from a claim brought by any Credit Party or any Subsidiary thereof against an Indemnitee for a material breach of such Indemnitee’s obligations hereunder or under any other Loan Document, if such Credit Party or such Subsidiary has obtained a final and non-appealable judgment in its favor on such claim as determined by a court of competent jurisdiction, or (C) result from a dispute solely among Indemnitees, other than (1) any claims against any agent in its respective capacity or fulfilling its role as an agent or arranger or any similar role hereunder, and (2) any claims arising out of any act or omission on the party of any Credit Party.  This Section 12.3(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

(c)Reimbursement by Lenders.  To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under clause (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), any Issuing Lender, the Swingline 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), such Issuing Lender, the Swingline Lender or such Related Party, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s share of the Total Credit Exposure at such time, or if the Total Credit Exposure has been reduced to zero, then based on such Lender’s share of the Total Credit Exposure immediately prior to such reduction) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender); provided that with respect to such unpaid amounts owed to any Issuing Lender or the Swingline Lender solely in its capacity as such, only the Revolving Credit Lenders shall be required to pay such unpaid amounts, such payment to be made severally among them based on such Revolving Credit Lenders’ Revolving Credit Commitment Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought or, if the Revolving Credit Commitment has been reduced to zero as of such time, determined immediately prior to such reduction); provided, further, 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), such Issuing Lender or the Swingline 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), such Issuing Lender or the Swingline Lender in connection with such capacity.  The obligations of the Lenders under this clause (c) are subject to the provisions of Section 5.7.

(d)Waiver of Consequential Damages, Etc.  To the fullest extent permitted by Applicable Law, no Credit Party or Indemnitee shall assert, and each Credit Party and Indemnitee hereby waives, any claim against any Credit Party or other 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 Credit Party or Indemnitee referred to in clause (b) above shall be liable for any damages

137

 

 

 

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.

(e)Payments.  All amounts due under this Section shall be payable promptly after demand therefor, which demand shall be accompanied by a statement from the applicable Person to whom such payment is due setting forth such amounts in reasonable detail.  

(f)Survival.  Each party’s obligations under this Section shall survive the termination of the Loan Documents and payment of the obligations hereunder.

SECTION 12.4.Right of Setoff

.  If an Event of Default shall have occurred and be continuing, each Lender, each Issuing Lender, the Swingline Lender and each of their respective Affiliates 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, such Issuing Lender, the Swingline Lender or any such Affiliate to or for the credit or the account of the Borrower or any other Credit Party against any and all of the obligations of the Borrower or such Credit Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, such Issuing Lender or the Swingline Lender or any of their respective Affiliates, irrespective of whether or not such Lender, such Issuing Lender, the Swingline Lender or any such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Credit Party may be contingent or unmatured or are owed to a branch or office of such Lender, such Issuing Lender, the Swingline Lender or such Affiliate different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 10.4 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Lenders, the Swingline Lender and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.  The rights of each Lender, each Issuing Lender, the Swingline Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, such Issuing Lender, the Swingline Lender or their respective Affiliates may have.  Each Lender, such Issuing Lender and the Swingline Lender agree 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.  

SECTION 12.5.Governing Law; Jurisdiction, etc

.

(a)Governing Law.  This Agreement and the other Loan Documents and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other

138

 

 

 

Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of New York.

(b)Submission to Jurisdiction.  Each of the parties hereto irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Applicable Law, in such federal court.  Each of the parties hereto agrees that a final judgment in any such action, litigation 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.  Each party hereto agrees that the Administrative Agent retains the right to bring proceedings against any Credit Party in the courts of any other jurisdiction solely in connection with the exercise of any rights under any Security Document.  

(c)Waiver of Venue.  Each of the parties hereto 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 paragraph (b) of this Section.  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.

(d)Service of Process.  Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 12.1.  Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by Applicable Law.

SECTION 12.6.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).  

SECTION 12.7.Reversal of Payments

.  To the extent any Credit Party makes a payment or payments to the Administrative Agent for the benefit of the Lenders or the Administrative Agent receives any payment or proceeds of the Collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any Debtor Relief Law, other Applicable Law or equitable cause, then, to the extent of such payment or proceeds repaid, the Obligations or part thereof intended to be satisfied shall be

139

 

 

 

revived and continued in full force and effect as if such payment or proceeds had not been received by the Administrative Agent.

SECTION 12.8.Injunctive Relief

.  The Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Lenders.  Therefore, the Borrower agrees that the Lenders, at the Lenders’ option, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

SECTION 12.9.Successors and Assigns; Participations.

(a)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 Credit 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 paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (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 paragraph (d) of this Section 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.

(b)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 Revolving Credit Commitment and the Loans at the time owing to it); provided that, in each case with respect to any Credit Facility, any such assignment shall be subject to the following conditions:

(i)Minimum Amounts.

(A)in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and/or the Loans at the time owing to it (in each case with respect to any Credit Facility) or contemporaneous assignments to related Approved Funds that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the aggregate 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 paragraph (b)(i)(A) of this Section, 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

140

 

 

 

such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $3,000,000, in the case of any assignment in respect of the Revolving Credit Facility, or $2,500,000, in the case of any assignment in respect of the Term Loan Facility, 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); provided that the Borrower shall be deemed to have given its consent 10 Business Days after the date written notice thereof has been delivered by the assigning Lender (through the Administrative Agent) unless such consent is expressly refused by the Borrower prior to such 10th Business Day;

(ii)Proportionate Amounts.  Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned, except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate classes on a non-pro rata basis;

(iii)Required Consents.  No consent shall be required for any assignment except to the extent required by paragraph (b)(i)(B) of this Section and, in addition:

(A)the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default under Section 10.1(a), (b), (i) or (j) has occurred and is continuing at the time of such assignment or (y) such assignment is to a Lender with a Commitment in respect of the applicable Credit Facility, an Affiliate of such Lender or an Approved Fund of such Lender; 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 10 Business Days after having received notice thereof.  

(B)the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (i) the Revolving Credit Facility or any unfunded Term Loan Commitments if such assignment is to a Person that is not a Lender with a Revolving Credit Commitment or a Term Loan Commitment, as applicable, an Affiliate of such Lender or an Approved Fund with respect to such Lender or (ii) the Term Loans to a Person who is not a Lender, an Affiliate of a Lender or an Approved Fund; and

(C)the consents of the Issuing Lenders and the Swingline Lender (each such consent not to be unreasonably withheld or delayed) shall be required for any assignment in respect of the Revolving Credit Facility.

(iv)Assignment and Assumption.  The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together

141

 

 

 

with a processing and recordation fee of $3,500 for each assignment; provided that (A) only one such fee will be payable in connection with simultaneous assignments to two or more related Approved Funds by a Lender and (B) the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment.  The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and any Tax forms or documentation required to be delivered pursuant to Section 5.11(g).

(v)No Assignment to Certain Persons.  No such assignment shall be made to (A) the Borrower or any of its Subsidiaries or Affiliates (except as permitted by Section 12.9(e) below) or (B) any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B).

(vi)No Assignment to Natural Persons.  No such assignment shall be made to a natural Person.

(vii)Certain Additional Payments.  In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Loans previously requested, but not funded by, the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (A) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the Issuing Lenders, the Swingline Lender and each other Lender hereunder (and interest accrued thereon), and (B) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swingline Loans in accordance with its Revolving Credit Commitment Percentage.  Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under Applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 5.8, 5.9, 5.10, 5.11 (subject to the requirements and limitations therein, including the requirements under Section 5.11(g)) and

142

 

 

 

12.3 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided that, except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph 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 paragraph (d) of this Section (other than a purported assignment to a natural Person or the Borrower or any of the Borrower’s Subsidiaries or Affiliates, which shall be null and void except as provided in Section 12.9(e)).  

(c)Register.  The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices in Charlotte, North Carolina, a copy of each Assignment and Assumption and each Lender Joinder Agreement delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amounts of (and stated interest on) the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for inspection by the Borrower and any Lender (but only to the extent of entries in the Register that are applicable to such Lender), at any reasonable time and from time to time upon reasonable prior notice.

(d)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, a Defaulting Lender or the Borrower or any of the Borrower’s Subsidiaries or Affiliates) (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 Issuing Lender, the Swingline Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 12.3(c) with respect to any payments made by such Lender to its Participant(s).

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver or modification described in Section 12.2(b), (c), (d) or (e) that directly and adversely affects such Participant and could not be effected by a vote of the Required Lenders.  The Borrower agrees that each Participant shall be entitled to the benefits of Sections 5.9, 5.10 and 5.11 (subject to the requirements and limitations therein, including the requirements under Section 5.11(g) (it being understood that the documentation required under Section 5.11(g) shall be delivered to the participating Lender)) to

143

 

 

 

the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Section 5.12 as if it were an assignee under paragraph (b) of this Section (without duplication of any benefits that would otherwise be owed to the Lender with respect to the Loans subject to such participation); and (B) shall not be entitled to receive any greater payment under Sections 5.10 or 5.11, with respect to any participation, than its participating Lender would have been entitled to receive unless the participation was made with the Borrower’s prior written consent.  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 5.12(b) with respect to any Participant.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.4 as though it were a Lender; provided that such Participant agrees to be subject to Section 5.6 as though it were a Lender.

Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts of (and stated interest on) 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.

(e)Notwithstanding anything to the contrary contained in this Section 12.9 or any other provision of this Agreement, so long as no Default or Event of Default has occurred and is continuing or would result therefrom, each Lender shall have the right at any time to sell, assign or transfer all or a portion of its Term Loan Commitment or Term Loans owing to it to Borrower on a non-pro rata basis (provided, however, that each assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of any applicable Term Loan and any related Term Loan Commitments), subject to the following limitations:

(i)   Borrower shall conduct one or more modified Dutch auctions (each, an “Auction”) to repurchase all or any portion of the Term Loans, provided that, (A) notice of and invitation to the Auction shall be made to all Term Loan Lenders and (B) the Auction shall be conducted pursuant to such procedures as the Auction Manager may establish which are consistent with this Section 12.9(e) and are otherwise reasonably acceptable to Borrower, the Auction Manager and the Administrative Agent;

(ii)   With respect to all repurchases made by Borrower pursuant to this Section 12.9(e), (A) Borrower shall deliver to the Auction Manager a certificate of a Responsible Officer stating that (1) no Default or Event of Default has occurred and is

144

 

 

 

continuing or would result from such repurchase and (2) as of the launch date of the related Auction and the effective date of any Affiliate Assignment Agreement, it is not in possession of any information regarding Borrower, its Subsidiaries or its Affiliates, or their assets, Borrower’s ability to perform its Obligations or any other matter that may be material to a decision by any Lender to participate in any Auction or enter into any Affiliate Assignment Agreement or any of the transactions contemplated thereby that has not previously been disclosed to the Auction Manager, Administrative Agent and the Lenders which are not Public Lenders, (B) Borrower shall not use the proceeds of any Revolving Credit Loans to acquire such Term Loans and (C) the assigning Lender and Borrower shall execute and deliver to the Auction Manager an Affiliate Assignment Agreement; and

(iii)   Following repurchase by Borrower pursuant to this Section 12.9(e), the Term Loans so repurchased shall, without further action by any Person, be deemed cancelled for all purposes and no longer outstanding (and may not be resold by Borrower), for all purposes of this Agreement and all other Loan Documents, including, but not limited to (A) the making of, or the application of, any payments to the Lenders under this Agreement or any other Loan Document, (B) the making of any request, demand, authorization, direction, notice, consent or waiver under this Agreement or any other Loan Document or (C) the determination of Required Lenders, or for any similar or related purpose, under this Agreement or any other Loan Document.  In connection with any Term Loans repurchased and cancelled pursuant to this Section 12.9(e), the Administrative Agent is authorized to make appropriate entries in the Register to reflect any such cancellation.

(f)Certain Pledges.  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.

SECTION 12.10.Treatment of Certain Information; Confidentiality

.  Each of the Administrative Agent, the Lenders and the Issuing Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties on a need to know basis (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 on substantially the same terms as provided herein), (b) upon the request or demand of any regulatory authority purporting to have jurisdiction over such Person or any of its Affiliates (including any self-regulatory authority, such as the National Association of Insurance Commissioners) (in which case the Administrative Agent, the applicable Lender or the applicable Issuing Lender shall, except with respect to any audit or examination conducted by bank accountants or any governmental bank regulatory authority exercising examination or regulatory authority, promptly notify the Borrower, in advance, to the extent practicable and lawfully permitted to do so), (c) to the extent required by Applicable Laws pursuant to a subpoena or an order of any court or administrative agency or in any pending legal or administrative proceeding or process (in which case, the Administrative Agent, the applicable Lender or the applicable Issuing Lender shall, to the extent permitted by

145

 

 

 

Applicable Law, inform the Borrower promptly in advance thereof so the Borrower may seek a protective order or take other appropriate action), (d) to any other party hereto, (e) in connection with the exercise of any remedies under this Agreement, under any other Loan Document or under any Secured Hedge Agreement or Secured Cash Management Agreement, or any action or proceeding relating to this Agreement, any other Loan Document or any Secured Hedge Agreement or Secured Cash Management Agreement, or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement, (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to the Borrower and its obligations, this Agreement or payments hereunder, (iii) to an investor or prospective investor in an Approved Fund that also agrees that Information shall be used solely for the purpose of evaluating an investment in such Approved Fund, (iv) to a trustee, collateral manager, servicer, backup servicer, noteholder or secured party in an Approved Fund in connection with the administration, servicing and reporting on the assets serving as collateral for an Approved Fund or (v) to a Rating Agency solely to the extent it requires access to information regarding the Borrower and its Restricted Subsidiaries, the Loans and the Loan Documents in connection with ratings issued with respect to an Approved Fund, (g) on a confidential basis to (i) any Rating Agency solely to the extent required in connection with rating the Borrower or its Restricted Subsidiaries or the Credit Facility or (ii) the CUSIP Service Bureau or any similar agency solely in connection with the issuance and monitoring of CUSIP numbers with respect to the Credit Facility, (h) with the prior written consent of the Borrower, (i) to Gold Sheets and other similar bank trade publications, such information to consist of deal terms and other information customarily found in such publications, (j) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, any Lender, any Issuing Lender or any of their respective Affiliates from a third party that is not, to such Person’s knowledge, subject to confidentiality obligations to the Borrower, (k) to the extent that such information is independently developed by the Administrative Agent, the applicable Lender or the applicable Issuing Lender or (l) for purposes of establishing a “due diligence” defense.  For purposes of this Section, “Information” means all information received from any Credit Party or any Subsidiary thereof relating to any Credit Party or any Subsidiary thereof or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or any Issuing Lender prior to disclosure by any Credit Party or any Subsidiary thereof other than as a result of a breach of this Section 12.10.  The parties hereto hereby agree that unless otherwise clearly identified by the Borrower at the time of delivery thereof, any information received from the Borrower or any Subsidiary after the date hereof shall be deemed confidential unless such information shall already be publicly available other than as a result of a breach of this Section 12.10.  Any failure by any of the Administrative Agent, the Issuing Lenders or the Lenders to give any such notice to the Borrower described in this Section 12.10 shall not result in any liability on the part of the Administrative Agent, the Issuing Lenders or the Lenders.

SECTION 12.11.Performance of Duties

.  Each of the Credit Party’s obligations under each of the Loan Documents to which it is a party shall be performed by such Credit Party at its sole cost and expense.

146

 

 

 

SECTION 12.12.All Powers Coupled with Interest

.  All powers of attorney and other authorizations granted to the Lenders, the Administrative Agent and any Persons designated by the Administrative Agent or any Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied, any of the Commitments remain in effect or the Credit Facility has not been terminated.

SECTION 12.13.Survival

.

(a)All representations and warranties set forth in Article VII and all representations and warranties contained in any certificate, or any of the Loan Documents (including any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement.  All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date (except those that are expressly made as of a specific date), shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lenders or any borrowing hereunder.

(b)Notwithstanding any termination of this Agreement, the indemnities to which the Administrative Agent and the Lenders are entitled under the provisions of this Article XII and any other provision of this Agreement and the other Loan Documents shall continue in full force and effect and shall protect the Administrative Agent and the Lenders against events arising after such termination as well as before.

SECTION 12.14.Titles and Captions

.  Titles and captions of Articles, Sections and subsections in, and the table of contents of, this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement.

SECTION 12.15.Severability of Provisions

.  Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

SECTION 12.16.Counterparts; Integration; Effectiveness; Electronic Execution

.

(a)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, the Issuing Lender, the Swingline Lender and/or the Arranger, 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.  Except as provided in Section 6.1, 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

147

 

 

 

page of this Agreement in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.

(b)Electronic Execution of Assignments.  The words “execution”, “signed”, “signature”, and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

SECTION 12.17.Term of Agreement

.  This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations (other than contingent indemnification obligations not then due) arising hereunder or under any other Loan Document shall have been indefeasibly and irrevocably paid and satisfied in full, all Letters of Credit have been terminated or expired (or been Cash Collateralized) or otherwise satisfied in a manner acceptable to the applicable Issuing Lender) and the Revolving Credit Commitment has been terminated.  No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination or in respect of any provision of this Agreement which survives such termination.

SECTION 12.18.USA PATRIOT Act

.  The Administrative Agent and each Lender hereby notifies the Borrower that pursuant to the requirements of the PATRIOT Act, each of them is required to obtain, verify and record information that identifies each Credit Party, which information includes the name and address of each Credit Party and other information that will allow such Lender to identify each Credit Party in accordance with the PATRIOT Act.

SECTION 12.19.Independent Effect of Covenants

.  The Borrower expressly acknowledges and agrees that each covenant contained in Articles VIII or IX hereof shall be given independent effect.  Accordingly, the Borrower shall not engage in any transaction or other act otherwise permitted under any covenant contained in Articles VIII or IX, before or after giving effect to such transaction or act, the Borrower shall or would be in breach of any other covenant contained in Articles VIII or IX.

SECTION 12.20.No Advisory or Fiduciary Responsibility

.

(a)In connection with all aspects of each transaction contemplated hereby, each Credit Party acknowledges and agrees, and acknowledges its Affiliates’ understanding, that (i) the facilities provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower and its Affiliates, on the one hand, and the Administrative Agent, the Arrangers and the Lenders, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof), (ii) in connection with the process leading to such transaction, each of the

148

 

 

 

Administrative Agent, the Arrangers and the Lenders is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person, (iii) none of the Administrative Agent, the Arrangers or the Lenders has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any Arranger or Lender has advised or is currently advising the Borrower or any of its Affiliates on other matters) and none of the Administrative Agent, the Arrangers or the Lenders has any obligation to the Borrower or any of its Affiliates with respect to the financing transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents, (iv) the Arrangers and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from, and may conflict with, those of the Borrower and its Affiliates, and none of the Administrative Agent, the Arrangers or the Lenders has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship and (v) the Administrative Agent, the Arrangers and the Lenders have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Credit Parties have consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate.

(b)Each Credit Party acknowledges and agrees that each Lender, the Arrangers and any Affiliate thereof may lend money to, invest in, and generally engage in any kind of business with, any of the Borrower, the Parent, any Affiliate thereof or any other person or entity that may do business with or own securities of any of the foregoing, all as if such Lender, Arranger or Affiliate thereof were not a Lender or Arranger or an Affiliate thereof (or an agent or any other person with any similar role under the Credit Facility) and without any duty to account therefor to any other Lender, the Arrangers, the Parent, the Borrower or any Affiliate of the foregoing.  Each Lender, the Arrangers and any Affiliate thereof may accept fees and other consideration from the Parent, the Borrower or any Affiliate thereof for services in connection with this Agreement, the Credit Facility or otherwise without having to account for the same to any other Lender, the Arrangers, the Parent, the Borrower or any Affiliate of the foregoing.

SECTION 12.21.Inconsistencies With Other Documents

.  In the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control; provided that any provision of the Security Documents which imposes additional burdens on the Borrower or any of its Restricted Subsidiaries or further restricts the rights of the Borrower or any of its Restricted Subsidiaries or gives the Administrative Agent or Lenders additional rights shall not be deemed to be in conflict or inconsistent with this Agreement and shall be given full force and effect.

SECTION 12.22.Consent Regarding Convertible Debt

.   Notwithstanding anything herein to the contrary:

(a)The Administrative Agent and the Lenders acknowledge that, so long as immediately prior to and after giving effect thereto, no Default or Event of Default shall exist or would result therefrom and the Borrower would be in compliance with the financial covenants

149

 

 

 

set forth in Section 9.15 on a Pro Forma Basis, the Borrower may (i) issue from time to time senior unsecured or subordinated unsecured debt securities that are convertible into Qualified Equity Interests of the Borrower (or cash in lieu of all or any portion of such Qualified Equity Interests) (“Convertible Debt”), provided that the maturity of such Convertible Debt shall be no earlier than a date that is six months after the Latest Maturity Date and such Convertible Debt shall have no scheduled principal payments prior to a date that is six months after the Latest Maturity Date and (ii) enter into related derivative overlay transactions (“Convertible Related Derivatives”) in respect of Qualified Equity Interests of the Borrower pursuant to which the Borrower will make or receive one or more payments or deliveries to or from counterparties with respect to the entry into, settlement or termination of such derivative overlay transactions (such debt securities and related derivatives, collectively, “Convertible Debt and Related Instruments”).

(b)The Administrative Agent and the Lenders consent to and agree that (i) the Borrower’s issuance from time to time of Convertible Debt, its entry from time to time into Convertible Debt and Related Instruments pursuant to documentation on customary market terms and otherwise in form and substance reasonably satisfactory to the Administrative Agent and the Borrower’s exercise of its rights and performance thereof and thereunder (including, without limitation, its payment of cash in lieu of stock for the principal amount and/or conversion premium associated with Convertible Debt, upon conversion of Convertible Debt securities), are permitted by Sections 9.1, 9.3, 9.5, 9.6 and 9.9; (ii) neither (a) any conversion, or rights of holders to convert, or require any repurchase of, such debt securities, in each case in accordance with terms of the indenture applicable to such debt securities, nor (b) any termination of any related derivatives, shall constitute an Event of Default under Section 10.1(f); (iii) any obligations under Convertible Related Derivatives shall not constitute Secured Obligations for purposes of the Loan Documents.

SECTION 12.23Acknowledgement and Consent to Bail-In of Affected Financial Institutions

.  Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a)the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and

(b)the effects of any Bail-In Action on any such liability, including, if applicable:

(i)a reduction in full or in part or cancellation of any such liability;

(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such

150

 

 

 

shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.

SECTION 12.24Certain ERISA Matters.

(a)Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and the Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that at least one of the following is and will be true:

(i)such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or more Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit or the Commitments;

(ii)the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement; or

(iii)(A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement; or

(iv)such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, the Borrower and such Lender.

151

 

 

 

(b)In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, the Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that none of the Administrative Agent, the Arranger and their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).

SECTION 12.25Acknowledgement Regarding Any Supported QFCs

.  To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and, each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the FDIC under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):

(c)In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.  

(d)As used in this Section 12.25, the following terms have the following meanings:

152

 

 

 

“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

“Covered Entity” means any of the following:

(i)a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

(ii)a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

(iii)a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

[Signature pages to follow]

 

153

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers, all as of the day and year first written above.

SYNAPTICS INCORPORATED,

as Borrower

 

 

By:

 

Name:

 

Title:

 

 

 

 

[Synaptics Credit Agreement – Signature Page]

 

 

 

 

ADMINISTRATIVE AGENT AND LENDERS:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, Swingline Lender, Issuing Lender and Lender

 

 

By:

 

Name:

 

Title:

 

 

[Synaptics Credit Agreement – Signature Page]

 

 

 

 

 

 

syna-ex102_100.htm

 

Exhibit 10.2

FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this “Amendment”) is entered into as of March 3, 2020 by and among Synaptics Incorporated, a company organized and existing under the laws of Delaware (“Seller”) and Creative Legend Investments Ltd., a company organized and existing under the laws of the British Virgin Islands (“Purchaser”), and amends that certain Asset Purchase Agreement entered into by and among Seller and Purchaser, dated as of December 18, 2019 (the “Asset Purchase Agreement”). Seller and Purchaser are referred to herein collectively as the “Parties” and, individually, as a “Party.” Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Asset Purchase Agreement.

RECITALS

WHEREAS, pursuant to Section 12.04 of the Asset Purchase Agreement, the Parties may amend the Asset Purchase Agreement on the terms set forth herein; and

WHEREAS, the Parties desire to amend the Asset Purchase Agreement in order to (i) update the definition of “Business Products” in Section 1.01 of the Asset Purchase Agreement;  (ii) revise Section 8.05(a) of the Asset Purchase Agreement; (iii) update Section 12.06(b) of the Asset Purchase Agreement; (iv) replace Schedule I to the Asset Purchase Agreement; and (v) update Schedules 2.01(d) and 2.06(f) to the Asset Purchase Agreement.

NOW, THEREFORE, in consideration of the promises herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1.Section 1.01. The definition of “Business Products” set forth in Section 1.01 of the Asset Purchase Agreement is hereby amended to add the following Seller products:

 

 

•

TD4291

 

•

TD4191

 

•

TD4320S

 

•

TD4151

 

2.Section 8.05(a). The first sentence of Section 8.05(a) of the Asset Purchase Agreement is hereby amended by deleting the words “March 1, 2020” and substituting “March 2, 2020” in lieu thereof.

 

3.Section 12.06(b). The notice information with respect to Purchaser, starting with the words “if to Purchaser, to:”, in Section 12.06(b) of the Asset Purchase Agreement is hereby amended and restated in its entirety as follows:

 

“if to Purchaser, to:

 

Wilson Sonsini Goodrich & Rosati P.C.

 

 

Address:One Market Plaza

Spear Tower, Suite 3300

San Francisco, California 94105-1126

Attention:Robert T. Ishii

 

Email:

achan@creativelegend.com ”

 

4.Schedule I. Schedule I to the Asset Purchase Agreement is hereby amended and restated in its entirety to be in the form attached to this Amendment as Exhibit A.

 

5.Schedule 2.01(d). Schedule 2.01(d) to the Asset Purchase Agreement is hereby amended and restated in its entirety to be in the form attached to this Amendment as Exhibit B.

 

6.Schedule 2.06(f). Schedule 2.06(f) to the Asset Purchase Agreement is hereby amended and restated in its entirety to be in the form attached to this Amendment as Exhibit C.

 

7.Effect of this Amendment. Except as expressly provided in this Amendment, the Asset Purchase Agreement shall not be amended or otherwise modified. In the event there is a conflict between the terms of the Asset Purchase Agreement and the terms of this Amendment, the terms provided in this Amendment shall control. On and after the date hereof, each reference in the Asset Purchase Agreement to “this Agreement,” “hereunder,” “hereof,” “hereto,” “herein,” or words of like import referring to the Asset Purchase Agreement shall mean and be a reference to the Asset Purchase Agreement as amended by this Amendment.

 

8.Full Force and Effect. This Amendment is expressly made subject to the terms and conditions of the Asset Purchase Agreement as modified herein, and, except as expressly modified herein, the Asset Purchase Agreement shall continue in full force and effect without change.

 

9.Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware.

 

10.Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

[Remainder of page intentionally left blank]

 

 

 

IN WITNESS WHEREOF, Seller and Purchaser have duly executed this Amendment as of the date first written above.

 

SYNAPTICS INCORPORATED

By: /S/ John McFarland

Name: John McFarland

Title: Senior Vice President, General Counsel and Secretary

CREATIVE LEGEND INVESTMENTS LTD.

By: /S/ Anson Chan

Name: Anson Chan

Title: Director

[Signature page to First Amendment to Asset Purchase Agreement]

 

syna-ex103_101.htm

Exhibit 10.3

SEPARATION AGREEMENT AND RELEASE

This Separation Agreement and Release (“Agreement”) is made by and between Hing Chung (Alex) Wong (“Employee”) and Synaptics Incorporated (the “Company”) (jointly referred to as the “Parties”):

WHEREAS, Employee was employed by the Company pursuant to an employment arrangement and began employment with the Company on January 1, 2006 (the “Service Arrangement”), and Employee will voluntarily terminate Employee’s employment on March 31, 2020 (the “Termination Date”);

WHEREAS, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that the Employee may have against the Company, including, but not limited to, any and all claims arising or in any way related to Employee’s employment with or separation from the Company; and

WHEREAS, this Agreement will become effective on the eighth day after it is affirmed by Employee on or within five (5) days following the Termination Date (with such effective date being the “Effective Date”), provided that Employee has not revoked this Agreement by written notice to the General Counsel of the Company prior to the Effective Date.   

NOW THEREFORE, in consideration of the promises made herein, the Parties hereby agree as follows:

1.Termination of Service Arrangement.  Employee’s employment with the Company ceases as of the Termination Date.  Employee agrees to resign as a director or officer of any Company subsidiaries or affiliates upon the request of the Company.

2.Consideration.  As consideration for the release of claims and all other covenants made herein, the Employee shall receive aggregate consideration of (i) $175,000.00, less applicable withholdings, payable in 12 equal installments on each regular semi-monthly payroll date over the next six calendar months following the Effective Date; (ii) $131,250.00, less applicable withholdings, payable in 12 equal installments on each regular semi-monthly payroll date over the next six calendar months following the Effective Date; (iii) $287,971, less applicable withholdings, payable within seven (7) business days following the Effective Date; (iv) $404,232.67, less applicable withholdings, payable within sixty (60) calendar days following the Termination Date; and (v) direct payment or reimbursement (grossed up for tax purposes) of COBRA premiums for Employee and Employee’s dependent family members under the Company’s medical plan for a period of six calendar months following the Termination Date, provided that such payments or reimbursements shall not extend beyond the period during which Employee and Employee’s dependents are eligible for COBRA.

3.Benefits. Employee’s health insurance benefits (including medical, dental and vision) cease at the end of the calendar month in which the Termination Date occurs, subject to Employee’s right to continue Employee’s health insurance under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.  Employee’s participation in, and accrual of, all other benefits and incidents of employment, including but not limited to incentives, vacation time, and paid time off, cease on the Termination Date.

4.Reserved.

5.Equity Incentives. Pursuant to the terms of the Synaptics Incorporated Amended and Restated 2010 Incentive Compensation Plan and 2019 Equity and Incentive Compensation Plan and the equity incentive agreements effective by and between Employee and the Company under which the Company granted to

1

 

Employee deferred stock units (“DSUs”), market stock units (“MSUs”), performance stock units (“PSUs”), and options to purchase common stock of the Company (“Options,” and collectively, the “Equity Incentives”), as of the Termination Date:  (i) Employee’s MSUs, DSUs, PSUs and Options cease vesting; (ii) Employee has and shall have no right to exercise any unvested portion of the Options or receive any unvested portion of the DSUs; (iii) Employee does not have and shall not have any rights under the unvested portion of the Options or DSUs and does not have other any rights or entitlements to purchase units or shares of the Company or any subsidiary or affiliate of the Company; and (iv) Employee’s MSUs and PSUs cease vesting, are voided and Employee shall have no right to any compensation under the MSUs or PSUs.  Employee has until the date that is ninety (90) calendar days after the Termination Date to exercise any vested portion of Employee’s Options or the Employee will lose all rights to such vested portion of the Options.  The exercise price for the Options cannot be offset against any amounts payable to the Employee by the Company or any subsidiary or affiliate thereof.

6.Payment of Salary, Accrued Vacation and Expense Reimbursements.  Employee acknowledges and represents that the Company has paid, as of the Termination Date, all salary, wages, bonuses, annual incentives, accrued vacation and paid time off, commissions, expense reimbursements, retention benefits, severance and separation benefits, and any and all other benefits due to Employee as of the Termination Date. Employee acknowledges that Employee is not eligible for any pro rata portion of Employee’s fiscal year 2020 target cash incentive. Employee represents and warrants that Employee never suffered an on-the-job or occupational injury or incurred any wage, overtime or leave claims while working at the Company.  

7.Confidential Information.  

(a)Employee acknowledges that Employee has signed a Proprietary Information and Invention Agreement dated as of January 1, 2006 (the “Confidential Information Agreement”).  Employee reaffirms Employee’s obligation to comply with the terms and conditions of the Confidential Information Agreement.  Employee will hold in strictest confidence and will not disclose, use, lecture upon, or publish any of the Company’s Proprietary Information.  Employee hereby assigns to the Company any rights that Employee may have or acquire in Proprietary Information and recognizes that all Proprietary Information shall be the sole property of the Company and its assigns.  For purposes of this Agreement, the term “Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company.  By way of illustration but not limitation, “Proprietary Information” includes (i) trade secrets, inventions, mask works, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques; (ii) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (iii) information regarding the skills and compensation of other employees of the Company

(b)Employee shall return all of the Company’s property and Proprietary Information in Employee’s possession to the Company as required by the terms of the Confidential Information Agreement.  By signing this Agreement, Employee represents that Employee has, as of the Termination Date, returned all Company property and Proprietary Information in Employee’s possession to the Company.

(c) Employee understands, in addition, that the Company has received and in the future may receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes.  Employee will hold Third Party Information in the strictest confidence and will not disclose to anyone other than Company personnel who need to know such information in connection with their work for the Company.  

8.Release of Claims. Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company, any subsidiaries or affiliates thereof, and all

2

 

officers, managers, members, supervisors, members of their board of directors, agents and employees thereof.  Employee, on Employee’s own behalf, and on behalf of Employee’s respective heirs, family members, executors, agents, and assigns, hereby fully and forever releases the Company, its affiliates and subsidiaries, and all officers, members of their board of directors, employees, agents, investors, shareholders, members, administrators, affiliates, divisions, predecessor and successor corporations, and assigns of the Company or any subsidiary or affiliate thereof (“the Releasees”), from, and agrees not to sue concerning, any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess arising from any omissions, acts or facts that have occurred up until and including the Termination Date including, without limitation:

(a)any and all claims relating to or arising from Employee’s employment relationship with the Company and the termination of that relationship;

(b)any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of, equity of the Company or any subsidiary or affiliate thereof, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

(c)any and all claims under the law of any jurisdiction including, but not limited to, wrongful discharge of employment, constructive discharge from employment, termination in violation of public policy, discrimination, harassment, retaliation, breach of contract, both express and implied, breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel, negligent or intentional infliction of emotional distress, negligent or intentional misrepresentation, negligent or intentional interference with contract or prospective economic advantage, unfair business practices, defamation, libel, slander, negligence, personal injury, assault, battery, invasion of privacy, false imprisonment, and conversion;

(d)any and all claims for violation of any national, federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, The Worker Adjustment and Retraining Notification Act, the Older Workers Benefit Protection Act; the Family and Medical Leave Act; the California Family Rights Act; the California Fair Employment and Housing Act, and the California Labor Code, including, but not limited to Labor Code sections 1400-1408;

(e)any and all claims for violation of the federal, or any state, constitution;

(f)any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

(g)any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Employee as a result of this Agreement; and

(h)any and all claims for attorneys’ fees and costs.

The Company and Employee agree that the release set forth in this Section shall be and remain in effect in all respects as a complete general release as to the matters released.  This release does not extend to any obligations incurred under this Agreement nor to any claims that, by statute, may not be waived.  

Furthermore, nothing in this Agreement is intended to, or shall, interfere with Employee’s rights under federal, state, or municipal civil rights or employment discrimination laws, including, but not limited to, the statutes specified in Paragraph 8(d) above, or their state or local counterparts, to file or otherwise institute a

3

 

charge of discrimination with a government agency or regulatory body, to testify or participate in such an agency or administrative hearing or proceeding, or to otherwise cooperate with a federal, state, or municipal government agency proceeding.  However, Employee understands and agrees that Employee is waiving any right to personal monetary or other recovery as to such charges or participation, and Employee shall not be entitled to any relief, recovery, or damages in connection with such an agency or administrative complaint, charge or proceeding, regardless of who filed or initiated the complaint, charge, or proceeding.  

Additionally, nothing in this Agreement is intended to, or shall, interfere with Employee’s rights to cooperate, participate, or testify in an administrative, legislative, or judicial proceeding, or to receive and fully retain a monetary award from a government-administered whistleblower award program for providing information directly to a government agency.  Nothing in this Agreement is intended to, or shall, interfere with the Company’s obligation to indemnify Employee against any claims, damages, liabilities pursuant to the Indemnification Agreement, dated May 17, 2016, and executed by and between Employee and the Company, and in accordance with applicable state corporate and labor law.

9.Acknowledgement of Waiver of Claims Under ADEA. Employee acknowledges that Employee is waiving and releasing any rights Employee may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary.  Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under ADEA after the Effective Date of this Agreement.  Employee acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Employee was already entitled.  Employee further acknowledges that Employee has been advised by this writing that:

(a)Employee should consult with an attorney prior to executing this Agreement;

(b)Employee has up to twenty-one (21) days within which to consider this Agreement;

(c)Employee has seven (7) days following Employee’s execution of this Agreement to revoke the Agreement;

(d)this Agreement shall not be effective until the revocation period has expired; and

(e)nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law.

10.Civil Code Section 1542.  Employee represents that Employee is not aware of any claim by Employee other than the claims that are released by this Agreement.  Employee acknowledges that Employee has had the opportunity to be advised by legal counsel and is familiar with the provisions of California Civil Code Section 1542, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN EMPLOYEE’S FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT IF KNOWN BY EMPLOYEE WOULD HAVE MATERIALLY AFFECTED EMPLOYEE’S SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.

Employee, being aware of said code section, agrees to expressly waive any rights Employee may have thereunder, as well as under any other statute or common law principles of similar effect.

11.No Pending or Future Lawsuits.  Employee represents that Employee has no lawsuits, claims, or actions pending in Employee’s name, or on behalf of any other person or entity, against the Company or any other

4

 

Releasee.  Employee also represents that Employee does not intend to bring any claims on Employee’s own behalf or on behalf of any other person or entity against the Company or any other Releasee.

12.Reserved.  

13.Confidentiality.  The Parties acknowledge that Employee’s agreement to keep the terms and conditions of this Agreement confidential was a material factor on which all parties relied in entering into this Agreement. Employee agrees to use Employee’s best efforts to maintain in confidence the existence of this Agreement, the contents and terms of this Agreement, and the consideration for this Agreement (hereinafter collectively referred to as “Settlement Information”). Employee agrees to take every reasonable precaution to prevent disclosure of any Settlement Information to third parties, and agrees that there will be no publicity, directly or indirectly, concerning any Settlement Information.  Employee agrees to take every precaution to disclose Settlement Information only to those attorneys, accountants, governmental entities, courts of law and family members who have a reasonable need to know (or as required by applicable law) of such Settlement Information. Employee will not have communication with any Company employees, partners, customers, unitholders, or any other third party regarding Employee’s separation from the Company without prior consent of Company’s General Counsel or Senior Vice President, Human Resources.

14.No Cooperation.  Employee agrees Employee will not act in any manner that might damage the business of the Company.  Employee agrees that Employee will not encourage, counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any of the Releasees, unless under a subpoena or other court order to do so or unless as otherwise provided for in Section 8.  Employee shall inform the Company in writing within three (3) business days of receiving any such subpoena or other court order.  

15.Non-Disparagement.  Employee agrees to refrain from any defamation, libel, or slander of the Releasees, and any tortious interference with the contracts, relationships and prospective economic advantage of the Releasees.  Employee agrees that Employee shall direct all inquiries by potential future employers to the Company’s Senior Vice President, Human Resources.

16.Reserved.

17.Reserved.  

18.Breach.  Employee acknowledges and agrees that any breach of any provision of this Agreement shall constitute a material breach of this Agreement and shall entitle the Company immediately to recover and/or cease the consideration payments provided to Employee under this Agreement.  

19.No Knowledge of Wrongdoing.  Employee represents that Employee has no knowledge of any wrongdoing involving improper or false claims against a national, federal, or state governmental agency, or any other wrongdoing that involves Employee or other present or former Company employees.

20.No Admission of Liability.  The Parties understand and acknowledge that this Agreement constitutes a compromise and settlement of actual or potential disputed claims.  No action taken by the Parties hereto, or either of them, either previously or in connection with this Agreement shall be deemed or construed to be:

(a)an admission of the truth or falsity of any claims made or any potential claims; or

(b)an acknowledgment or admission by either Party of any fault or liability whatsoever to the other Party or to any third party.

5

 

21.Indemnification.  Employee agrees to indemnify and hold harmless the Company from and against any and all loss, costs, damages or expenses, including, without limitation, attorneys’ fees or expenses incurred by the Company arising out of the breach of this Agreement by Employee, or from any false representation made herein by Employee, or from any action or proceeding which may be commenced, prosecuted or threatened by Employee or for Employee’s benefit, upon Employee’s initiative, or with Employee’s aid or approval, contrary to the provisions of this Agreement.  Employee further agrees that in any such action or proceeding, this Agreement may be pled by the Company as a complete defense, or may be asserted by way of counterclaim or cross-claim. In the event that Employee incurs an indemnification obligation under this Agreement, Employee acknowledges and agrees that Company may in its discretion pursue remedies available to the Company at equity and at law.

22.Reasonable Assistance.  Employee acknowledges the continuation of Employee’s obligations to assist Company pursuant to the Confidential Information Agreement.  In addition, Employee acknowledges that Employee’s assistance may be required regarding certain ongoing dispute resolution and corporate matters of Company.  To that end, Employee will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request.  Employee’s obligation to assist the Company under this Section shall continue beyond the Termination Date, provided that Company shall compensate Employee at a reasonable rate after the Termination Date for the time actually spent by Employee and fees incurred (including attorneys’ fees and costs) at the Company’s request on such assistance.

23.Costs.  The Parties shall each bear their own costs, expert fees, attorneys’ fees, and other fees incurred in connection with this Agreement, except as provided herein.

24.Tax Consequences.  The Company makes no representations or warranties with respect to the tax consequences of the payment of any sums to Employee under the terms of this Agreement.  Employee agrees and understands that Employee is responsible for payment, if any, of local, state and/or federal taxes on the sums paid hereunder by the Company and any penalties or assessments thereon; provided, however, that the Company shall withhold from the consideration and other benefits due hereunder any taxes, charges, or other assessments of any kind required under law to be withheld by the Company.  Employee further agrees to indemnify and hold the Company harmless from any claims, demands, deficiencies, penalties, assessments, executions, judgments, or recoveries by any government agency against the Company for any amounts claimed due on account of Employee’s failure to pay federal or state taxes or damages sustained by the Company by reason of any such claims, including reasonable attorneys’ fees.

25.Arbitration.  The Parties agree that any and all disputes arising out of the terms of this Agreement, their interpretation, and any of the matters herein released, shall be subject to binding arbitration before the American Arbitration Association under its Employment Arbitration Rules and Mediation Procedures (the “Rules”).  The Company will pay for all professional fees for the arbitrator’s services, regardless of who is determined to be the prevailing party. The Parties agree that the prevailing Party in any arbitration shall be awarded its reasonable attorneys’ fees and costs, unless contrary to applicable law or the Rules.  The arbitration will take place in Santa Clara County, California. The Parties agree that the prevailing Party in any arbitration shall be entitled to injunctive relief in any court of competent jurisdiction to enforce the arbitration award.  The Parties hereby agree to waive their right to have any dispute between them resolved in a court of law by a judge or jury.  This Section will not prevent either Party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of their dispute upon such grounds permitted by the applicable law without waiving the right to compel arbitration, such as the circumstances set forth in California Code of Civil Procedure Section 1281.8.

26.Authority.  The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement.  Employee represents and warrants that Employee has the capacity to act on Employee’s own behalf and on behalf of all who might claim through Employee to bind them to the terms and conditions of this

6

 

Agreement.  Each Party warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein.

27.No Representations.  Each Party represents that it has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement.  In entering into this Agreement, neither Party has relied upon any representations or statements made by the other Party hereto which are not specifically set forth in this Agreement.

28.Severability.  In the event that any provision, or any portion thereof, becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision or portion of said provision.

29.Entire Agreement.  This Agreement, together with the Confidential Information Agreement and Employee’s equity incentive agreements and Indemnification Agreement, represent the entire agreement and understanding between the Company and Employee concerning the subject matter of this Agreement and Employee’s relationship with the Company, and supersedes and replaces any and all prior agreements and understandings between the Parties concerning the subject matter of this Agreement and Employee’s relationship with the Company.

30.No Waiver.  The failure of the Company to insist upon the performance of any of the terms and conditions in this Agreement, or the failure to prosecute any breach of any of the terms and conditions of this Agreement, shall not be construed thereafter as a waiver of any such terms or conditions.  This entire Agreement shall remain in full force and effect as if no such forbearance or failure of performance had occurred.

31.No Oral Modification.  This Agreement may only be amended in a writing signed by Employee and the Chief Executive Officer or other duly authorized officer of the Company.

32.Governing Law.  This Agreement shall be construed, interpreted, governed, and enforced in accordance with the laws of the State of California, without regard to choice of law provisions.  

33.Counterparts.  This Agreement may be executed in counterparts and by facsimile, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

34.Binding Effect.  This Agreement shall be binding upon and inure to the benefit of Employee and Employee’s heirs, executors, personal representatives, assigns, administrators, and legal representatives.  This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives.

35.Voluntary Execution of Agreement.  This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties, with the full intent of releasing all claims.  Employee acknowledges that Employee:

(a)has read this Agreement;

(b)has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of Employee’s own choice or that Employee has voluntarily declined to seek such counsel;

(c)understands the terms and consequences of this Agreement and of the releases it contains; and

7

 

(d)is fully aware of the legal and binding effect of this Agreement.

[Signature Page Follows]


8

 

IN WITNESS WHEREOF, the Parties have executed and agreed to this Agreement on the respective dates set forth below.

COMPANY:

Synaptics Incorporated

Dated: March 3, 2020

By:/S/ Michael Hurlston

Name: Michael Hurlston

Title: President and Chief Executive Officer

 

EMPLOYEE:

Dated: March 3, 2020

/S/ Alex Wong

Hing Chung (Alex) Wong

 

 

 

 

 

Employee hereby affirms this Agreement, and all terms herein, on March 31, 2020.

 

 

EMPLOYEE:

/S/ Alex Wong

Hing Chung (Alex) Wong

 

 

 

[Signature Page to SEPARATION AGREEMENT and Release]

9

 

syna-ex311_8.htm

 

Exhibit 31.1

Certification of Chief Executive Officer

I, Michael E. Hurlston, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Synaptics Incorporated;

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(s) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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: May 7, 2020

 

/s/ Michael E. Hurlston

Michael E. Hurlston

Chief Executive Officer

 

 

syna-ex312_9.htm

 

Exhibit 31.2

Certification of Chief Financial Officer

I, Dean Butler, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Synaptics Incorporated;

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(s) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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: May 7, 2020

 

/s/ Dean Butler

Dean Butler

Chief Financial Officer

 

 

syna-ex321_6.htm

 

Exhibit 32.1

Section 1350 Certification of Chief Executive Officer

In connection with the Quarterly Report on Form 10-Q of Synaptics Incorporated (the “Company”) for the quarterly period ended March 28, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael E. Hurlston, Chief Executive Officer of the Company, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Michael E. Hurlston

Michael E. Hurlston

Chief Executive Officer

May 7, 2020

 

 

syna-ex322_7.htm

 

Exhibit 32.2

Section 1350 Certification of Chief Financial Officer

In connection with the Quarterly Report on Form 10-Q of Synaptics Incorporated (the “Company”) for the quarterly period ended March 28, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dean Butler, Chief Financial Officer of the Company, certify, to the best of my knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Dean Butler

Dean Butler

Chief Financial Officer

May 7, 2020

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This website contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business, and can be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements may include words such as "expect," "anticipate," "intend," "believe," "estimate," "plan," "target," "strategy," "continue," "may," "will," "should," variations of such words, or other words and terms of similar meaning. All forward-looking statements reflect our best judgment and are based on several factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Such factors include, but are not limited to, the risks as identified in the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" sections of our Annual Report on Form 10-K for our most recent fiscal year, and other risks as identified from time to time in our Securities and Exchange Commission reports. Forward-looking statements are based on information available to us on the date hereof, and we do not have, and expressly disclaim, any obligation to publicly release any updates or any changes in our expectations, or any change in events, conditions, or circumstances on which any forward-looking statement is based. Our actual results and the timing of certain events could differ materially from the forward-looking statements. These forward-looking statements do not reflect the potential impact of any mergers, acquisitions, or other business combinations that had not been completed as of the date of this filing.