The financial covenants require the maintenance of a specified interest expense coverage ratio of not less than 5.00 to 1.00, and a leverage ratio for any period of four consecutive fiscal quarters that, prior to the Collateral Release Date, is not greater than 2.50 to 1.00 and, after the Collateral Release Date, is not greater than 2.00 to 1.00, although, under the Amended Revolving Credit Agreement, such maximum leverage ratio of 2.00 to 1.00 may be increased to a level not higher than 2.25 to 1.00 in certain circumstances.
The Amended Revolving Credit Agreement contains customary affirmative covenants, negative covenants, and events of default substantially comparable to the Original Revolving Credit Agreement, but provides additional flexibility, in some cases based on financial ratios, for Holdings and its subsidiaries to make restricted payments, to make investments and to incur indebtedness, as further described below.
The Amended Revolving Credit Agreement provides additional capacity for restricted payments by raising the maximum consolidated net leverage ratio in the ratio-based test for restricted payments from 1.20 to 1.00 to 1.50 to 1.00, and through the addition of a basket that grows based on available amounts determined as (a) the sum of 50% of consolidated net income of Holdings and the Borrower and their restricted subsidiaries for a given period and 100% of certain equity and investment proceeds, minus (b) the sum of investments and restricted payments made in reliance on the available amounts basket (which is shared with the available amounts basket for investments).
The investments basket for loans or advances made by the loan parties tonon-loan parties has been increased from the greater of $50 million and 0.3% of consolidated total assets to the greater of $300 million and 2.0% of consolidated total assets and, in addition, the consolidated net leverage ratio-based test for investments has been increased from 1.30 to 1.00 to 1.50 to 1.00 and certain other limitations have been removed.
The indebtedness basket for capital leases and purchase money obligations has been increased to the greater of $500 million and 3.0% of consolidated total assets. The pension refinancing debt basket was amended to permit the incurrence of an unlimited amount of pension refinancing debt subject to pro forma compliance of the applicable leverage ratio. The basket for certain letters of credit has been expanded.
The obligations of Holdings or a domestic entity under the Amended Revolving Credit Agreement, and all other obligations under the Amended Revolving Credit Agreement, are guaranteed and secured in the same manner as the Original Revolving Credit Agreement, subject to the release of the collateral on the Collateral Release Date as described above.
The foregoing description of the Amended Revolving Credit Agreement is not complete and is subject to, and qualified in its entirety by reference to, the full text of the Second Amendment and the Amended Revolving Credit Agreement, which are attached hereto as Exhibit 10.1 and incorporated herein by reference. The representations, warranties and covenants contained in the Amended Revolving Credit Agreement were made only for purposes of that agreement and as of specific dates and were solely for the benefit of the parties to the Amended Revolving Credit Agreement. Information concerning the subject matter of the representations, warranties and covenants may change after the date of the Amended Revolving Credit Agreement.
In the ordinary course of their respective businesses, the lenders and issuers under the Amended Revolving Credit Agreement, or their affiliates, have performed, and may in the future perform, commercial banking, investment banking, trust, advisory or other financial services for Holdings and its affiliates for which they have received, and will receive, customary fees and expenses.
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