Usual and Customary Negative Covenants Negative Covenants in

  • Slides: 31
Download presentation
“Usual and Customary” Negative Covenants

“Usual and Customary” Negative Covenants

Negative Covenants in Credit Agreements Purpose and Goals A. Constrain the Borrower- Prohibit actions/activities

Negative Covenants in Credit Agreements Purpose and Goals A. Constrain the Borrower- Prohibit actions/activities detrimental to Lenders. B. Accelerate the Debt, if All Else Fails- Give the Lenders ability to terminate Commitments and accelerate maturity of Loans. C. Must Be Realistic- What restrictions is the Borrower capable of meeting in the ordinary course. D. Must Be Flexible- Give the Borrower SOME wiggle room, to reflect ordinary ups and downs. E. Breaches Must Be Material for Lenders to Act- Immaterial breaches cannot be basis of material action by the Lenders.

Indebtedness 1. Purpose - Prevents Borrower from issuing excessive additional debt 2. Permitted Exceptions

Indebtedness 1. Purpose - Prevents Borrower from issuing excessive additional debt 2. Permitted Exceptions – Examples a. “True” Basket- Permits the Borrower to issue additional, “undedicated” debt. Typically dollar capped “(o) other Indebtedness incurred by Parent or any of its Subsidiaries in an amount not to exceed $50, 000 outstanding at any time; ” [Six Flags Theme Parks]

(Continued - Indebtedness Permitted Exceptions – Examples) b. “True” Refinancing - New debt permitted

(Continued - Indebtedness Permitted Exceptions – Examples) b. “True” Refinancing - New debt permitted to refinance or replace existing debt “ “Credit Agreement Refinancing Indebtedness”: [Indebtedness] … incurred … in exchange for, or to extend, renew, replace or refinance, in whole or part, existing Tranche B Term Loans (including any successive Credit Agreement Refinancing Indebtedness) (“Refinanced Debt”); provided that (i) such extending, renewing or refinancing Indebtedness is in an original aggregate principal amount not greater than the aggregate principal amount of the Refinanced Debt except by an amount equal to a reasonable premium or other similar amount paid, and fees and expenses reasonably incurred, in connection with such Refinanced Debt, (ii) such Indebtedness has a later maturity and a Weighted Average Life to Maturity equal to or greater than the Refinanced Debt and (iii) such Refinanced Debt shall be repaid, defeased or satisfied and discharged, and all accrued interest, fees and premiums (if any) in connection therewith shall be paid, on the date such Credit Agreement Refinancing Indebtedness is issued, incurred or obtained. ” [B&G Foods]

(Continued - Indebtedness Permitted Exceptions – Examples) c. Ratio Debt - Permits additional debt

(Continued - Indebtedness Permitted Exceptions – Examples) c. Ratio Debt - Permits additional debt on a formula basis. NOT $ capped. Typically measured by a leverage or coverage ratio “…the Borrower … may incur any Indebtedness if, after giving pro forma effect to such Incurrence and the receipt and application of the net proceeds thereof, …the Borrower Debt Ratio would be less than (1) 4. 0 to 1. 0 if such Indebtedness is Incurred on or prior to March 15, 2008 and (2) 3. 75 to 1. 0 if such Indebtedness is Incurred after March 15, 2008; ” [Level 3]

Liens 1. Purpose - Prohibits or limits debt/other obligations secured by collateral, which would

Liens 1. Purpose - Prohibits or limits debt/other obligations secured by collateral, which would improve other lenders’ prospects and recovery in default or insolvency 2. Permitted Exceptions – Examples a. Pari Passu/Junior; Intercreditor Agreement(s) - Allows limited secured debt with equal or junior claim to same assets. Intercreditor Agreement governs interrelationship of competing claims in same collateral “(dd) Liens securing [certain permitted Indebtedness] …; provided that such Liens may be either a first priority Lien on the Collateral that is pari passu with the Lien securing the Obligations or a Lien ranking junior to the Lien on the Collateral securing the Obligations (but may not be secured by any other assets that are not Collateral) and, in any such case, the beneficiaries thereof ([or their agent]) shall have entered into an intercreditor agreement with the Administrative Agent that is reasonably satisfactory to the Administrative Agent; ” [Kinetic Concepts]

Asset Sales 1. Purpose - Limits risk to Lenders when the Borrower “shrinks” 2.

Asset Sales 1. Purpose - Limits risk to Lenders when the Borrower “shrinks” 2. Permitted Exceptions – Examples Consideration - Goal is to get FMV for assets sold and as much cash as possible a. “(vii) the sale of any Property, provided that … (I) the fair market value of all Property sold in the aggregate shall not exceed the greater of (x) $250, 000 or (y) 10% of consolidated total assets … as of the end of the immediately preceding fiscal year, (II) such Dispositions shall be made for at least fair market value, as determined in good faith by the board of directors …, and for at least 75% cash or cash equivalent consideration, (III) the requirements of [the Mandatory Prepayments provisions] are complied with … and (IV) in connection with any such Disposition as to which the fair market value of the related Property is in excess of $20, 000, individually or in the aggregate with other sales made substantially contemporaneously as part of the same transaction or series of transactions …, the Borrower shall be in compliance with [the maintenance Financial Covenants] on a Pro Forma Basis as of the applicable Measurement Period; ” [Six Flags Theme Parks] [Xtract Comment: The exception described in [(vii)] above is subject to the Mandatory Prepayment provisions. ]

(Continued – Asset Sales Permitted Exceptions – Examples) b. Application of Proceeds - Ideally

(Continued – Asset Sales Permitted Exceptions – Examples) b. Application of Proceeds - Ideally term loans are prepaid out of asset sale proceeds “(b) If … the Borrower or … its Subsidiaries shall receive Net Cash Proceeds from any Asset Sale …, the Loans shall be prepaid … by an amount equal to … such Net Cash Proceeds…; provided that, notwithstanding the foregoing, no prepayment of the Loans shall be required to be made under this Section 5. 5(b) in respect of (i) Net Cash Proceeds received by the Borrower or any of its Subsidiaries from Asset Sales … in any fiscal year not to exceed $15, 000 in the aggregate, ” [Six Flags Theme Parks] [Xtract Comment: Note the … aggregate $15 mm annual threshold. ]

Investments 1. Purpose - Protects Lenders against “imprudent” investments. One of three covenants governing

Investments 1. Purpose - Protects Lenders against “imprudent” investments. One of three covenants governing payments of cash OUT of the Borrower 2. Permitted Exceptions – Examples a. Permitted Acquisition - Limits size, nature, financial impact and other characteristics/results of an acquisition

(Continued – Investments Permitted Exceptions – Examples) “ “Permitted Acquisition”: any acquisition … of

(Continued – Investments Permitted Exceptions – Examples) “ “Permitted Acquisition”: any acquisition … of all of the Capital Stock of, or all or substantially all of the assets constituting a business unit of, any other Person so long as… the following conditions are satisfied: (a) [Deleted] (b) the Borrower shall be in compliance with the financial covenants set forth in Section 6. 1, after giving pro forma effect to such acquisition as if it had occurred on the first day of the respective periods measured by such covenants; (c) such acquisition shall be consistent with the Borrower’s stated management strategy as in effect on the Closing Date, and the target of such acquisition shall be in the same or a similar line of business as the Borrower and its Subsidiaries; (d/e) [Deleted] (f) the Borrower and/or the applicable Subsidiary shall have obtained all material third party consents and approvals required in connection with such acquisition; (g/h) [Deleted] (i) substantially all of the assets so acquired are located in the United States or Canada or, if such acquisition is structured as a purchase of stock, the Person so acquired is organized under the laws of a state of the United States, and substantially all of the assets owned by such Person are located in the United States or Canada; provided that … the Borrower may acquire the stock of any Person organized under the laws of any jurisdiction other than the United States, so long as the aggregate amount of Investments made pursuant to this clause …, together with Investments made as permitted by [the basket], does not exceed an amount equal to …. $200, 000 …. ” [B&G Foods]

(Continued – Investments Permitted Exceptions – Examples) b. Build-Up Basket - “Rewards” Borrower for

(Continued – Investments Permitted Exceptions – Examples) b. Build-Up Basket - “Rewards” Borrower for good operating results and other “positive” events by permitting Borrower to invest, spend, distribute, etc. resulting cash

(Continued – Investments Permitted Exceptions – Examples) “ “Available Amount”: at any time, the

(Continued – Investments Permitted Exceptions – Examples) “ “Available Amount”: at any time, the sum of (a) $40, 000 plus (b) an amount (which … shall not be less than zero) equal to (i) the cumulative amount of Adjusted Excess Cash Flow of the Borrower and its Subsidiaries for the [applicable period] minus (ii) the portion of such Adjusted Excess Cash Flow that has been (or is required to be) applied to the prepayment of Loans in accordance with [the Mandatory Prepayment provisions] …, plus (c) the amount of Net Cash Proceeds received by the Borrower from the issuance of Capital Stock…, plus (d) an amount equal to any return (including dividends, interest, distributions, returns of principal and profits on sale) received … in cash in respect of any Investments made using the Available Amount …; provided that such amount may not exceed the original Investment made …, [MINUS] (e) the aggregate amount of Restricted Payments made pursuant to Section 6. 6(b)(ii) for the [applicable period], minus (f) the aggregate amount of Investments made using the Available Amount pursuant to Section 6. 8(n) for the [applicable period], minus (g) the aggregate amount of Capital Expenditures made using the Available Amount pursuant to Section 6. 7(b) for the [applicable period], minus (h) the aggregate amount of any refinancing, repayment, redemption, repurchase, retirement or other acquisition for consideration of Indebtedness made with the proceeds of the Available Amount pursuant to Section 6. 9(a)(C) for the [applicable period. ” [B&G Foods] [Xtract Comment: An Available Amount basket is available to make restricted payments, investments, capex and certain prepayments of debt. The Available Amount is based on $40, 000 plus the cumulative amount of Adjusted Excess Cash Flow. ]

Restricted Payments (including Subordinated Debt) 1. Purpose - Limits MOST problematic use of cash

Restricted Payments (including Subordinated Debt) 1. Purpose - Limits MOST problematic use of cash – payments OUT with little/no chance to recover such amounts 2. Permitted Exceptions – Examples a. Overhead/Tax Payments to Parent - Dividends to holding company-type parent to fund the parent’s “ordinary” expenses, pay taxes, etc “(a) each Subsidiary of Parent may make Restricted Payments to… Parent to enable Parent to pay out-of-pocket accounting fees, legal fees and other amounts incurred or owing by Parent in the ordinary course of business pursuant to the Shared Services Agreement; (b) each Subsidiary of Parent may make Restricted Payments to… Parent in respect of (i) income tax liabilities of Parent and its Subsidiaries in accordance with the Tax Sharing Agreement, [and] (ii) value added tax, franchise taxes and similar Taxes to enable Parent to pay any such Taxes imposed on Parent on behalf or on account of its Subsidiaries” [Six Flags Theme Parks]

(Continued – Restricted Payments Permitted Exceptions – Examples) b. Regular Dividends/Interest on Sub. Debt

(Continued – Restricted Payments Permitted Exceptions – Examples) b. Regular Dividends/Interest on Sub. Debt - Addresses reality of paying dividends on public equity and servicing public debt “(m) the declaration and payment by the Company of dividends on the common stock … of the Company or the Holding Company following a public offering of such common stock or common equity interests, in an amount not to exceed 6% of the proceeds received by or contributed to the Company in or from any public offering in any fiscal year. [Kinetic Concepts] [Xtract Comment: [A]fter a public offering of stock, 6% of the proceeds received from such offering can be distributed each fiscal year. ] “(c) subject to the subordination terms of such Subordinated Debt, (i) to make regularly scheduled interest payments on such Subordinated Debt” [Gencorp]

(Continued – Restricted Payments Permitted Exceptions – Examples) c. Special Dividends - Allows a

(Continued – Restricted Payments Permitted Exceptions – Examples) c. Special Dividends - Allows a sponsor to cash out its investment. Typically, when included, the principal purpose of the financing “(g) (i) … consummate a Debt Repurchase, using cash on hand (including, without limitation, net proceeds from an equity issuance) or via the issuance or incurrence of Indebtedness permitted under Section 6. 1(i), of the 4. 0625% Convertible Debentures, the 9. 50% Senior Subordinated Notes and the 2. 25% Convertible Notes; provided that the Borrower shall have Liquidity of at least $50, 000 after giving effect to such Debt Repurchase, ” [Gencorp] [Xtract Comment: Restrictions on debt prepayments apply only to subordinated indebtedness and are subject to generous exceptions…. ]

(Continued – Restricted Payments Permitted Exceptions – Examples) d. Management Fees - Compensates sponsor

(Continued – Restricted Payments Permitted Exceptions – Examples) d. Management Fees - Compensates sponsor for services, without doing an “end run” around general dividend restrictions “(e) the payment of management, advisory, consulting, refinancing, subsequent transaction and exit fees to the Sponsor in an aggregate amount in any fiscal year not to exceed the amount permitted to be paid pursuant to the Sponsor Management Agreement as in effect on the date hereof and any Sponsor Termination Fees not to exceed the amount set forth in the Sponsor Management Agreement as in effect on the date hereof …; provided that, upon the occurrence and during the continuance of an Event of Default such amounts may accrue, but not be payable in cash during such period, but all such accrued amounts (plus accrued interest, if any, with respect thereto) may be payable in cash upon the cure or waiver of such Event of Default; ” [Kinetic Concepts]

Prepayments of Debt 1. 2. Purpose - Middle ground between Investments and Restricted Payments.

Prepayments of Debt 1. 2. Purpose - Middle ground between Investments and Restricted Payments. Allows limited prepayments on debt “below” Lenders. Balances excessive outflows of cash against reduction in debt service costs Permitted Exceptions – Examples a. “Equal for Equal” or “Junior for Senior” - Refinancing which does not improve position of refinanced debt “(b) payments of the principal amount of Indebtedness (or accreted value, if applicable) of Parent or Holdings shall be permitted, with the Net Cash Proceeds of Indebtedness of Parent or Holdings, as the case may be (to the extent such Indebtedness constitutes a refinancing, refunding, replacement or renewal thereof plus all interest capitalized in connection therewith, any Refinancing Expenses and any costs and premiums associated with such refinancing, refunding, replacement or renewal)” [Six Flags Theme Parks]

203 -599 -1000 / 203 -438 -6700 inquiry@xtractresearch. com (Continued – Prepayments of Debt

203 -599 -1000 / 203 -438 -6700 inquiry@xtractresearch. com (Continued – Prepayments of Debt Permitted Exceptions – Examples) b. Special Refinancing - When included, often primary purpose of Lenders’ loans. Akin to a “special dividend” “The proceeds of the Term B Loans and the Initial Revolving Borrowing (to the extent permitted …), together with the proceeds of (i) the Senior Unsecured Notes, (ii) the Senior Secured Notes and (iii) the Equity Contribution, will be used …, subject to the terms and conditions set forth herein, to consummate the Refinancing [the repayment, repurchase or other discharge of all Existing Indebtedness]. ” [Kinetic Concepts]

Transactions with Affiliates 1. Purpose - Protects Lenders against “sweetheart” deals, which disproportionately benefit

Transactions with Affiliates 1. Purpose - Protects Lenders against “sweetheart” deals, which disproportionately benefit affiliates and disproportionately penalize Borrower (and, therefore, Lenders) 2. Permitted Exceptions – Examples a. b. “Arm’s Length” - Affiliates do NOT exploit their control over Borrower Board Approval/Fairness Opinion -Blessing from disinterested persons and/or knowledgeable expert

(Continued – Transactions with Affiliates Permitted Exceptions – Examples) “unless (a) such Affiliate Transaction

(Continued – Transactions with Affiliates Permitted Exceptions – Examples) “unless (a) such Affiliate Transaction or series of Affiliate Transactions is … on terms that are no less favorable to Level 3 or such Restricted Subsidiary than those that would have been obtained in a comparable arm’s-length transaction by Level 3 or such Restricted Subsidiary with a Person that is not an Affiliate … (b) Level 3 obtains … with respect to any Affiliate Transaction … involving aggregate payments equal to or in excess of $15, 000, a Board Resolution of Level 3 certifying that such Affiliate Transaction … complies with clause (a) above and that such Affiliate Transaction … has been approved by the Board of Directors of Level 3, including a majority of the disinterested members of the Board of Directors of Level 3; provided, however, that, in the event that there shall not be at least two disinterested members of the Board of Directors of Level 3 with respect to the Affiliate Transaction, Level 3 shall… in addition to such Board Resolution, deliver … a written opinion from an investment banking firm of national standing … to the effect that the consideration to be paid or received in connection with such Affiliate Transaction is fair, from a financial point of view, to Level 3 or such Restricted Subsidiary. ” [Level 3]

Financial Covenants

Financial Covenants

Leverage Ratio - Limits excessive debt on “core”, predictable earnings 1. Current Convention -

Leverage Ratio - Limits excessive debt on “core”, predictable earnings 1. Current Convention - Maximum debt to EBITDA (typically trailing, not projected). Generally maximum required to reduce (de-leverage) over time 2. Debt Definition Issues a. “Net” Debt - Allows Borrower to reduce numerator by available cash “the ratio of (i) Consolidated Funded Debt on such date minus Designated Cash [cash and Cash Equivalents of the Credit Parties subject to account control agreements in favor of the Administrative Agent that are in form and substance reasonably acceptable thereto] (in an aggregate amount not to exceed $100, 000) to (ii) Consolidated EBITDA…” [Gencorp] [Xtract Comment: The debt component is net of certain cash and cash equivalents…. ]

EBITDA Issues a. Typical Formulation - CNI plus interest, taxes, depreciation and amortization. Additional

EBITDA Issues a. Typical Formulation - CNI plus interest, taxes, depreciation and amortization. Additional add-backs usually heavily negotiated “(a) the net income or net loss (excluding [certain losses, gains, adjustments and expenses]) of the Borrower and its Subsidiaries on a Consolidated basis for such period (the “Consolidated Net Income”), plus (b) the sum of the following (without duplication) to the extent deducted in calculating Consolidated Net Income: (i) Consolidated Interest Expense for such period; (ii) tax expense (including, without limitation, any federal, state, local and foreign income …taxes) of the Borrower and its Subsidiaries for such period; (iii) (iv) depreciation and amortization for such period; [Deleted]; (v) non-cash expenses related to contributions by the Borrower or any Subsidiary to 401(k) employee retirement plans and non-cash expenses related to Capital Stock grants by the Borrower or any Subsidiary to officers and employees of the Borrower and its Subsidiaries; (vi) … financing fees and expenses paid or accrued in connection with the Transactions or any other debt or equity issuance during such …; (vii) charges related to legal matters involving the Credit Parties and their Subsidiaries with respect to pending or threatened litigation … in an amount not to exceed $30, 000 during the term of this Agreement; minus (c) the following (without duplication): [certain negotiated items]” [Gencorp]

(Continued – EBITDA Issues) b. Anticipated Synergies/Cost Savings - Gives Borrower current benefit for

(Continued – EBITDA Issues) b. Anticipated Synergies/Cost Savings - Gives Borrower current benefit for ANTICIPATED synergies/cost savings that may never be realized (xii) the amount of net cost savings in connection with any Permitted Acquisition or otherwise projected by the Borrower in good faith to be realized as a result of specified actions taken prior to the last day of such period (calculated on a pro forma basis as though such cost savings had been realized since the first day of such period), net of [actual related benefits realized during such period]; provided that (A) in connection with any Permitted Acquisition, such actions have been taken within 12 months after the closing date of a Permitted Acquisition and (B) no cost savings shall be added pursuant to this clause (xii) to the extent duplicative of any expenses or charges relating to such cost savings that are included in clause (vii) above with respect to such period, [Mylan] [Xtract Comment: The definition of Consolidated EBITDA… is subject to increase by certain uncapped non-cash [e]xpenses…relating to pension plans, among other addbacks (including up to $30 mm in litigation charges). ]

Coverage Ratio 1. Interest Coverage - Requires adequate earnings to service interest costs a.

Coverage Ratio 1. Interest Coverage - Requires adequate earnings to service interest costs a. Typical Version - Minimum EBITDA to interest expense (typically trailing for both). Generally minimum required to increase over time “Permit the Consolidated Interest Coverage Ratio as at the last day of any Measurement Period of the Borrower to be less than 2. 25 to 1. 00” [Six Flags Theme Parks]

(Continued – Coverage Ratio) b. Cash Interest/Netting Interest Income - Reduces interest denominator by

(Continued – Coverage Ratio) b. Cash Interest/Netting Interest Income - Reduces interest denominator by limiting to cash and reducing for interest income “ “Consolidated Interest Expense” means, with respect to any Person for any period, without duplication, the sum of: (1) consolidated cash interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) all cash commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (b) the cash interest component of Capitalized Lease Obligations, and (c) net cash payments, if any, pursuant to interest rate obligations under any Swap Contracts with respect to Indebtedness, and excluding (w) penalties and interest relating to taxes, (x) any additional cash interest owing pursuant to any registration rights agreement, (y) accretion or accrual of discounted liabilities other than Indebtedness and (z) any expensing of bridge commitment and other financing fees); plus (2) amortization of original issue discount resulting from the issuance of the Term Loans at less than par; plus (3) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, to the extent paid in cash; less (4) cash interest income for such period. ” [Kinetic Concepts]

Coverage Ratio continued 2. costs Fixed Charges - Measures earnings to service debt service

Coverage Ratio continued 2. costs Fixed Charges - Measures earnings to service debt service and other “ “Consolidated Fixed Charges” means, for any Measurement Period, the sum of (i) Consolidated Interest Charges, (ii) the aggregate principal amount of all regularly scheduled principal payments or redemptions or similar acquisitions for value of [certain loans] (which…shall not be deemed to include prepayments), but excluding any such payments to the extent refinanced through the incurrence of additional Indebtedness otherwise expressly permitted …, and (iii) the aggregate amount of [certain] Restricted Payments …, in each case, of or by the Borrower and its Subsidiaries on a consolidated basis for such Measurement Period. For all purposes hereunder, Consolidated Fixed Charges shall be calculated on a Pro Forma Basis unless otherwise specified. ” [Ashland]

Covenant-Lite a. Meaning - NO maintenance or ongoing Financial Covenants b. Purpose of Maintenance

Covenant-Lite a. Meaning - NO maintenance or ongoing Financial Covenants b. Purpose of Maintenance Financial Covenants - An “early warning system” for financial problems – “canary in the mineshaft” c. Incurrence Financial Covenants - NOT required to be tested on periodic basis. Only required as condition to taking certain action, setting interest rate or level of prepayments, etc ”the Borrower may incur Indebtedness … if the Fixed Charge Coverage Ratio on a consolidated basis for the Borrower’s and its Restricted Subsidiaries’ most recently ended four full fiscal quarters … would have been at least 2. 00 to 1. 00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, … and the application of the proceeds therefrom had occurred at the beginning of such four-quarter period; ” [Neiman Marcus] [Xtract Comment: This is a Covenant-LITE Credit Agreement. [T]here is NO ongoing interest (or other) coverage test (although there is an incurrence Fixed Charge Coverage Ratio test). ] d. “Dedicated” Provision - Maintenance covenants ONLY exist to benefit one or more facilities, most often the revolver, but not ALL facilities

Equity Cure/Cure Rights - Permits sponsor to “cure” a Financial Covenant default by putting

Equity Cure/Cure Rights - Permits sponsor to “cure” a Financial Covenant default by putting in cash equity “ [If] the Borrowers fail to comply with either of the Financial Covenants, [until 10 days after the applicable fiscal quarter] (the “ Test Period”), if Zayo receives a Specified Equity Contribution [cash contribution to the equity of Zayo and/or any purchase or investment in Equity Interests of Zayo], Zayo may apply … the net proceeds of such Specified Equity Contribution to increase its Annualized EBITDA with respect to such applicable fiscal quarter (the “Cure Right”) and the Financial Covenants shall be recalculated…, provided that such pro forma adjustment to Zayo’s Annualized EBITDA shall be given solely for the purpose of determining [compliance with] the Financial Covenants with respect to any Test Period that includes the fiscal quarter for which such Cure Right was exercised and not for any other purpose under any Loan Document. If, after the exercise of the Cure Right and the recalculations …, the Borrowers shall then be in compliance [with the] Financial Covenants during such Test Period, the Borrower shall be deemed to have satisfied the requirements of the Financial Covenants as of the relevant date … and the applicable Default or Event of Default … shall be deemed cured; provided that (i) in each four-fiscal quarter period, there shall be at least two fiscal quarters in which the Cure Right is not exercised, (ii) there shall be no more than four Specified Equity Contributions during the term of this Agreement, (iii) with respect to any exercise of the Cure Right, the Specified Equity Contribution shall be no greater than the amount required to cause the Borrowers to be in compliance with the Financial Covenants and (iv) all Specified Equity Contributions will be disregarded for purposes of determining the Available Amount or the availability of any baskets or carve-outs with respect to the covenants contained in Article 8 hereof. [Zayo Group] [Xtract Comment: While we consider any cure right to be a weakness as it reduces the efficiency of the Financial Covenants, the cure right in this Agreement is fairly typical of those currently found in the market. ]

Cap. Ex Budget - Limits expenditures for fixed or capital assets (additions to PP&E)

Cap. Ex Budget - Limits expenditures for fixed or capital assets (additions to PP&E) “ 6. 7 Limitation on Capital Expenditures. Make or commit to make any Capital Expenditure, except Capital Expenditures of the Borrower and its Subsidiaries in the ordinary course of business not exceeding an aggregate amount for any fiscal year equal to the sum of (a) $25, 000 plus (b) so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the Available Amount at such time; provided that (i) any such amount, if not so expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next succeeding fiscal year and (ii). …” [B&G Foods] [Xtract Comment: For any fiscal year equal to the sum of $25, 000 plus the Available Amount. Carryovers are permitted to the next fiscal year …]

203 -599 -1000 / 203 -438 -6700 inquiry@xtractresearch. com

203 -599 -1000 / 203 -438 -6700 inquiry@xtractresearch. com