SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
July 29, 2022
LOYALTY VENTURES INC.
(Exact Name of Registrant as Specified in Charter)
Delaware |
| 001-40776 |
| 87-1353472 |
(State or Other Jurisdiction |
| (Commission |
| (IRS Employer |
of Incorporation) |
| File Number) |
| Identification No.) |
8235 DOUGLAS AVENUE, SUITE 1200
DALLAS, TX 75225
(Address and Zip Code of Principal Executive Offices)
(972) 338-5170
(Registrant’s Telephone Number, including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
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| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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 $0.01 per share |
| LYLT |
| The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☒
Item 1.01 Entry Into a Material Definitive Agreement.
On July 29, 2022, Loyalty Ventures Inc. (“Loyalty Ventures,” or the “Company”), together with certain subsidiaries as borrowers and certain other subsidiaries as guarantors, entered into Amendment No. 1 to Credit Agreement (Financial Covenant) (the “First Amendment”) to the Company’s Credit Agreement, dated as of November 3, 2021 with Bank of America, N.A., as administrative agent, and the lenders party thereto (the “Credit Agreement”). The First Amendment provides for adjustments to the financial maintenance covenant applicable to the term loan A and revolving credit facility as shown in the table below:
Four Fiscal Quarters Ending | Maximum Consolidated Total Leverage Ratio |
December 31, 2021 through June 30, 2022 | 5.00:1.00 |
September 30, 2022 through September 30, 2023 | 5.75:1.00 |
December 31, 2023 | 5.50:1.00 |
March 31, 2024 through September 30, 2024 | 5.25:1.00 |
December 31, 2024 through March 31, 2025 | 5.00:1.00 |
June 30, 2025 and each fiscal quarter thereafter | 4.75:1.00 |
The First Amendment further provides, among other things, for (i) certain adjustments to the definition of “Consolidated EBITDA” (as defined in the Credit Agreement) for purposes of computing the financial maintenance covenant, (ii) beginning with the quarter ending September 30, 2022, the permanent reduction of the amount of commitments under the revolving credit facility by $2,812,500 per quarter for each quarter as of the last day of which the Consolidated Total Leverage Ratio (as defined in the Credit Agreement) is in excess of 4.75:1.00, and (iii) certain additional limitations on the incurrence of additional indebtedness and the making of certain restricted payments.
The description of the First Amendment herein is qualified in its entirety by reference to the full text of such First Amendment, a copy of which is attached as Exhibit 10.1 hereto and incorporated by reference herein.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information provided in Item 1.01 above is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
The financial results of the Company’s BrandLoyalty segment have been impacted in its markets by rising prices, supply chain disruptions and changing consumer preferences, particularly in light of the ongoing Russia invasion of Ukraine in Europe. As a result, and in partnership with its lenders, the Company proactively adjusted its Credit Agreement to provide more certainty and flexibility as it continues to execute on its strategic imperatives over the coming quarters.
Based on its current visibility, the Company now expects consolidated adjusted EBITDA for full year 2022 to be approximately $110 million, which represents the AIR MILES® Reward Program segment’s contribution, as BrandLoyalty’s contribution is expected to offset corporate expense. These financial results, together with the add-backs used to calculate Consolidated EBITDA (as defined in the Credit Agreement), are expected to enable the Company to maintain compliance with its revised loan covenants.
The Company will provide additional insight into current business conditions and its business outlook for full year 2022 in its earnings release, which is expected to be issued after market on Thursday, August 11, 2022 and on its conference call, which is scheduled to take place at 4 p.m. CT on that date.
Caution Regarding Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give our expectations or forecasts of future events and can generally be identified by the use of words such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “project,” “plan,” “likely,” “may,” “should” or other words or phrases of similar import. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding, and the guidance we give with respect to, our anticipated operating or financial results and future economic conditions, including, but not limited to, continuing impacts related to COVID-19, including variants, reductions in government economic stimulus, labor shortages, reduction in demand from clients, supply chain disruption for our reward suppliers and disruptions in the airline or travel industries; changes in geopolitical conditions, including the Russian invasion of Ukraine; execution of restructuring plans and any resulting cost savings; loss of, or reduction in demand for services from, significant clients; loss of active AIR MILES® Reward Program collectors or greater than expected redemptions by the same; unfavorable resolution of pending or future litigation matters; disruption to operations due to the separation from our former parent or failure of the separation to be tax-free; our high level of indebtedness; increases in market interest rates; fluctuation in foreign exchange rates; new regulatory limitations related to consumer protection or data privacy limiting our services; and loss of consumer information due to compromised physical or cyber security.
We believe that our expectations are based on reasonable assumptions. Forward-looking statements, however, are subject to a number of risks and uncertainties that could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, and no assurances can be given that our expectations will prove to have been correct. These risks and uncertainties include, but are not limited to, factors set forth in the Risk Factors section of both (1) our Form 10-K for the most recently ended fiscal year and (2) any updates in Item 1A, or elsewhere, in our Quarterly Reports on Form 10-Q filed for periods subsequent to such Form 10-K or any updates thereto. Our forward-looking statements speak only as of the date made, and we undertake no obligation, other than as required by applicable law, to update or revise any forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.
Financial Measures
In addition to financial measures presented in accordance with generally accepted accounting principles, or GAAP, the Company may present financial measures that are non-GAAP measures, such as adjusted EBITDA. The Company believes that this non-GAAP financial measure, viewed in addition to and not in lieu of the Company’s reported GAAP results, provide useful information to investors regarding the Company’s performance, liquidity and overall results of operations. The Company uses adjusted EBITDA as an integral part of internal reporting to measure the performance and operational strength of reportable segments and to evaluate the performance of senior management. Adjusted EBITDA eliminates the uneven effect across all reportable segments of non-cash depreciation of tangible assets and amortization of intangible assets, including certain intangible assets that were recognized in business combinations, and the non-cash effect of stock compensation expense. In addition, adjusted EBITDA eliminates goodwill impairment, strategic transaction costs, which were comprised of amounts associated with the Employee Matters Agreement entered into as part of the separation, and restructuring and other charges.
Reconciliation of Non-GAAP Financial Measures
No reconciliation is provided with respect to forward looking annual guidance as we cannot reliably predict all necessary components or their impact to reconcile these non-GAAP measures without unreasonable effort. The events necessitating a non-GAAP adjustment are inherently unpredictable and may have a material impact on the Company’s future results.
The financial measures presented are consistent with the Company’s historical financial reporting practices. The non-GAAP financial measures presented herein may not be comparable to similarly titled measures presented by other companies and are not identical to corresponding measures used in other various agreements or public filings.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. | Document Description | |
Amendment No. 1 to Credit Agreement (Financial Covenant), dated as of July 29, 2022, by and among Loyalty Ventures Inc., Brand Loyalty Group B.V., Brand Loyalty International B.V., as borrowers, certain other subsidiaries as guarantors, Bank of America, N.A., as administrative agent, and certain lenders party thereto. | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
Note: The information contained in Item 7.01 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Loyalty Ventures Inc. | |||
Date: August 4, 2022 | By: | /s/ Cynthia L. Hageman | |
Cynthia L. Hageman | |||
Executive Vice President, General Counsel and Secretary |
Exhibit 10.1
Execution Version
AMENDMENT NO. 1 TO CREDIT AGREEMENT
(FINANCIAL COVENANT)
This AMENDMENT NO. 1 TO CREDIT AGREEMENT (FINANCIAL COVENANT) (this “Amendment”), dated as of July 29, 2022, is entered into by and among LOYALTY VENTURES INC., a Delaware corporation (the “Company”), BRAND LOYALTY GROUP B.V., BRAND LOYALTY HOLDING B.V. and BRAND LOYALTY INTERNATIONAL B.V., each a Netherlands private limited company (together with the Company, the “Borrowers”), each Guarantor (as defined in the Existing Credit Agreement (as defined below)) party hereto, each Lender (as defined in the Existing Credit Agreement) party hereto, and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”).
RECITALS
WHEREAS, the Borrowers, the Guarantors, the Administrative Agent and the Lenders are parties to that certain Credit Agreement, dated as of November 3, 2021 (as amended hereby and as further amended, restated, extended, supplemented or otherwise modified from time to time, the “Credit Agreement” and the Credit Agreement prior to giving effect to this Amendment being referred to as the “Existing Credit Agreement”), pursuant to which the Lenders have extended certain revolving and term facilities to the Borrowers;
WHEREAS, the Company has requested that the Required Pro Rata Facilities Lenders agree to amend Section 7.11 of the Existing Credit Agreement (and certain defined terms and component defined terms used therein), as more particularly set forth below, and the Administrative Agent acknowledge such amendments, and the Required Pro Rata Facilities Lenders party to this Amendment and the Administrative Agent are each willing to effect such amendments and acknowledgements, as provided in, and on the terms and conditions contained in, this Amendment;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:
162131603_4
The execution of this Amendment by each Loan Party shall constitute its affirmation as to the accuracy of the above representations and warranties as of the Amendment No. 1 Effective Date.
[Signature Pages Follow.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.
BORROWERS:LOYALTY VENTURES INC.
By: /s/ J. JEFFREY CHESNUT
Name: J. Jeffrey Chesnut
Title: Executive Vice President, Chief Financial Officer
BRAND LOYALTY GROUP B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
BRAND LOYALTY HOLDING B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
BRAND LOYALTY INTERNATIONAL B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
GUARANTORS:LOYALTYONE, CO.
By: /s/ J. JEFFREY CHESNUT
Name: J. Jeffrey Chesnut
Title: Treasurer
LVI LUX HOLDINGS S.À.R.L.
By: /s/ Cynthia L. Hageman
Name: Cynthia L. Hageman
Title: Class A Manager and Authorised Signatory
LVI LUX FINANCING S.À.R.L.
By: /s/ Cynthia L. Hageman
Name: Cynthia L. Hageman
Title: Class A Manager and Authorised Signatory
APOLLO HOLDINGS B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
BRAND LOYALTY AMERICAS B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
BRAND LOYALTY EUROPE B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
BRAND LOYALTY ASIA B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
BRAND LOYALTY SOURCING B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
BRAND LOYALTY B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
WORLD LICENSES B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
ICEMOBILE AGENCY B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
BRAND LOYALTY DEVELOPMENT B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
BRAND LOYALTY RUSSIA B.V.
By: /s/ CORNELIA MARIA PIETERNELLA MENNEN-VERMEULE
Name: Cornelia Maria Pieternella Mennen-Vermeule
Title: Authorised Signatory
ADMINISTRATIVE AGENT:BANK OF AMERICA, N.A., as Administrative Agent
By: /s/ Spencer Hunter
Name: Spencer Hunter
Title: Vice President
PRO RATA LENDERS:BANK OF AMERICA, N.A., as a pro rata Lender
By: /s/ Spencer Hunter
Name: Spencer Hunter
Title: Vice President
CITIZENS BANK, N.A., as a pro rata Lender
By: /s/ Doug Kennedy
Name: Doug Kennedy
Title: SVP
TEXAS CAPITAL BANK, as a pro rata Lender
By: /s/ Austin Tabor
Name: Austin Tabor
Title: Vice President
TRUIST BANK, as a pro rata Lender
By: /s/ Jim C. Wright
Name: Jim C. Wright
Title: Vice President
MORGAN STANLEY BANK N.A., as a pro rata Lender
By: /s/ Jack Kuhns
Name: Jack Kuhns
Title: Authorized Signatory
CITY NATIONAL BANK., as a pro rata Lender
By: /s/ Brian Myers
Name: Brian Myers
Title: Senior Vice President
JPMorgan Chase, N.A., as a pro rata Lender
By: /s/ David Tepper
Name: David Tepper
Title: Vice President
WELLS FARGO BANK, N.A., as a pro rata Lender
By: /s/ Sid Khanolkar
Name: Sid Khanolkar
Title: Managing Director
MIZUHO BANK, LTD., as a pro rata Lender
By: /s/ Donna DeMagistris
Name: Donna DeMagistris
Title: Executive Director
MUFG BANK, LTD., as a pro rata Lender
By: /s/ Matthew Antioco
Name: Matthew Antioco
Title: Director
REGIONS BANK, as a pro rata Lender
By: /s/ Jason Douglas
Name: Jason Douglas
Title: Director
FIFTH THIRD BANK, NATIONAL ASSOCIATION, as a pro rata Lender
By: /s/ Zach Femal
Name: Zach Femal
Title: Principal
Annex A
(Changed pages to Credit Agreement to be attached)
Execution Version
DEAL CUSIP: 54912FAA8
REVOLVER CUSIP: 54912FAB6
TERM A CUSIP: 54912FAC4
TERM B CUSIP: 54912FAD2
CREDIT AGREEMENT
Dated as of November 3, 2021
(as amended through Amendment No. 1 to Credit Agreement (Financial Covenant) dated as of July 29, 2022)
among
LOYALTY VENTURES INC., BRAND LOYALTY GROUP B.V., BRAND LOYALTY HOLDING B.V.,
BRAND LOYALTY INTERNATIONAL B.V. and
CERTAIN SUBSIDIARIES OF LOYALTY VENTURES INC. IDENTIFIED HEREIN,
as the Borrowers,
LOYALTY VENTURES INC. and
CERTAIN SUBSIDIARIES OF LOYALTY VENTURES INC. IDENTIFIED HEREIN,
as the Guarantors,
BANK OF AMERICA, N.A.,
as Administrative Agent, Swing Line Lender and an L/C Issuer, and
THE OTHER LENDERS PARTY HERETO
BANK OF AMERICA, N.A.,
DEUTSCHE BANK SECURITIES, MUFG BANK, LTD., RBC CAPITAL MARKETS, LLC, MORGAN STANLEY SENIOR FUNDING, INC., REGIONS CAPITAL MARKETS, A DIVISION OF REGIONS BANK, CITIZENS BANK, NATIONAL ASSOCIATION, FIFTH THIRD BANK, NATIONAL ASSOCIATION, TRUIST SECURITIES, INC., WELLS FARGO SECURITIES, LLC, MIZUHO BANK, LTD., JPMORGAN CHASE BANK, N.A.,
and
TEXAS CAPITAL BANK,
as Joint Lead Arrangers and Joint Bookrunners
“Alternative Currency Daily Rate Loan” means a Loan that bears interest at a rate based on the definition of “Alternative Currency Daily Rate.” All Alternative Currency Daily Rate Loans must be denominated in an Alternative Currency.
“Alternative Currency Equivalent” means, at any time, with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Alternative Currency as determined by the Administrative Agent or the applicable L/C Issuer, as the case may be, by reference to Bloomberg (or such other publicly available service for displaying exchange rates), to be the exchange rate for the purchase of such Alternative Currency with Dollars at approximately 11:00 a.m. on the date two (2) Business Days prior to the date as of which the foreign exchange computation is made; provided, however, that if no such rate is available, the “Alternative Currency Equivalent” shall be determined by the Administrative Agent or the applicable L/C Issuer, as the case may be, using any reasonable method of determination its deems appropriate in its sole discretion (and such determination shall be conclusive absent manifest error).
“Alternative Currency Loan” means an Alternative Currency Daily Rate Loan or an Alternative Currency Term Rate Loan, as applicable.
“Alternative Currency Scheduled Unavailability Date” has the meaning specified in Section
3.03(e).
“Alternative Currency Successor Rate” has the meaning specified in Section 3.03(e).
“Alternative Currency Term Rate” means, for any Interest Period, with respect to any Credit Extension:
provided, that, if any Alternative Currency Term Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.
“Alternative Currency Term Rate Loan” means a Loan that bears interest at a rate based on the definition of “Alternative Currency Term Rate.” All Alternative Currency Term Rate Loans must be denominated in an Alternative Currency.
“Amendment No. 1” means that certain Amendment No. 1 to Credit Agreement (Financial Covenant) dated as of July 29, 2022.
“Applicable Authority” means with respect to any Alternative Currency, the applicable administrator for the Relevant Rate for such Alternative Currency or any Governmental Authority having jurisdiction over the Administrative Agent or such administrator.
(i) U.S. federal, state, local and non-U.S. Tax recoveries of the Company and its Subsidiaries for such period, (ii) non-cash items (excluding (A) any non-cash recovery that is expected to be received in cash in any future period and (B) any reversal of a write-down of current assets) increasing Consolidated Net Income for such period and (iii) unusual or non-recurring gains for such period incurred outside the ordinary course of business; provided that in the event of the acquisition by the Company or a Subsidiary of a newly acquired Subsidiary or operation (as such term is used in the definition of “Pro Forma Basis”), Consolidated EBITDA will include the Target EBITDA of the newly acquired Subsidiary or operation on a Pro Forma Basis in accordance with the terms of the definition of “Pro Forma Basis”.
Notwithstanding the foregoing, for purposes of computing the Consolidated Total Leverage Ratio for purposes of testing quarterly compliance with the covenant levels set forth in Section 7.11, for determining Pro Forma Compliance with the Pro Forma Compliance Table in Section 7.11 and for determining the Consolidated Total Leverage Ratio in Section 7.11(b)(i) and Section 7.11(b)(ii)(C) (and for no other purposes, including any other calculation of the Consolidated Total Leverage Ratio for any other purpose hereunder or the use of Consolidated EBITDA in any other provision hereof), the proviso to clause (a)(vii) of this definition of Consolidated EBITDA shall be computed utilizing “the greater of (A) $25,000,000 and (B) 15% of Consolidated EBITDA” in lieu of “the greater of (A) $10,000,000 and (B) 5% of Consolidated EBITDA” contained therein, and any document (including any Compliance Certificate) delivered in connection with any Loan Document that demonstrates the calculation of Consolidated EBITDA shall clearly identify whether such calculation is being made pursuant to this paragraph or pursuant to the calculation methodology set forth in the preceding paragraph without giving effect to this paragraph.
“Consolidated Excess Cash Flow” means, for any period for the Company and its Subsidiaries on a consolidated basis, an amount (if positive) equal to Consolidated Net Income for such period plus (a) the following without duplication: (i) an amount equal to any net decrease in Consolidated Working Capital from the first day to the last day of such period, (ii) to the extent not included in Consolidated Net Income, any cash gains and income (actually received in cash) during such period and (iii) the amount of all non-cash losses, charges and expenses deducted in calculating Consolidated Net Income including for depreciation and amortization for such period, minus (b) the following without duplication:
(i) Consolidated Interest Charges actually paid in cash for such period, (ii) cash Taxes paid by the Company and its Subsidiaries during such period, (iii) the amount of (A) all scheduled payments of principal on Consolidated Funded Indebtedness (including the Term Loans) actually paid in such period and (B) all optional prepayments of principal on Consolidated Funded Indebtedness (other than Revolving Loans and the Term Loans) actually paid in cash in such period (in the case of revolving credit facilities, solely to the extent the commitments with respect thereto are permanently reduced), (iv) an amount equal to any net increase in Consolidated Working Capital from the first day to the last day of such period, (v) the amount of (A) any non-cash gains and income included in calculating Consolidated Net Income for such period and (B) all cash expenses, charges and losses excluded in arriving at such Consolidated Net Income, in each case, to the extent not financed with the proceeds of long-term, non-revolving Indebtedness, (vi) any required up-front cash payments in respect of Swap Contracts to the extent not financed with the proceeds of long-term, non-revolving Indebtedness and not deducted in arriving at such Consolidated Net Income, (vii) any cash payments actually made during such period that represent a non-cash charge from a previous period and deducted in calculating Consolidated Excess Cash Flow in a previous period, (viii) the aggregate amount of expenditures actually made by the Company or any of its Subsidiaries in cash during such period for the payment of financing fees, rent and pension and other retirement benefits to the extent that such expenditures are not from such period, (ix) capital expenditures actually paid in cash by the Company or any Subsidiary, (x) the aggregate amount actually paid in cash by the Company and its Subsidiaries on account of Permitted Investments, (xi) to the extent not deducted in the calculation of Consolidated Net Income for such period, the amount of Restricted Payments pursuant to Section 7.06(d) and (e) (or otherwise consented to by the Required
Four Fiscal Quarters Ending | Maximum Consolidated Total Leverage Ratio |
December 31, 2021 through SeptemberJune 30, 2022 | 5.00:1.00 |
December 31September 30, 2022 through September 30, 2023 December 31, 2023 | 4.50:1.00 5.75:1.00 5.50:1.00 |
March 31, 2024 through September 30, 2024 | 5.25:1.00 |
December 31, 2024 through March 31, 2025 | 5.00:1.00 |
December 31June 30, 20232025 and each fiscal quarter thereafter | 4.25:1.004.75:1.00 |
In the event; provided that notwithstanding the foregoing, for purposes of any calculation of Pro Forma Compliance, the delivery of any Pro Forma Compliance Certificate or any other compliance with the Consolidated Total Leverage Ratio is required to be measured or satisfied prior to the delivery of financial statements forunder this Agreement other than (i) the quarterly maintenance compliance expressly required by this Section 7.11(a) and (ii) compliance required to be measured under Section 7.11(b)(i) and Section 7.11(b)(ii)(C), the required Consolidated Total Leverage Ratio level at such time shall be deemed to be the following (the “Pro Forma Compliance Table):
Four Fiscal Quarters Ending | Maximum Consolidated Total Leverage Ratio |
December 31, 2021 through September 30, 2022 | 5.00:1.00 |
December 31, 2022 through September 30, 2023 | 4.50:1.00 |
December 31, 2023 and each fiscal quarter thereafter | 4.25:1.00 |
(b) In addition, in consideration of and in connection with the amendments to clause
(a) of this Section 7.11 provided in Amendment No. 1:
(i) the Company and each other Borrower agree that simultaneously with each delivery of the Compliance Certificate pursuant to Section 6.02(a) for a fiscal quarter or fiscal year (or on the day that such Compliance Certificate is required to be delivered, if not so delivered on or prior to such date), beginning with the fiscal yearquarter ending December 31September 30, 20212022, the requiredAggregate Revolving Commitments shall be permanently reduced (such reduction to be applied ratably to the Revolving Commitment of each Revolving Lender) by $2,812,500, provided that if the Consolidated Total Leverage Ratio level at such time shall be deemed to be 5.00:1.00as of the last day of the fiscal quarter or fiscal year for which such Compliance Certificate is delivered in a timely manner is less than or equal to 4.75:1.00, the reduction provided in this clause (b)(i) shall not be effectuated for such fiscal quarter or fiscal year; and
(ii) each Loan Party hereby covenants that no Loan Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, do any of the following (notwithstanding any provision of any Loan Document otherwise permitting or not prohibiting such action), and acknowledges that doing any of the following shall constitute a violation of this Section 7.11 (and solely of this Section 7.11):
(A) create, incur, assume or suffer to exist any Indebtedness under an Incremental Facility pursuant to Section 2.16 unless (in addition to the relevant requirements and limitations contained in Section 2.16), after giving effect thereto and the application of the proceeds thereof on a Pro Forma Basis, the Consolidated Total Leverage Ratio shall be in compliance with the level at such time set forth in the Pro Forma Compliance Table;
(B) create, incur, assume or suffer to exist any Indebtedness pursuant to Section 7.03(z) unless (in addition to the relevant requirements and limitations contained in Section 7.03(z)), after giving effect thereto and the application of the proceeds thereof on a Pro Forma Basis, the Consolidated Total Leverage Ratio shall be in compliance with the level at such time set forth in the Pro Forma Compliance Table;
(C) create, incur, assume or suffer to exist any Indebtedness pursuant to Section 7.03(aa) to the extent such Indebtedness is to be secured on a senior or pari passu basis with the Obligations unless (in addition to the relevant requirements and limitations contained in Section 7.03(aa)), after giving effect thereto and the application of the proceeds thereof on a Pro Forma Basis, the Consolidated Total Leverage Ratio shall not be greater than 4.75:1.00; or
(D) make any Restricted Payment or Junior Payment that would otherwise be permitted at such time pursuant to Section 7.06(e)(i) unless both before and after giving effect to such Restricted Payment or Junior Payment, as applicable, and the application of the proceeds thereof on a Pro Forma Basis, the Consolidated Total Leverage Ratio shall be in compliance with the level at such time set forth in the Pro Form15a Compliance Table.