EXHIBIT 10.2
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Fifth Amendment") is
dated as of August 1, 2003 among CROWN CRAFTS, INC., CHURCHILL WEAVERS, INC.,
HAMCO, INC. and CROWN CRAFTS INFANT PRODUCTS, INC. (collectively, the
"Borrowers"), WACHOVIA BANK, NATIONAL ASSOCIATION (successor by merger to
Wachovia Bank, N.A.), as Agent (the "Agent") and WACHOVIA BANK, NATIONAL
ASSOCIATION (successor by merger to Wachovia Bank, N.A.), BANC OF AMERICA
STRATEGIC SOLUTIONS, INC. (assignee of Bank of America, N.A.) and THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, as Lenders (collectively, the "Lenders");
W I T N E S S E T H :
WHEREAS, the Borrowers, the Agent and the Lenders executed and
delivered that certain Credit Agreement, dated as of July 23, 2001, as amended
by First Amendment to Credit Agreement dated as of September 28, 2001, Second
Amendment to Credit Agreement dated as of November 25, 2002, Third Amendment to
Credit Agreement dated as of February 10, 2003 and Global Amendment Agreement
dated as of April 29, 2003 (as so amended, the "Credit Agreement");
WHEREAS, the Borrowers, the Agent and the Lenders have agreed to
certain amendments to the Credit Agreement, subject to the terms and conditions
hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrowers, the Agent and the
Lenders hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer to the Credit
Agreement as amended hereby.
2. Amendments to Section 1.01A. SECTION 1.01A of the Credit Agreement
hereby is deleted entirely and the following is substituted therefor:
The following terms as defined in this SECTION 1.01 pertaining
to yield maintenance regarding the Term Loan Notes shall, for all
purposes of this Agreement and any amendment hereto (except as herein
otherwise expressly provided), have the meanings set forth herein.
"Called Principal" means, with respect to any Term Loan Note,
the principal of such Term Loan Note that is prepaid (i) in connection
with any payment of principal following a declaration that all
principal of the Term Loans is immediately due and payable pursuant to
SECTION 6.01, (ii) following the commencement of any case under the
Bankruptcy Code in which any Borrower is the debtor and (iii) where
mutually agreed by the Borrowers and the Lenders.
"Discounted Value" means, with respect to the Called Principal
of any Term Loan Note, the amount obtained by discounting all remaining
Scheduled Principal Reduction Amounts with respect to such Called
Principal from their respective scheduled due dates to the Settlement
Date with respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (as converted to reflect
the periodic basis on which interest on such Term Loan Note is payable,
if payable other than on a semi-annual basis) equal to the Reinvestment
Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Term Loan Note, the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City local time) on the
Domestic Business Day next preceding the Settlement Date with respect
to such Called Principal, on the display designated as "Page 678" on
the Telerate Service (or such other display as may replace page 678 on
the Telerate Service) for actively traded U.S. Treasury securities
having a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall
not be ascertainable, (ii) the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have been so
reported as of the Domestic Business Day next preceding the Settlement
Date with respect to such Called Principal, in Federal Reserve
Statistical Release H. 15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield shall be
determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between Yields
reported for various maturities. For purposes of this calculation for
any Term Loan Note, it is agreed that the mandatory prepayment schedule
applicable to the Term Loan Notes as originally issued (the Scheduled
Principal Reduction Amounts as set forth in this Agreement as of the
Closing Date, with a maturity date of June 30, 2006 and the Cash
Contract Rate as set forth in this Agreement as of the Closing Date)
shall be used.
"Remaining Average Life" means, with respect to the Called
Principal of any Term Loan Note, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such Called
Principal into (ii) the sum of the products obtained by multiplying (a)
each of the remaining Scheduled Principal Reduction Amounts of such
Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse
between the Settlement Date with respect to such Called Principal and
the scheduled due date of such remaining Scheduled Principal Reduction
Amounts. For purposes of this calculation for any Term Loan Note, it is
agreed that the mandatory prepayment schedule applicable to the Term
Loan Notes as originally issued (the Scheduled Principal Reduction
Amounts as set forth in this Agreement as of the Closing Date, with a
maturity date of June 30, 2006 and the Cash Contract Rate as set forth
in this Agreement as of the Closing Date) shall be used.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Term Loan Note, all payments of such Called
Principal and interest thereon that would be due on or after the
Settlement Date with respect to such Called Principal if no payment of
such Called Principal were made prior to its scheduled due date. For
purposes of this calculation for any Note, it is agreed that the
Scheduled Principal Reduction Amounts as set forth in this Agreement as
of the Closing Date, with a maturity date of June 30, 2006 and the Cash
Contract Rate as set forth in this Agreement as of the Closing Date,
shall be used.
"Settlement Date" means with respect to the Called Principal
of any Term Loan Note, the date on which such Called Principal is to be
prepaid pursuant to SECTION 2.09 or 2.10 or is declared to be
immediately due and payable pursuant to SECTION 6.01, as the context
requires.
"Yield-Maintenance Amount" means, with respect to any Term
Loan Note, an amount equal to the excess, if any, of the Discounted
Value of the Called Principal of such Term Loan Note over the sum of
(i) such Called Principal plus (ii) interest accrued thereon as of
(including interest due on) the Settlement Date with respect to such
Called Principal. The Yield-Maintenance Amount shall in no event be
less than zero. For purposes of this calculation for any Term Loan
Note, it is agreed that the Scheduled Principal
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Reduction Amounts as set forth in this Agreement as of the Closing
Date, with a maturity date of June 30, 2006 and the Cash Contract Rate
as set forth in this Agreement as of the Closing Date, shall be used.
3. Amendments to SECTION 1.01B. SECTION 1.01B of the Credit Agreement
hereby is amended by deleting the definitions of "Consolidated Excess Cash
Flow", "Eligible Accounts", "Foreign Stock Pledge Agreement", "Obligations",
"Revolving Loan Termination Date", "Scheduled Principal Reduction Amount" and
"Senior Officer", and substituting therefor the following new definition of such
terms:
"Consolidated Excess Cash Flow" means, for each Annual Period,
(i) Consolidated Available Free Cash Flow for such Annual Period, minus
(ii) Cash Interest paid during such Annual Period, minus (iii) the
aggregate of the Minimum Principal Reduction Amounts paid during such
Annual Period.
"Eligible Accounts" means that portion of the Accounts
Receivable Collateral of each Borrower consisting of trade accounts
receivable actually owing to such Borrower by its Account Debtors
subject to no counterclaim, defense, setoff or deduction, provided, in
each of the foregoing cases, that such Accounts Receivable Collateral
is at all times subject to a duly perfected, first priority security
interest in favor of Collateral Agent, subject only to any Permitted
Encumbrances excluding, however, in any event any such account:
(i) with respect to which any portion thereof is
more than 90 days past invoice date or more than 60 days past
due date (or such lesser number of days which the Agent may
establish by written notice from time to time to the Borrowers
in its good faith credit judgment);
(ii) which is owing by any Subsidiary or other
Affiliate;
(iii) which is owing by any Account Debtor having
50% or more in face value of its then existing accounts with
such Borrower more than 90 days past invoice date or more than
60 days past due date;
(iv) the assignment of which is subject to any
requirements set forth in the Assignment of Claims Act of
1940, as amended;
(v) which is owing by any Account Debtor whose
accounts, in face amount, with such Borrower exceed 10% of
such Borrower's Eligible Accounts, but only to the extent of
such excess; provided, however, that Account Receivable
Collateral from the following Account Debtors shall not be
considered ineligible solely on the basis of exceeding such
10% limitation, so long as the aggregate amount of Accounts
Receivable Collateral owed by any such Account Debtor does not
exceed the following amount for such Account Debtor, and so
long as there is no material deterioration in the
creditworthiness of such Account Debtor: (1) for each of Toys
R Us, Sears, Roebuck, Target and Wal-Mart, $1,000,000, and (2)
for each of Burlington Coat Factory, J.C. Penney and K-Mart,
$500,000;
(vi) which arises from a sale to an Account
Debtor with its principal office, assets or place of business
outside the United States, unless the sale is backed by an
irrevocable letter of credit that is issued or confirmed by a
bank acceptable to the Agent that is in form and substance
acceptable to the Agent and payable in the full amount of such
account is freely convertible into Dollars at a place of
payment within the United States, and, if requested by the
Agent, such letter of credit, or amounts payable thereunder,
is collaterally assigned to the Collateral Agent;
(vii) which arises from (A) the sale of goods
which have not been delivered and accepted by the Account
Debtor (a "bill and hold" arrangement), or (B) services which
have not been performed by such Borrower and accepted by the
Account Debtor;
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(viii) which is owing by any Account Debtor which
is the subject (as debtor) of any voluntary or involuntary
case or proceeding under any bankruptcy, insolvency or other
similar law or as to which a trustee, receiver, liquidator,
custodian or other similar official has been appointed for it
or for any substantial part of its property;
(ix) which arises from the sale of any Inventory
Collateral that is not Eligible Inventory pursuant to clause
(iii) of the proviso contained in the definition of "Eligible
Inventory";
(x) with respect to which the Agent determines
in its good faith credit judgment that collection of such
account is insecure, or that payment thereof is doubtful or
will be delayed by reason of such Account Debtor's financial
condition or that the prospect of payment or performance by
such Account Debtor is or will be impaired;
(xi) with respect to which the Account Debtor's
executive offices are located in the State of New Jersey,
Minnesota, Indiana or any other state imposing similar
conditions to the right of a creditor to collect accounts,
unless (A) such Borrower has filed a notice of business
activities report, or such other similar report required by
such state, with the appropriate officials of such state for
the then current year, or (B) such Account Debtor has
substantial assets located, respectively, outside of the
States of New Jersey, Minnesota, Indiana or such other state,
as the case may be;
(xii) which is owed by, billed to, or will be paid
by an Account Debtor located in the State of Alabama or any
other state the laws of which deny creditors access to its
courts in the absence of qualification to do business as a
foreign corporation in such state or in the absence of the
filing of any required reports with such state, unless such
Borrower has qualified as a foreign corporation authorized to
do business in Alabama or such state or has filed such
required reports;
(xiii) which is subject to any Lien other than a
Permitted Encumbrance;
(xiv) which consists of "billings over cost"
(items which have been invoiced but for which costs incurred
in connection therewith have not been recognized);
(xv) which is owing by any Account Debtor with
respect to which any Borrower has determined for any reason
not to continue selling goods to or performing services for on
open account;
(xvi) which is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment;
(xvii) which is owed by an Account Debtor owing any
account with a balance greater than $100,000 which is not an
Eligible Account;
(xviii) with respect to which such Borrower has made
an agreement with the Account Debtor (A) for any deduction
therefrom, except for discounts or allowances which are made
in the ordinary course of business for prompt payment and
which discounts or allowances are reflected in the calculation
of the face amount of each invoice related to such account,
but only to the extent of such deduction, or (B) to extend the
time of payment thereof beyond the period set forth in clause
(i) in this definition;
(xix) which arises from a retail sale of goods to
a Person who is purchasing the same primarily for personal,
family or household purposes;
4
(xx) which represents a progress billing (unless
the Required Lenders, in the exercise of their sole
discretion, after the Borrower's request, permits the same to
not be excluded hereunder) or a retainage or;
(xxi) which has not otherwise been determined by
mutual agreement of the Agent and the Borrowers to be
ineligible for purposes hereof.
"Foreign Stock Pledge Agreement" means, collectively, (i) the
Foreign Stock Pledge Agreement, substantially in the form of EXHIBIT T,
to be executed by the Parent (and, pursuant to SECTION 5.15, any other
Borrower creating or acquiring a Direct Foreign Subsidiary), and (ii)
and if requested by the Collateral Agent, any pledge or other agreement
which may be required pursuant to applicable law in the jurisdiction in
which a Direct Foreign Subsidiary is located, in each case to be
executed and delivered by the Parent and each other Borrower which owns
any Direct Foreign Subsidiaries, pledging to the Collateral Agent
pursuant thereto, for the ratable benefit of the Lenders, 65% of the
capital stock of all Direct Foreign Subsidiaries, to secure the payment
of all of the Obligations, as any of the foregoing may be amended or
supplemented from time to time.
"Obligations" means all Debts, indebtedness, liabilities,
covenants, duties and other obligations of the Borrowers: (i) to the
Agent, the Collateral Agent or the Lenders included or arising from
time to time under this Agreement or any other Credit Document, whether
evidenced by any note or other writing, whether arising from the
extension of credit, opening of a letter of credit, acceptance or loan
guaranty, including, without limitation, principal, interest,
Yield-Maintenance Amount, fees, costs, attorney's fees and
indemnification amounts and any and all extensions or renewals thereof
in whole or in part, direct or indirect, absolute or contingent, due or
to become due, primary or secondary, or joint or several; (ii) to the
Agent or Wachovia, with respect to all Letter of Credit Obligations and
all other obligations arising in connection with the issuance of any
Letter of Credit; (iii) to any Lender or Affiliate thereof arising
under any Interest Rate Protection Agreement with any such Lender or
Affiliate, including, without limitation, any premature termination or
breakage or other costs with respect thereto; (iv) to any Lender and
its Affiliates, arising in connection with any banking or related
transactions, services or functions provided to any Borrower in
connection with the conduct of such Borrower's business (excluding
extensions of credit giving rise to any Debt for money borrowed not
related to this Agreement or any of the other Credit Documents).
"Revolving Loan Termination Date" means the earliest to occur
of: (i) June 30, 2005, (ii) the date the Revolving Loan Commitments are
terminated pursuant to SECTION 6.01 following the occurrence of an
Event of Default, or (iii) the date the Borrowers terminate the
Revolving Loan Commitments entirely pursuant to SECTION 2.07.
"Scheduled Principal Reduction Amount" means, for each Annual
Period, the aggregate amount of principal payments required to be made
on the Term Loans for such Annual Period, subject to deferment of the
Deferred Principal Amount, if any, for such Annual Period pursuant to
SECTION 2.01(c), which Scheduled Principal Reduction Amount shall be:
(i) for the Annual Period ending on June 30, 2002, $2,000,000; and (ii)
for each Annual Period thereafter, $3,000,000.
"Senior Officer" means any of the following officers of
Parent, regardless of actual title: Chief Executive Officer; Chief
Operating Officer; Chief Financial Officer and Treasurer.
5
Amendment to SECTION 5.20(a). SECTION 5.20(a) hereby is deleted in its
entirety, and the following is substituted therefor:
(a) Minimum EBITDA. Consolidated EBITDA shall not be less
than, for each Fiscal Quarter set forth below and the 3 immediately
preceding Fiscal Quarters, the amount set forth below corresponding to
such Fiscal Quarter:
- --------------------------------------------------------------------
FISCAL QUARTER ENDING MINIMUM EBITDA
- --------------------------------------------------------------------
December 29, 2002 through March 28, 2004 $6,885,000
- --------------------------------------------------------------------
June 27, 2004 through March 27, 2005 $7,000,000
- --------------------------------------------------------------------
June 26, 2005 through April 2, 2006 $7,200,000
- --------------------------------------------------------------------
July 2, 2006 and each Fiscal Quarter thereafter $7,400,000
- --------------------------------------------------------------------
Amendment to SECTION 5.20(b). SECTION 5.20(b) hereby is deleted in its
entirety, and the following is substituted therefor:
(b) Debt/EBITDA Ratio. The Debt/EBITDA Ratio will not
exceed, at the end of each Fiscal Quarter set forth below, calculated
as to Debt as of such Fiscal Quarter and calculated as to Consolidated
EBITDA for such Fiscal Quarter and the 3 immediately preceding Fiscal
Quarters, the ratio set forth below corresponding to such Fiscal
Quarter :
- ----------------------------------------------------------------------------------
FISCAL QUARTER ENDING MAXIMUM DEBT/EBITDA RATIO
- ----------------------------------------------------------------------------------
December 29, 2002 through March 28, 2004 4.75 to 1.00
- ----------------------------------------------------------------------------------
June 27, 2004 through September 26, 2004 4.25 to 1.00
- ----------------------------------------------------------------------------------
December 26, 2004 through March 27, 2005 4.00 to 1.00
- ----------------------------------------------------------------------------------
June 26, 2005 through September 25, 2005 3.75 to 1.00
- ----------------------------------------------------------------------------------
December 25, 2005 through July 2, 2006 3.50 to 1.00
- ----------------------------------------------------------------------------------
October 1, 2006 through December 31, 2006 3.25 to 1.00
- ----------------------------------------------------------------------------------
April 1, 2007 and each Fiscal Quarter thereafter 3.00 to 1.00
- ----------------------------------------------------------------------------------
6
Amendment to Exhibit G (Compliance Certificate). Exhibit G to the
Credit Agreement hereby is deleted in its entirety, and Exhibit G attached
hereto is substituted therefor.
4. Restatement of Representations and Warranties. The Borrowers hereby
restate and renew each and every representation and warranty heretofore made by
them in the Credit Agreement and the other Loan Documents as fully as if made on
the date hereof (except where reference is expressly made to a specific date)
and with specific reference to this Fifth Amendment and all other loan documents
executed and/or delivered in connection herewith.
5. Effect of Amendment. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Loan Documents shall be and remain
in full force and effect, and shall constitute the legal, valid, binding and
enforceable obligations of the Borrowers. The amendments contained herein shall
be deemed to have prospective application only, unless otherwise specifically
stated herein.
6. Ratification. The Borrowers hereby restate, ratify and reaffirm each
and every term, covenant and condition set forth in the Credit Agreement and the
other Loan Documents effective as of the date hereof.
7. Counterparts. This Fifth Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
8. Section References. Section titles and references used in this Fifth
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
9. No Default. To induce the Agent and the Lenders to enter into this
Fifth Amendment and to continue to make advances pursuant to the Credit
Agreement, the Borrowers hereby acknowledge and agree that, as of the date
hereof, and after giving effect to the terms hereof, (i) there exists no Default
or Event of Default, (ii) there exists no right of offset, defense,
counterclaim, claim or objection in favor of the Borrowers arising out of or
with respect to any of the Loans or other obligations of the Borrowers owed to
the Lenders under the Credit Agreement and (iii) the Agent and each Lender has
acted in good faith and has conducted its relationships with the Borrowers in a
commercially reasonable manner in connection with the negotiations, execution
and delivery of this Fifth Amendment and in all respects in connection with the
Credit Agreement, each of the Borrowers hereby waiving and releasing any such
claims to the contrary that may exist as of the date of this Fifth Amendment.
10. Further Assurances. The Borrowers agree to take such further
actions as the Agent shall reasonably request in connection herewith to evidence
the amendments herein contained.
11. Governing Law. This Fifth Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the State of Georgia.
12. Conditions Precedent. This Fifth Amendment shall become effective
only upon (i) payment to the Agent, for the ratable account of the Lenders, of
an amendment fee equal to
7
$47,500, (ii) execution and delivery of this Fifth Amendment by each of the
parties hereto and (iii) execution and delivery by all parties thereto of a
Fifth Amendment of Subordinated Note and Warrant Purchase Agreement (the Global
Amendment Agreement dated as of April 29, 2003 in effect constituting the fourth
amendment to such Subordinated Note and Warrant Purchase Agreement) in form and
substance satisfactory to the Agent and the Lenders, amending the Senior
Subordinated Notes Purchase Agreement to conform it to the changes contained in
Sections 1, 2, 3, 4 and 5 hereof, to the extent applicable.
[SIGNATURES COMMENCE ON NEXT PAGE]
8
IN WITNESS WHEREOF, each of the Borrowers, the Agent and each of the
Lenders has caused this Fifth Amendment to be duly executed, under seal, by its
duly authorized officer as of the day and year first above written.
CROWN CRAFTS, INC., (SEAL)
By: /s/ E. RANDALL CHESTNUT
--------------------------------
Name: E. Randall Chestnut
Title: President and CEO
CHURCHILL WEAVERS, INC.,
HAMCO, INC.
CROWN CRAFTS INFANT
PRODUCTS, INC. (SEAL)
By: /s/ AMY VIDRINE SAMSON
--------------------------------
Name: Amy Vidrine Samson
Title: Vice President
WACHOVIA BANK, NATIONAL
ASSOCIATION (successor by merger
to Wachovia Bank, N.A.), (SEAL)
as Agent and as a Lender
By: /s/ MONICA H. COLE
--------------------------------
Name: Monica H. Cole
Title: Vice President
9
BANC OF AMERICA STRATEGIC SOLUTIONS,
INC. (assignee of Bank of America,
N.A.), (SEAL)
as a Lender
By: /s/ JOHN F. REGISTER
--------------------------------
Name: John F. Register
Title: Principal
THE PRUDENTIAL INSURANCE (SEAL)
COMPANY OF AMERICA, as a Lender
By: /s/ PAUL G. PRICE
--------------------------------
Name: Paul G. Price
Title: Vice President
10
EXHIBIT G
COMPLIANCE CERTIFICATE
Reference is made to the Credit Agreement dated as of July 23, 2001, as
amended by First Amendment to Credit Agreement dated as of September 28, 2001,
Second Amendment to Credit Agreement dated as of November 25, 2002, Third
Amendment to Credit Agreement dated as of February 10, 2003, Global Amendment
Agreement dated as of April 29, 2003 and Fifth Amendment to Credit Agreement
dated as of August 1, 2003 (as so amended and as thereafter modified and
supplemented and in effect from time to time, the "Credit Agreement") by and
among Crown Crafts, Inc., Churchill Weavers, Inc., Hamco, Inc. and Crown Crafts
Infant Products, Inc. (collectively or individually, as the context shall
require, the "Borrowers"), the Lenders from time to time parties thereto, and
Wachovia Bank, National Association (successor by merger to Wachovia Bank,
N.A.), as Agent. Capitalized terms used herein shall have the meanings ascribed
thereto in the Credit Agreement.
Pursuant to SECTION 5.01(c) of the Credit Agreement, ________________,
the duly authorized ______________ of the Borrowers, hereby certifies to the
Agent and the Lenders that, as of the date hereof, (i) the information contained
in the Compliance Certificate attached hereto is true, accurate and complete in
all material respects and (ii) no Default is in existence.
CROWN CRAFTS, INC. CHURCHILL WEAVERS, INC.
HAMCO, INC.
CROWN CRAFTS INFANT PRODUCTS, INC.
By: ______________________ (SEAL) By: _________________________ (SEAL)
Name: Name:
Title: Title:
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CROWN CRAFTS, INC.
COMPLIANCE CHECKLIST
1. Minimum EBITDA (Section 5.20(a))
Consolidated EBITDA shall not be less than, for each Fiscal
Quarter set forth below and the 3 immediately preceding Fiscal
Quarters, the amount set forth below corresponding to such Fiscal
Quarter:
- ----------------------------------------------------------------
FISCAL QUARTER ENDING MINIMUM EBITDA
- ----------------------------------------------------------------
December 29, 2002 through March 28, 2004 $6,885,000
- ----------------------------------------------------------------
June 27, 2004 through March 27, 2005 $7,000,000
- ----------------------------------------------------------------
June 26, 2005 through April 2, 2006 $7,200,000
- ----------------------------------------------------------------
July 2, 2006 and each Fiscal Quarter thereafter $7,400,000
- ----------------------------------------------------------------
(a) Consolidated EBITDA Schedule 1 $ _________
Minimum Consolidated EBITDA [$6,885,000]
[$7,000,000]
[$7,200,000]
[$7,400,000]
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2. Debt/EBITDA Ratio (Section 5.20(b))
The Debt/EBITDA Ratio will not exceed, at the end of each
Fiscal Quarter set forth below, calculated as to Debt as of such Fiscal
Quarter and calculated as to Consolidated EBITDA for such Fiscal
Quarter and the 3 immediately preceding Fiscal Quarters, the ratio set
forth below corresponding to such Fiscal Quarter:
- ------------------------------------------------------------------------
FISCAL QUARTER ENDING MAXIMUM DEBT/EBITDA RATIO
- ------------------------------------------------------------------------
December 29, 2002 through March 28, 2004 4.75 to 1.00
- ------------------------------------------------------------------------
June 27, 2004 through September 26, 2004 4.25 to 1.00
- ------------------------------------------------------------------------
December 26, 2004 through March 27, 2005 4.00 to 1.00
- ------------------------------------------------------------------------
June 26, 2005 through September 25, 2005 3.75 to 1.00
- ------------------------------------------------------------------------
December 25, 2005 through July 2, 2006 3.50 to 1.00
- ------------------------------------------------------------------------
October 1, 2006 through December 31, 2006 3.25 to 1.00
- ------------------------------------------------------------------------
April 1, 2007 and each Fiscal Quarter thereafter 3.00 to 1.00
- ------------------------------------------------------------------------
(a) Consolidated Debt Schedule 2 $ ___________
(b) Consolidated EBITDA Schedule 1 $ ___________
(c) actual ratio of (a) to (b) ___ to 1.00
Limitation: (c) may not exceed [4.75 to 1.0]
[4.25 to 1.0]
[4.00 to 1.0]
[3.75 to 1.0]
[3.50 to 1.0]
[3.25 to 1.0]
[3.00 to 1.0]
3. Senior Debt/EBITDA Ratio (Section 5.20(c))
The Senior Debt/EBITDA Ratio will not exceed, at the end of each Fiscal
Quarter set forth below, calculated as to Senior Debt as of such Fiscal
Quarter and calculated as to
13
Consolidated EBITDA for such Fiscal Quarter and the 3 immediately
preceding Fiscal Quarters (except that for the Fiscal Quarter ending
March 31, 2002, such calculation shall be for such Fiscal Quarter and
the 2 immediately preceding Fiscal Quarters), the ratio set forth below
corresponding to such Fiscal Quarter:
- ------------------------------------------------------------------------
MAXIMUM SENIOR
FISCAL QUARTER ENDING DEBT/EBITDA RATIO
- ------------------------------------------------------------------------
March 31, 2002 4.80 to 1.0
- ------------------------------------------------------------------------
June 30, 2002 3.50 to 1.0
- ------------------------------------------------------------------------
September 29, 2002 3.25 to 1.0
- ------------------------------------------------------------------------
December 29, 2002 3.00 to 1.0
- ------------------------------------------------------------------------
March 30, 2003 2.75 to 1.0
- ------------------------------------------------------------------------
June 29, 2003 and September 28, 2003 2.50 to 1.0
- ------------------------------------------------------------------------
December 28, 2003 2.25 to 1.0
- ------------------------------------------------------------------------
March 28, 2004 through September 26, 2004 2.00 to 1.0
- ------------------------------------------------------------------------
December 26, 2004 1.75 to 1.0
- ------------------------------------------------------------------------
March 27, 2005 and thereafter 1.50 to 1.00
- ------------------------------------------------------------------------
(a) Consolidated Senior Debt Schedule 2 $ ___________
(b) Consolidated EBITDA Schedule 1 $ ___________
(c) actual ratio of (a) to (b) ___ to 1.00
Limitation: (c) may not exceed [4.80 to 1.0]
[3.50 to 1.0]
[3.25 to 1.0]
[3.00 to 1.0]
[2.75 to 1.0]
[2.50 to 1.0]
[2.25 to 1.0]
[2.00 to 1.0]
[1.75 to 1.0]
[1.50 to 1.0]
14
4. EBITDA/Cash Interest Ratio (Section 5.20(d))
The EBITDA/Cash Interest Ratio will not be less than, at the end of
each Fiscal Quarter set forth below, for such Fiscal Quarter and the 3
immediately preceding Fiscal Quarters (except that for the Fiscal
Quarter ending March 31, 2002, such calculation shall be for such
Fiscal Quarter and the 2 immediately preceding Fiscal Quarters), the
amount set forth below corresponding to such Fiscal Quarter:
- ----------------------------------------------------------------------------
MINIMUM EBITDA/CASH
FISCAL QUARTER ENDING INTEREST RATIO
- ----------------------------------------------------------------------------
March 31, 2002 1.60 to 1.0
- ----------------------------------------------------------------------------
June 30, 2002 1.65 to 1.0
- ----------------------------------------------------------------------------
September 29, 2002 1.80 to 1.0
- ----------------------------------------------------------------------------
December 29, 2002 2.00 to 1.0
- ----------------------------------------------------------------------------
March 30, 2003 2.20 to 1.0
- ----------------------------------------------------------------------------
June 29, 2003 through December 28, 2003 2.25 to 1.0
- ----------------------------------------------------------------------------
March 28, 2004 through December 26, 2004 2.50 to 1.0
- ----------------------------------------------------------------------------
March 27, 2005 through December 25, 2005 2.75 to 1.0
- ----------------------------------------------------------------------------
April 2, 2006 and each Fiscal Quarter thereafter 3.00 to 1.00
- ----------------------------------------------------------------------------
(a) Consolidated EBITDA Schedule 1 $ __________
(b) Cash Interest Schedule 3 $ __________
(c) actual ratio of (a) to (b) ___ to 1.00
Limitation: (c) may not exceed [1.60 to 1.0]
[1.65 to 1.0]
[1.80 to 1.0]
[2.00 to 1.0]
[2.20 to 1.0]
[2.25 to 1.0]
[2.50 to 1.0]
[2.75 to 1.0]
[3.00 to 1.0]
15
5. Minimum Stockholders' Equity (Section 5.20(e))
As of the end of each Fiscal Quarter, Stockholders' Equity will not be
less than the sum of (i) Stockholders' Equity as of the Closing Date
(after giving effect to the sale of its adult bedding line of business
to its former management) plus (ii) 75% of the cumulative (since the
Closing Date) Reported Net Income (excluding any Fiscal Quarter during
which Reported Net Income is less than $0.00) of the Parent and the
Subsidiaries.
(a) Stockholders' Equity $ __________
(b) Cumulative positive Reported Net Income since
the Closing Date $ __________
(c) 75% of (b) $ __________
(d) sum of (c) and $ ___________(1) $ __________
Limitation: (a) must not be less than (d)
6. Capital Expenditures (Section 5.20(f))
No Borrower shall, nor shall it permit any Subsidiary to, make any
expenditures (including obligations incurred under any lease) in any
Fiscal Year that are required to be capitalized under GAAP in the
aggregate for any Borrower and the Subsidiaries, on a consolidated
basis, exceeding $500,000.
(a) aggregate Capital Expenditures made to date in current
Fiscal Year $ __________
Limitation: (a) may not exceed $500,000
- -----------------
(1) Insert amount of Stockholders' Equity as of the Closing Date
16
7. Operating Leases (Section 5.20(g))
No Borrower shall, nor shall it permit any Subsidiary to, enter into or
remain or become liable upon any lease (other than intercompany leases
between the Borrower and its Subsidiaries) which would be characterized
as an operating lease under GAAP if the aggregate amount of all
consolidated rents paid by the Borrower and its Subsidiaries under all
such leases would exceed $3,000,000 in the first Fiscal Year following
the Closing Date, with such amount increasing each Fiscal Year
thereafter by an additional 5% of the amount in effect at the end of
the preceding Fiscal Year.
(a) aggregate amount of consolidated rents payable in current Fiscal
Year $ ___________
Limitation: (a) may not exceed [$3,000,000](2)
- -----------------
(2) Increase after the first Fiscal Year by an additional 5% of the amount in
effect at the end of the preceding Fiscal Year
17
Schedule 1
CONSOLIDATED EBITDA
(a) Consolidated Net Income for:
____ quarter ____ $___________
____ quarter ____ $___________
____ quarter ____ $___________
____ quarter ____ $___________
(b) depreciation and amortization expenses for:
____ quarter ____ $___________
____ quarter ____ $___________
____ quarter ____ $___________
____ quarter ____ $___________
(c) Consolidated Interest Expense for:
____ quarter ____ $___________
____ quarter ____ $___________
____ quarter ____ $___________
____ quarter ____ $___________
(d) income tax expense included in Consolidated Net
Income for:
____ quarter ____ $___________
____ quarter ____ $___________
____ quarter ____ $___________
____ quarter ____ $___________
18
(e) before-tax reserve related to the closing of the
operations of Burgundy Interamericana SA de CV for:(3)
____ quarter ____ $___________
____ quarter ____ $___________
____ quarter ____ $___________
- -----------------
(3) Include only for the following Fiscal Quarters, not exceeding following
amounts for such Fiscal Quarters: (1) for the Fiscal Quarter ending December 29,
2002, $1,775,000, (2) for the Fiscal Quarter ending March 30, 2003, $225,000 and
(3) for the Fiscal Quarter ending June 29, 2003, $275,000
19
Schedule 2
CONSOLIDATED DEBT AND CONSOLIDATED SENIOR DEBT
CONSOLIDATED DEBT(4)
(a) obligations for borrowed money $__________
(b) payment obligations evidenced by bonds, debentures notes or $__________
other similar instruments
(c) obligations to pay the deferred purchase price of property or $__________
services, except trade accounts payable and accrued expenses
arising in the ordinary course of business
(d) obligations as lessee under capital leases or leases for $__________
which the Borrowers Person retain tax ownership of the
property subject to a lease
(e) obligations to reimburse any bank or other Person in respect $__________
of amounts payable under a banker's acceptance
(f) Redeemable Preferred Stock $__________
(g) obligations to reimburse any bank or other Person in respect $__________
of amounts paid or undrawn amounts available to be paid under
a letter of credit or similar instrument
(h) Debt of others secured by a Lien on any asset of any $__________
Borrower, whether or not such Debt is assumed by such Borrower
(i) obligations with respect to interest rate protection $__________
agreements, foreign currency exchange agreements or other
hedging arrangements, other than commodity hedging agreements
entered into as risk protection rather than as an investment
(each valued as the termination value thereof computed in
accordance with a method approved by the International Swap
Dealers Association and agreed to in the applicable
agreement, if any)
- -----------------
(4) Exclude Contingent Interest and amounts payable pursuant to SECTION 2.06(a)
of the Senior Subordinated Notes Purchase Agreement
20
(j) Debt of others Guaranteed by any Borrower $__________
(k) CONSOLIDATED DEBT (sum of (a) through (i)) $__________
CONSOLIDATED SENIOR DEBT
(l) Subordinated Debt $__________
(m) CONSOLIDATED SENIOR DEBT ((j) less (k)) $__________
21
Schedule 3
CASH INTEREST
(a) interest on Revolving Loans $_____________
(b) interest on Term Loans at Cash Contract Rate $_____________
(c) interest on Senior Subordinated Debt $_____________
(d) CASH INTEREST (sum of (a), plus (b), plus (c)) $_____________
22