Documentation Principles. General: The covenants applicable to the First-Out Notes shall be negotiated in good faith and shall not be materially inconsistent with (but may deviate, consistent with the high yield nature thereof, from) those set forth in the asset-based revolving credit agreement dated August 12, 2025, among the Issuer, as a U.S. borrower and borrower representative, Fossil Partners, L.P., as a U.S. borrower, certain subsidiaries of the Issuer from time to time party thereto, as borrowers, the other loan parties from time to time party thereto, the lenders from time to time party thereto, and ACF FINCO I LP, as administrative agent (the “ABL Credit Agreement”, and the obligations incurred pursuant thereto, the “ABL Obligations”), and shall include, without limitation, covenants with respect to: o restricted payments; o dividend and other payment restrictions affecting restricted subsidiaries; o the incurrence of indebtedness and the issuance of disqualified stock or preferred stock; o asset sales; o transactions with affiliates; o liens; o offers to repurchase upon a change of control; o guarantees; o after-acquired property; and o merger, consolidation or sale of assets. provided, that, notwithstanding the foregoing or anything else to the contrary, the covenants, thresholds and “baskets” set forth in the definitive documentation for the First-Out Notes (the indenture related thereto, the “First-Out Notes Indenture”) shall be consistent with the “First Out Notes Covenant Grid” attached hereto as Annex A to the extent set forth therein, it being understood that the First-Out Notes Covenant Grid is not an exclusive list of covenants, terms or provisions to be included in such First-Out Notes Indenture. For the avoidance of doubt, all of the Issuer’s subsidiaries shall be “restricted subsidiaries” and subject to the covenants, and the Issuer shall not be permitted to create or otherwise permit any “unrestricted” subsidiaries. • ABL Facility Basket: The First-Out Notes Indenture shall include a basket for the incurrence of indebtedness and the granting of liens in respect of the ABL Obligations in an aggregate principal amount not to exceed (a) the greater of (i) $180,000,000 and (ii) the Borrowing Base (with “Borrowing Base” equal to sum of (1) 90.0% of the face amount of all credit card receivable owned by the Issuer and the Subsidiaries as of the end of the most recent fiscal month preceding such date, (2) 90.0% of the face amount of all other accounts receivable owned by the Issuer and the Subsidiaries as of the end of the most recent fiscal month preceding such date, (3) 100.0% of the book value of all inventory owned by the issuer and its Subsidiaries as of the end of the most recent fiscal month preceding such date, and (4) 70% of the appraised value of intellectual property (determined based on most recent appraisal of such intellectual property)); provided that any reductions in the “IP Cap” and/or “IP Advance Rate” as defined in the ABL Credit Agreement shall not reduce the Borrowing Base for purposes of this basket. • To the extent that advances permitted under the Borrowing Base (including components and subcomponents thereof) and advance rates, in each case, as set forth in the ABL Credit Agreement (as of the closing date thereof) exceed the amount that would have been permitted under the Borrowing Base advance rates as of the closing date of the ABL Credit Agreement (without giving effect to any future step-downs in IP Caps or IP Advance Rates), the First-Out Notes will accrue additional interest in an amount equal 2.0% per annum payable in payment-in-kind interest during the period that such over-advance is outstanding. Call Protection • 7.5% of the principal amount of the First-Out Notes due on any date of redemption, repayment, prepayment, acceleration, or maturity. Guarantees, Ranking and Collateral • The Guarantors will, jointly and severally and unconditionally guarantee, on a senior basis, the Issuer’s obligations under the First-Out Notes and all obligations under the First-Out Notes Indenture to the maximum extent permitted by, but subject in all respects to, applicable law (including limitations as to capital maintenance, financial assistance, corporate benefit, exclusion of matters which might be deemed contra legem, director and officer fiduciary and other similar legal duties) and subject in all respects to customary enforcement limitation language and materiality considerations to be set forth in the First-Out Notes Indenture (the “Guaranty and Security Principles”). • The First-Out Notes will be secured by all or substantially all assets of the Issuer and the Guarantors, including first-priority liens on Notes Priority Collateral (as defined in the ABL Intercreditor Agreement) and second-priority liens on ABL Priority Collateral (as defined in the ABL Intercreditor Agreement), in each case, to the maximum extent permitted by law, subject to the Guaranty and Security Principles and any applicable Intercreditor Agreement.
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Documentation Principles. General: The covenants applicable to the First-Out Notes shall be negotiated in good faith and shall not be materially inconsistent with (but may deviate, consistent with the high yield nature thereof, from) those set forth in the asset-based revolving credit agreement dated August 12, 2025, among the Issuer, as a U.S. borrower and borrower representative, Fossil Partners, L.P., as a U.S. borrower, certain subsidiaries of the Issuer from time to time party thereto, as borrowers, the other loan parties from time to time party thereto, the lenders from time to time party thereto, and ACF FINCO I LP, as administrative agent (the “ABL Credit Agreement”, and the obligations incurred pursuant thereto, the “ABL Obligations”), and shall include, without limitation, covenants with respect to: o restricted payments; o dividend and other payment restrictions affecting restricted subsidiaries; o the incurrence of indebtedness and the issuance of disqualified stock or preferred stock; o asset sales; o transactions with affiliates; o liens; o offers to repurchase upon a change of control; o guarantees; o after-acquired property; and o merger, consolidation or sale of assets. provided, that, notwithstanding the foregoing or anything else to the contrary, the covenants, thresholds and “baskets” set forth in the definitive documentation for the First-Out New Notes (the indenture related thereto“Notes Documentation”) will (a) contain the terms and conditions set forth in this Term Sheet, (b) reflect the operational and strategic requirements of, and investor protections with respect to, the “First-Out Notes Indenture”) shall be consistent with the “First Out Notes Covenant Grid” attached hereto as Annex A Issuer and its subsidiaries (after giving effect to the extent Transactions) in light of its size, industry, geographic locations, businesses, business practices, payroll, operations, financial accounting, (c) be based on the indenture governing the Existing Notes with modifications as necessary or appropriate to reflect the terms and conditions set forth thereinherein (including, it being understood that the First-Out Notes Covenant Grid is not an exclusive list of covenants, terms or provisions to be included in such First-Out Notes Indenture. For for the avoidance of doubt, all collateral and guarantee provisions, affirmative and negative covenants and events of default typical of high yield senior secured debt instruments) (the “Identified Precedent”), (d) take into account any applicable changes in law or accounting standards, (e) not permit unrestricted subsidiaries, (f) include an additional Event of Default tied to breaches of covenants in the Exchange Agreement as amended from time to time applicable to the New Notes, (g) exclude from the definition of “material adverse effect” any adverse event, change, occurrence or effect publicly disclosed or announced in the Issuer’s 10-Q for the fiscal quarter ended March 31, 2024 or the earnings release for such fiscal quarter on the Issuer’s website or any notification from the stock exchange related to a curable delisting event and (h) prohibit the Investor or any of its affiliates from purchasing or otherwise holding any Existing Other Notes without the prior written consent of the Issuer’s subsidiaries shall be “restricted subsidiaries” . The Notes Documentation will include those payment or redemption provisions, representations and subject to the warranties, covenants, events of default and the Issuer shall not be permitted to create or otherwise permit any “unrestricted” subsidiaries. • ABL Facility Basket: The First-Out Notes Indenture shall include a basket for the incurrence of indebtedness guarantee and the granting of liens collateral provisions expressly set forth in respect of the ABL Obligations in an aggregate principal amount not to exceed (a) the greater of (i) $180,000,000 and (ii) the Borrowing Base (with “Borrowing Base” equal to sum of (1) 90.0% of the face amount of all credit card receivable owned by the Issuer and the Subsidiaries as of the end of the most recent fiscal month preceding such date, (2) 90.0% of the face amount of all other accounts receivable owned by the Issuer and the Subsidiaries as of the end of the most recent fiscal month preceding such date, (3) 100.0% of the book value of all inventory owned by the issuer and its Subsidiaries as of the end of the most recent fiscal month preceding such date, and (4) 70% of the appraised value of intellectual property (determined based on most recent appraisal of such intellectual property)); provided that any reductions in the “IP Cap” and/or “IP Advance Rate” as defined in the ABL Credit Agreement shall not reduce the Borrowing Base for purposes of this basket. • To the extent that advances permitted under the Borrowing Base (including components and subcomponents thereof) and advance ratesTerm Sheet, in each case, as applicable to the Issuer and its subsidiaries and with standards, qualifications, thresholds, exceptions, “baskets” and grace and cure periods set forth in the ABL Credit Agreement (Identified Precedent and otherwise consistent with the Documentation Principles. The foregoing is referred to herein, collectively, as of the closing date thereof) exceed the amount that would have been permitted under the Borrowing Base advance rates as of the closing date of the ABL Credit Agreement (without giving effect to any future step-downs in IP Caps or IP Advance Rates), the First-Out Notes will accrue additional interest in an amount equal 2.0% per annum payable in payment-in-kind interest during the period that such over-advance is outstanding. Call Protection • 7.5% of the principal amount of the First-Out Notes due on any date of redemption, repayment, prepayment, acceleration, or maturity. Guarantees, Ranking and Collateral • The Guarantors will, jointly and severally and unconditionally guarantee, on a senior basis, the Issuer’s obligations under the First-Out Notes and all obligations under the First-Out Notes Indenture to the maximum extent permitted by, but subject in all respects to, applicable law (including limitations as to capital maintenance, financial assistance, corporate benefit, exclusion of matters which might be deemed contra legem, director and officer fiduciary and other similar legal duties) and subject in all respects to customary enforcement limitation language and materiality considerations to be set forth in the First-Out Notes Indenture (the “Guaranty and Security Documentation Principles”). • The First-Out Notes will be secured by all or substantially all assets of the Issuer and the Guarantors, including first-priority liens on Notes Priority Collateral (as defined in the ABL Intercreditor Agreement) and second-priority liens on ABL Priority Collateral (as defined in the ABL Intercreditor Agreement), in each case, to the maximum extent permitted by law, subject to the Guaranty and Security Principles and any applicable Intercreditor AgreementIssuance Characteristics: CUSIP security held through DTC. Ratings: None.
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