XXXXXX COMMERCIAL PAPER INC. Xxxxxx Brothers Inc.
3 WORLD FINANCIAL CENTER 0 Xxxxx Xxxxxxxxx Xxxxxx
XXX XXXX, XXX XXXX 00000 Xxx Xxxx, Xxx Xxxx 00000
August 25 1998
COMMITMENT LETTER
Board of Directors
Key Energy Group, Inc.
Ladies and Gentlemen:
This commitment letter agreement (together with all exhibits and
schedules hereto, this "Commitment Letter") will confirm the understanding and
agreement among Xxxxxx Commercial Paper Inc., as Administrative Agent ("LCPI" or
the "Administrative Agent"), Xxxxxx Brothers Inc., as exclusive advisor and
arranger under the Interim Loan Agreement referred to below ("Xxxxxx Brothers"),
Key Energy Group, Inc. (together with each of its subsidiaries, the "Company"),
in connection with the proposed acquisition of Xxxxxx Production Services, Inc.
(together with each of its subsidiaries, the "Acquired Business"). We understand
that the Company proposes to sign an agreement (the "Acquisition Agreement")
pursuant to which the Company will commence a tender offer (the "Tender Offer")
to acquire all of the issued and outstanding common stock of the Acquired
Business (the "Acquisition") and in connection with the Acquisition, the
Acquired Business will merge with and into the Company and will no longer be a
subsidiary of the Company (the "Merger").
You have advised us that the total purchase price for the Acquisition
(including fees and expenses (which will not exceed $25 million) and the
refinancing of approximately $350 million of existing debt of the Company and
the Acquired Business, including the repurchase (the "Xxxxxx Note Repurchase")
of up to $140 million aggregate principal amount of 9 3/8% Senior Notes due 2007
(the "Xxxxxx Notes") of the Acquired Business at a purchase price of 101% of the
principal amount thereof plus accrued interest upon a Change of Control (as
defined in the Indenture governing the Xxxxxx Notes) (a "Xxxxxx Change of
Control")), will be approximately $625 million and that the Acquisition (and the
refinancing of such debt) and the payment of such fees and expenses will be
financed with (i) $475 million of borrowings by the Company under a facility
(the "Senior Credit Facility") among the Company, PNC Bank, N.A. ("PNC") and the
financial institutions party thereto and (ii) the issuance by the Company of
$150 million in aggregate principal amount of Senior or Senior Subordinated
Notes due 2008 (the "Permanent Securities"). Following the Acquisition and the
Merger, the Company and the Acquired Business will have no debt (except as
described above and except for $216 million in aggregate principal amount of
convertible subordinated notes due 2004 issued by the Company (the "Convertible
Notes")) and the Acquired Business will merge with and into the Company and will
no longer be a subsidiary of the Company.
1. The Commitments. You have requested that LCPI and/or one or more
affiliates of LCPI to be designated by LCPI in its sole discretion and/or any
lenders who become party to this Commitment Letter by assignment in accordance
with Section 6 (collectively, the "Interim Lenders") commit to provide the
Company up to $150 million in interim loans (the "Interim Loans"), having the
terms set forth on Exhibit A hereto, which Interim Loans may be drawn at the
time of payment for the Tender Offer in lieu of initially issuing Permanent
Securities. The Interim Loans will be senior secured Interim Loans from the date
of funding thereof until the date of the Merger, ranking pari passu with the
Senior Credit Facility, and the Interim Loans will be senior subordinated
Interim Loans, from and after the date of the Merger (if the Merger occurs) or
if such funding occurs on or after the date of the Merger.
Based on the foregoing and in reliance on an Engagement Letter, each
of the Interim Lenders is pleased to confirm by this Commitment Letter its
respective commitment to you (each, a "Commitment" and, collectively, the
"Commitments"), severally and not jointly, to provide or cause one of its
affiliates to provide an Interim Loan in the amount set forth opposite its name
on Schedule 1 hereto pursuant to a loan agreement (the "Interim Loan Agreement")
containing the terms, conditions and other provisions set forth on Exhibit A
hereto. Notwithstanding the above, you understand that each Interim Lender's
obligation to provide Interim Loans is expressly subject to the terms and
conditions set forth herein and will exist only upon the execution and delivery
of definitive documentation, including, without limitation, the Interim Loan
Agreement, satisfactory to the Administrative Agent and its counsel, and the
satisfaction of the terms, covenants and conditions contained therein. You
further agree that if LCPI determines in its sole discretion that it would be
advisable to structure the Interim Loans as securities to facilitate syndication
of the Commitments or for any other reason, that the documentation contemplated
by this Commitment Letter will be appropriately modified to provide for an
issuance of senior interim notes having terms as nearly identical as practicable
to those of the Interim Loans.
2. Fees and Expenses. In consideration of the execution and delivery
of this Commitment Letter by each of the Interim Lenders, you agree to pay the
fees contemplated by the Fee Letter dated the date hereof.
3. Indemnification The Company hereby agrees to indemnify and hold
harmless each of the Interim Lenders and each of their respective officers,
directors, employees, advisors and agents (each, an "Indemnified Person") from
and against any and all losses, claims, damages and liabilities to which any
such indemnified person may become subject arising out of or in connection with
this Commitment Letter, the Interim Loans, the use of the proceeds therefrom,
the Acquisition or any of the other transactions contemplated by this Commitment
Letter or the term sheet attached as Exhibit A hereto or any claim, litigation,
investigation or proceeding relating to any of the foregoing, regardless of
whether any indemnified person is a party thereto, and to reimburse each
indemnified person upon demand for all legal and other expenses reasonably
incurred by it in connection with investigating, preparing to defend or
defending, or providing evidence in or preparing to serve or serving as a
witness with respect to, any lawsuits, investigations, claims or other
proceedings relating to any of the foregoing (including, without limitation, in
connection with the enforcement of the indemnification obligations set forth
herein); provided, however, that no indemnified person shall be entitled to
indemnity hereunder in respect of any loss, claim, damage, liability or expense
to the extent that it is finally judicially determined that such loss, claim,
damage, liability or expense resulted directly from the gross negligence or
willful misconduct of such indemnified person.
The Company further agrees that, without the prior written consent of
each of the Interim Lenders, which consent will not be unreasonably withheld, it
will not enter into any settlement of a lawsuit, claim or other proceeding
arising out of this Commitment Letter or the transactions contemplated by this
Commitment Letter unless such settlement includes an explicit and unconditional
release from the party bringing such lawsuit, claim or other proceeding of all
indemnified persons.
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In case any action or proceeding shall be instituted involving any
indemnified person for which indemnification is to be sought hereunder by such
indemnified person, then such indemnified person shall promptly notify the
Company of the commencement of such action or proceeding; provided, however,
that the failure so to notify the Company shall not relieve the Company from any
liability that they may have to such indemnified person pursuant to this Section
3 or from any liability that they may have to such indemnified person other than
pursuant to this Section 3. Notwithstanding the above, following such
notification, the Company may elect in writing to assume the defense of such
action or proceeding, and, upon such election, it shall not be liable for any
legal costs subsequently incurred by such indemnified person (other than
reasonable costs of investigation and providing evidence) in connection
therewith, unless (i) it has failed to provide counsel reasonably satisfactory
to such indemnified person in a timely manner, (ii) counsel provided by the
Company reasonably determines that its representation of such indemnified person
would present it with a conflict of interest or (iii) the indemnified person
reasonably determines that there may be legal defenses available to it which are
different the Company shall not be responsible for the fees and expenses of more
than one separate law firm (in addition to local counsel) for all indemnified
persons.
The Company and the Interim Lenders agree that if any indemnification
or reimbursement sought pursuant to this Section 3 is judicially determined to
be unavailable for a reason other than the gross negligence or willful
misconduct of an indemnified person, then, whether or not an Interim Lender is
the indemnified person, the Company, on the one hand, and the Interim Lenders,
on the other hand (pro rata in accordance with their respective Commitments),
shall contribute to the losses, claims, damages, liabilities and expenses for
which such indemnification or reimbursement is held unavailable (i) in such
proportion as is appropriate to reflect the relative benefits to the Company, on
the one hand, and the Interim Lenders, on the other hand, in connection with the
transactions to which such indemnification or reimbursement relates, or (ii) if
the allocation provided by clause (i) above is judicially determined not to be
permitted, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) but also the relative faults of the Company,
on the one hand, and the Interim Lenders, on the other hand, as well as any
other equitable considerations; provided, however, that in no event shall the
amount to be contributed by an Interim Lender pursuant to this paragraph exceed
the amount of the fees actually received by such Interim Lender under this
Commitment Letter .
4. Expiration of Commitment. The Commitments shall expire at 5:00
p.m., New York City time, on August 26, 1998 unless you shall have executed and
returned a copy of this Commitment Letter and the Fee Letter to the Interim
Lenders prior to the expiration of the Commitments and paid the commitment fee
contemplated by the Fee Letter, which will follow in which event each Interim
Lender agrees to hold its respective Commitment available for you until the
earlier of (i) the termination of the Acquisition Agreement, (ii) the payment
for the Tender Offer without the funding of any Interim Loans and (iii) 5:00
p.m., New York City time, on December 31, 1998. The date and time of expiration
of the Commitments is sometimes referred to herein as the "Commitment Expiration
Date."
5. Confidentiality. This Commitment Letter and the terms and
conditions contained herein shall not be disclosed by the Company to any person
or entity (other than the Acquired Business and such of your and their agents
and advisers as need to know and agree to be bound by the provisions of this
paragraph) without the prior written consent of the Interim Lenders.
6. Assignment and Syndication. The parties hereto agree that LCPI
shall have the right to arrange for other banks, financial institutions or other
financial investors (including, without limitation, each affiliate and
beneficial owner of LCPI or Strategic Resource Partners Fund ("SRP"), any entity
that acquires substantially all of the business or assets of LCPI or SRP and
3
each entity with whom SRP or any of its affiliates has entered into an
arrangement with respect to the syndication of interim loans (collectively,
"Permitted Assignees")) to directly provide a portion of the Commitments and
become an Interim Lender under this Commitment Letter, subject to the Company's
prior approval (which may not be unreasonably withheld) only in the case of
entities that are not Permitted Assignees. In any such case, LCPI, Xxxxxx
Brothers or a designee of LCPI would act as arranger, underwriter and sole
syndication agent (in such capacity, the "Syndication Agent"). The Syndication
Agent would manage all aspects of any such syndication, including the timing of
all offers to potential Interim Lenders, the acceptance of commitments, the
amounts offered, the amounts allocated and the compensation provided, and the
Company agree to use their best efforts to assist the Syndication Agent in such
syndication process, including, without limitation, preparing disclosure
materials, meeting with prospective lenders, arranging for the management of the
Acquired Business to meet with prospective lenders and providing such
information as the Syndication Agent shall reasonably request during the course
of such process. The Company may not assign any of its respective rights, or be
relieved of any of its obligations, without the prior written consent of each of
the Interim Lenders. In connection with any syndication of all or a portion of
the Commitments, the rights and obligations of each of the Interim Lenders
hereunder may be assigned by such Interim Lender, in whole or in part, as
provided above, and upon such assignment, such Interim Lender shall be relieved
and novated hereunder from the obligations of such Interim Lender with respect
to any portion of its Commitment that has been assigned as provided above. LCPI
intends to consult with PNC, as agent for the Senior Credit Facility, with
respect to such syndication.
SRP is a Delaware business trust managed by an affiliate of Xxxxxx
Brothers. SRP's Certificate of Trust is on file with the Secretary of State of
the State of Delaware. All persons dealing with SRP, because it is a Delaware
statutory business trust, must look solely to the series (within the meaning
given to such term by Section 3806(b)(2) of the Delaware Business Trust Act) of
ownership interests in SRP evidencing ownership by SRP of Interim Loans for the
enforcement of any claims against SRP arising by reason of or in connection with
such interest. None of the manager, the adviser, the trustee, the beneficial
owners or other agents of SRP assumes any personal liability in connection with
the business of SRP or for obligations entered into on behalf of SRP.
7. Survival. The provisions of this Commitment Letter relating to the
payment of fees and expenses, indemnification and contribution and
confidentiality and the provisions of Section 8 below will survive the
expiration or termination of this Commitment Letter (including any extensions
thereof).
8. Choice of Law; Jurisdiction; Waivers. This Commitment Letter shall
be governed by and construed in accordance with the laws of the State of New
York, without giving effect to the principles of conflicts of laws thereof. To
the fullest extent permitted by applicable law, the Company hereby irrevocably
submits to the jurisdiction of any New York State court or Federal court sitting
in the County of New York in respect of any suit, action or proceeding arising
out of or relating to the provisions of this Commitment Letter and irrevocably
agrees that all claims in respect of any such suit, action or proceeding may be
heard and determined in any such court. The Company hereby waives, to the
fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of venue of any such suit, action or proceeding
brought in any such court, and any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
The Company hereby waives, to the fullest extent permitted by applicable law,
any right to trial by jury with respect to any action or proceeding arising out
of or relating to this Commitment Letter.
9. Miscellaneous. This Commitment Letter may be executed in one or
more counterparts, each of which will be deemed an original, but all of which
taken together will constitute one and the same instrument.
4
This Commitment Letter and the attached Exhibits A and B set forth the
entire understanding of the parties hereto as to the scope of the Commitment and
the obligations of the Interim Lenders hereunder. This Commitment Letter shall
supersede all prior understandings and proposals, whether written or oral,
between the Interim Lenders and you relating to any financing or the
transactions contemplated hereby.
This Commitment Letter has been and is made solely for the benefit of
the Company, the Interim Lenders, the indemnified persons, and their respective
successors and assigns, and nothing in this Commitment Letter, expressed or
implied, is intended to confer or does confer on any other person or entity any
rights or remedies under or by reason of this Commitment Letter or the
agreements of the parties contained herein.
As you know, beneficial owners and affiliates of SRP, including Xxxxxx
Brothers, are full service financial firms and as such from time to time may
effect transactions for their own account or the account of customers, and hold
long or short positions in debt or equity securities or loans of companies that
may be the subject of the transactions contemplated by this Commitment Letter.
[Signature Page Follows]
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[Commitment Letter-Signature Page]
If you are in agreement with the foregoing, kindly sign and return to
us the enclosed copy of this Commitment Letter.
Very truly yours,
XXXXXX COMMERCIAL PAPER INC.
By: /s/ Xxxxxxxxxxx Xxxx
---------------------------
Name: Xxxxxxxxxxx Xxxx
Title: Authorized Signatory
XXXXXX BROTHERS INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Managing Director
Accepted and agreed to as of the
date first above written:
KEY ENERGY GROUP, INC.
By: /s/ Xxxxxxx X. XxXxxxxx
-----------------------
Name: Xxxxxxx X. XxXxxxxx
Title: EVP & CFO
6
EXHIBIT A TO COMMITMENT LETTER
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SUMMARY OF TERMS OF INTERIM LOANS AND INTERIM LOAN AGREEMENT
------------------------------------------------------------
Set forth below is a summary of certain of the terms of the Interim
Loans and the Interim Loan Agreement. The Commitment of the Interim Lenders to
provide the Interim Loans is subject expressly to the negotiation, execution and
delivery of definitive documentation, including, without limitation, an Interim
Loan Agreement and other appropriate Loan Documents, satisfactory to Xxxxxx
Brothers and its counsel, which will contain the terms, conditions and other
provisions set forth herein and such other representations, warranties,
covenants, events of default and other provisions as are customary for
financings of this kind or deemed appropriate by the Interim Lenders for this
transaction in particular (in their sole discretion). Capitalized terms used and
not otherwise defined herein have the meanings set forth in the Commitment
Letter to which this Summary of Terms is attached and of which it forms a part.
Borrower The Company.
Arranger Xxxxxx Brothers.
Administrative Agent Xxxxxx Commercial Paper Inc. ("LCPI").
Loans $150 million of Senior Secured Increasing
Rate Loans due 1999, if the date of funding
occurs prior to the Merger, or $150 million
of Senior Subordinated Increasing Rate Loans
due 1999, if the date of funding occurs on or
after the date of the Merger (the "Interim
Loans").
Use of Proceeds Proceeds from the Interim Loans will be used
solely to consummate the Acquisition (and to
pay related amounts).
Maturity 365 days from the date of initial funding
(the "Maturity Date"). The initial date of
funding of the Interim Loans is hereinafter
referred to as the "Closing Date," which
shall be no later than December 31 1998.
Subordination Following the Merger, if it occurs, the
Interim Loans will be subordinated in right
of payment to the payment in full of all
obligations of the Company under the Senior
Credit Facility and certain refinancings
thereof, on terms satisfactory to the Interim
Lenders in their sole discretion. The Company
will not be permitted to incur any
indebtedness that is subordinated to the
borrowings under the Senior Credit Facility
and senior to other indebtedness of the
Company. The Interim Notes in all cases will
rank senior in right of payment to the
Convertible Notes. Prior to the Merger, if
any Interim Loans are outstanding, the
Interim Loans will not be subordinated to any
other indebtedness.
Mandatory Rollover If (i) the Interim Loans are not repaid in
full on or prior to the Maturity Date and
(ii) the conditions precedent set forth in
A-1
Exhibit B to the Commitment Letter are
satisfied, then the Interim Loans will be
automatically converted on the Maturity Date
into term loans due 2008 of the Company (the
"Term Loans") in an aggregate principal
amount equal to the aggregate senior
principal amount of Interim Loans so
converted. The Term Loans will have the terms
set forth in Exhibit B attached hereto. Term
Loans may be exchanged by the holders thereof
for Exchange Notes. The Exchange Notes will
be issued, undated, on the Closing Date and
placed in an escrow account and held by a
mutually agreeable fiduciary pending such
mandatory exchange.
Interest The Interim Loans will bear interest at a
variable per annum rate equal to the sum of
(a) a base rate to be selected by the
Administrative Agent on the date of funding
equal to the one- or three-month London
Interbank Offered Rate, reset monthly or
quarterly, as the case may be (the "LIBOR
Option"), calculated on the basis of the
actual number of days elapsed in a year of
360 days, plus (b) a spread (the "Spread")
equal to 550 basis points. The Spread will
increase by 50 basis points upon the 180-day
anniversary of the date of issuance of the
Interim Loans and by an additional 50 basis
points on each 90-day anniversary thereafter.
The interest rate on the Interim Loans will
not exceed 17% per annum. To the extent that
the total interest payable on the Interim
Loans on any interest payment date exceeds
14% per annum, the Company shall have the
option to pay such excess interest by
capitalizing such interest as additional
Interim Loans. Interest will be payable
quarterly, in arrears, on the Maturity Date
and on the date of any prepayment of the
Interim Loans. Notwithstanding the foregoing,
interest will accrue on any overdue amount
(whether interest or principal), to the
extent lawful, at a rate per annum equal to
200 basis points over the then current
interest rate on the Interim Loans, until
such amount (plus all accrued and unpaid
interest) is paid in full. For Interim Loans
outstanding after the Maturity Date, interest
will be payable on demand at the default
rate.
Guarantees The Interim Loans will be guaranteed by each
affiliate of the Company that guarantees all
or a portion of the indebtedness under the
Senior Credit Facility (the "Guarantors"),
which guarantees will rank in priority on the
same basis as the Interim Loans rank in
priority to the indebtedness under the Senior
Credit Facility. A subsidiary's guarantee
will be released upon the sale of such
subsidiary, subject to use of the proceeds
therefrom to repay Interim Loans and/or
borrowings under the Senior Credit Facility.
Collateral If the Closing Date occurs prior to the date
of the Merger, the Interim Loans will,
subject to the provisions set forth under the
heading "The Merger" herein, be secured on an
equal and ratable basis (pursuant to
intercreditor arrangements satisfactory to
the Interim Lenders) with the indebtedness
A-2
under the Senior Credit Facility by the same
collateral that secures such indebtedness
(the "Collateral").
Mandatory Repayment Notwithstanding the "Subordination"
provisions set forth above, the Company will
repay Interim Loans with the net proceeds
from (i) any direct or indirect incurrence
(whether by public offering, private
placement or otherwise) of subordinated
indebtedness of the Company or any of the
Guarantors or any equity securities of the
Company, (ii) the incurrence of any other
indebtedness by the Company, or any
subsidiary of the Company (subject to the
requirements of the Senior Credit Facility)
and (iii) any future issuances or sales of
stock of subsidiaries or sales of assets
(subject to customary ordinary course
exceptions and the requirements of the Senior
Credit Facility) by the Company or any
subsidiary of the Company, in each case at
100% of the principal amount of the Interim
Loans repaid, plus accrued fees and all
accrued and unpaid interest and fees to the
date of the repayment. The Senior Credit
Facility will permit 100% of the net proceeds
from the issuance of the subordinated
indebtedness or equity of the Company to be
applied to repay the Interim Loans (as
converted, extended or exchanged), and prior
to the Merger, while the Interim Loans rank
pari passu with the Senior Credit Facility,
the Interim Loans and the indebtedness under
Senior Credit Facility will be prepayable
only on a pro rata pari passu basis. In
addition, concurrent with the payment of
amounts required under the Xxxxxx Change of
Control, the Company shall prepay the Interim
Loans in an amount equal to the difference
between the principal amount of the Interim
Loans funded and the principal, premium and
interest in respect of the Xxxxxx Notes so
purchased.
Change of Control Each holder of Interim Loans will be entitled
to require the Company, and the Company must
offer, to repay the Interim Loans held by
such holder at a price of 101% of principal
amount, plus accrued fees and all accrued and
unpaid interest to the date of repayment,
upon the occurrence of a Change of Control
(as defined in the Interim Loan Agreement).
The Interim Loan Agreement will require that
the Company, prior to complying with the
above covenant, but in any event within 90
day following a Change of Control, will
either repay all indebtedness under the
Senior Credit Facility or obtain the
requisite consents to permit the repayment of
the Interim Loans.
Optional Repayment The Interim Loans may be repaid, in whole or
in part on a pro rata basis, at the option of
the Company at any time upon five business
days' prior written notice at a price equal
to 100% of the principal amount thereof, plus
accrued fees and all accrued and unpaid
interest to the date of repayment.
A-3
Payments Payments by the Company will be made by wire
transfer of immediately available funds.
Transferability With the consent of the Administrative Agent
(which consent shall not be unreasonably
withheld), each of the Interim Lenders will
be free to sell or transfer all or any part
of its Interim Loans to any third party and
to pledge any or all of the Interim Loans to
any commercial bank or other institutional
lender. Participations will not require the
consent of the Administrative Agent. Each
Interim Lender will have the absolute and
unconditional right to assign Interim Loans
or any participation therein without the
consent of the Company.
Amendments Modifications to the terms of the Interim
Loan Agreement may be made with consent of
the holders of a majority in aggregate
principal amount of the Interim Loans then
outstanding, except that without the consent
of each holder of Interim Loans affected
thereby, no modification or change may (i)
extend the maturity or time of payment of
interest of any Interim Loans, (ii) reduce
the rate of interest or the principal amount
of any Interim Loans, (iii) alter the
repayment provisions of the Interim Loans, or
reduce the percentage of holders necessary to
modify or change the Interim Loans.
Cost and Yield Protection The Interim Lenders shall receive cost and
yield protection customary for facilities and
transactions of this type, including but not
limited to breakage costs incurred in
connection with any repayment of the Interim
Loans on a day other than the last day of an
interest period, compensation in respect of
prepayments, taxes (including but not limited
to gross-up provisions for withholding taxes
imposed by any domestic or foreign
governmental authority, including taxes
relating to gross-up payments), changes in
capital requirements, guidelines or policies
or their interpretation or application,
illegality, change in circumstances, reserves
and other provisions deemed necessary by the
Interim Lenders to provide customary
protection for U.S. and non-U.S. financial
institutions.
Representations and Warranties The Interim Loan Agreement will contain such
representations and warranties of the Company
and the Guarantors as are customary for
financings of this kind or deemed appropriate
by the Interim Lenders for this transaction
in particular (in their sole discretion).
Covenants The Interim Loan Agreement will contain such
covenants of the Company and the Guarantors
as are usual and customary for financings of
this kind or as are otherwise deemed
appropriate by the Interim Lenders for this
transaction in particular (in their sole
discretion.
A-4
Conditions Precedent The obligation of each of the Interim Lenders
to provide, or cause one of its affiliates to
maintain, a commitment to fund the Interim
Loans will be subject to the condition that
the following conditions (the "Tender Offer
Conditions") must be satisfied at the time of
funding which shall be the closing of the
Tender Offer. The Tender Offer Conditions
will be conditions that are customary for
closing financings of this kind or deemed
appropriate by the Interim Lenders for this
transaction in particular (in their sole
discretion), including, without limitation,
the following closing conditions:
1. Concurrent Transactions. The Company
shall purchase at the closing of the
Tender Offer a sufficient number of
shares to cause the merger to occur. All
conditions precedent to borrowings under
the Senior Credit Facility shall have
been satisfied or, with the prior
approval of the Administrative Agent,
waived, and the Company shall borrow
funds under the Senior Credit Facility,
which, together with the proceeds of the
Interim Loans, will be sufficient to
consummate the Tender Offer and pay all
related fees and expenses. The terms and
conditions of the Tender Offer and the
Acquisition Agreement shall not be
modified in a way which is not
satisfactory to the Interim Lenders. A
Xxxxxx Change of Control shall have
occurred and be continuing, there shall
be available under the Senior Credit
Facility sufficient amounts to fund the
Xxxxxx Change of Control in its entirety
and to pay the other unfunded amounts
required in connection with the
Acquisition, and the Company shall have
given notice of its offer to repurchase
the Xxxxxx Notes promptly (within the
requirements of the indenture for the
Xxxxxx Notes) upon the occurrence of
such Xxxxxx Change of Control, There
shall not exist (pro forma for the
Acquisition and the financing thereof)
any default or event of default under
the Senior Credit Facility, the Interim
Loan Agreement, or under any other
material indebtedness or agreement of
the Company or the Acquired Business.
The capitalization and corporate and
ownership structure of the Company
before and after the Acquisition and the
financing thereof shall be satisfactory
to the Interim Lenders in all respects.
The Company and the Acquired Business
shall not have any outstanding debt
other than as described in the first
paragraph of the Commitment Letter.
2. Concurrence with Assumptions. The
concurrence by the Interim Lenders (in
their sole discretion) with the
operating and financial assumptions used
in preparing the combined pro forma
historical and projected performance of
the Company after giving effect to the
Acquisition.
A-5
3. Absence of Certain Changes. No material
adverse change in the consolidated
financial condition, results of
operations, business, assets,
liabilities, management, prospects or
value of the Company or the Acquired
Business (including any event which, in
the opinion of the Interim Lenders, is
likely to result in such a material
adverse change) shall have occurred
since the date of the most recent
audited financial statements that have
been delivered to the Interim Lenders as
of the date hereof as to make it, in the
reasonable judgment of Xxxxxx Brothers,
impractical or inadvisable to proceed
with the funding of the Interim Loans on
the Closing Date pursuant to the terms
contemplated herein. No material
inaccuracy in such financial statements
shall exist. The Company and the
Acquired Business shall have no material
liabilities except (i) those set forth
on the most recent audited balance
sheets of such entities provided to the
Interim Lenders as of the date hereof
and (ii) those incurred in the ordinary
course of business (and consistent with
past practice) since such date.
4. Documentation, Legal Matters, etc. All
matters relating to the transactions
contemplated hereby, the Senior Credit
Facility and the transactions
contemplated thereby shall be
satisfactory to each of the Interim
Lenders in all respects, and each of the
Interim Lenders shall have received such
additional certificates, legal and other
opinions (including with respect to
solvency) and documentation as it shall
request.
5. Market Disruption. There shall not have
occurred any of the following: (i)
trading in securities generally on the
New York Stock Exchange or The Nasdaq
Stock Market's National Market or in the
over-the-counter market shall have been
suspended or materially limited, or
minimum prices shall have been
established on such exchange by the
Securities and Exchange Commission, or
by such exchange or by any other
regulatory body or governmental
authority having jurisdiction, (ii) a
banking moratorium shall have been
declared by Federal or state
authorities, (iii) the United States
shall have become engaged in
hostilities, there shall have been any
escalation in hostilities involving the
United States or there shall have been
declared a national emergency or war by
the United States, (iv) a disruption or
adverse change in the financial or
capital markets generally, in the market
for new issues of high yield debt or
equity securities in particular or (v) a
material adverse change in the general
economic, political or financial
conditions (or the effect of
international conditions on the
financial markets in the United States
shall be such) as to make it, in the
A-6
reasonable judgment of Xxxxxx Brothers,
impracticable or inadvisable to proceed
with the funding of the Interim Loans on
the Closing Date pursuant to the terms
contemplated herein.
6. Net Capital. There shall not have
occurred any change in law or regulation
(or interpretation thereof) that could
result in any Interim Lender's
commitment to provide, or any Interim
Lender's providing, the financing
contemplated by the Interim Loan
Agreement being a charge to the net
capital of such Interim Lender's parent
or affiliate.
7. Environmental Audit. The Interim Lenders
shall have received environmental
reports with respect to the real
property owned or leased by the Company,
any of its subsidiaries or the Acquired
Business and their respective operations
from a firm satisfactory to the
Administrative Agent, in its sole
discretion, and the Interim Lenders
shall be satisfied with the results of
such reports, in their sole discretion.
8. Financial Statements. The Interim
Lenders shall have received all audited
and unaudited historical financial
statements of the Company, the
Guarantors and the Acquired Business and
all other completed or probable
acquisitions (including pro forma
financial statements) meeting the
requirements of Regulation S- X for a
Form S-1 registration statement under
the Securities Act of 1933, as amended,
and all such financial statements shall
be satisfactory in form and substance to
the Interim Lenders, in their sole
discretion.
9. Compliance With Other Agreements. The
Company shall have complied with all of
their obligations under the Fee Letter
and the Engagement Letter.
10. Solvency. The Interim Lenders shall have
received a satisfactory solvency
analysis from the chief financial
officer of the Company which shall
document the solvency of the Company and
its subsidiaries after giving effect to
the Acquisition and the other
transactions contemplated hereby.
11. Approvals and Consents. All
governmental, quasi-governmental,
shareholder and third-party approvals
and consents necessary or desirable in
connection with the transactions
contemplated hereby and the financing
thereof shall have been received and
shall be in full force and effect.
A-7
12. Availability under Senior Credit
Facility. After giving effect to the
consummation of the Tender Offer, the
amount undrawn and available to the
Company under the Senior Credit Facility
shall be sufficient to fund the Merger,
the Xxxxxx Change of Control in its
entirety, to refinance indebtedness
required to be refinanced, to pay
related transaction fees and costs and
otherwise satisfactory to the
Administrative Agent, in its sole
discretion.
13. Legal Opinions. The Interim Lenders
shall have received such legal opinions
as the Administrative Agent may request
relating to the Company and its
subsidiaries and the Acquired Business
in form and substance satisfactory the
Interim Lenders, in their sole
discretion.
14. Payment of Fees and Expenses. All fees
and expenses due to any Interim Lender
or Xxxxxx Brothers on or before the
Closing Date in connection with the
Interim Loans shall have been paid in
full.
Events of Default; Remedies The Interim Loan Agreement will contain such
events of default that are similar to the
events of default under the Senior Credit
Facility and such others as are customary for
financings of this kind or deemed appropriate
by the Interim Lenders for this transaction
in particular (in their sole discretion),
including, without limitation, compliance
with the Fee Letter. If the Company fails to
comply with the provisions of Sections 2 and
3 of the Fee Letter in any material respect
at any time, then the Interim Lenders shall
be entitled to unilaterally amend the
provisions of the Interim Loan Agreement (and
related documents) relating to interest rate,
optional redemption, maturity, warrants and
registration rights so as to reflect the
terms of the Permanent Securities that would
have been issued in accordance with Sections
2 and 3 of the Fee Letter had the Company
complied therewith.
The Merger If the Closing Date occurs prior to the date
of the Merger, upon the effectiveness of the
Merger in accordance with applicable law, the
Collateral will be released and the Interim
Loans will become senior subordinated Interim
Loans in accordance with the provisions set
forth under the heading "Subordination"
herein.
Governing Law New York.
A-8
EXHIBIT B
---------
SUMMARY OF TERMS OF TERM LOANS AND EXCHANGE NOTES
-------------------------------------------------
Capitalized terms used but not defined herein have the meanings assigned to them
in the Commitment Letter to which this Exhibit B is attached.
Borrower The Company.
Term Loans On the Maturity Date, subject to satisfaction
of the conditions set forth below, the
outstanding Interim Loans will be
automatically converted into Term Loans. The
Term Loans will be governed by the provisions
of the Interim Loan Agreement and, except as
expressly set forth below, shall have the
same terms as the Interim Loans as of the
Maturity Date.
Exchange Notes At any time on or after the Maturity Date,
the Term Loans may, at the option of a holder
thereof and with the consent of the
Administrative Agent, be exchanged for an
Exchange Note having a ranking and principal
amount equal to the ranking and principal
amount of the Term Loan for which it is
exchanged.
The Company will issue Exchange Notes under
an indenture that complies with the Trust
Indenture Act of 1939, as amended (the
"Indenture"). The Company will appoint a
trustee reasonably acceptable to the
Administrative Agent. The Exchange Notes and
the Indenture will be fully executed and
deposited into escrow at the closing of the
Interim Loans
Maturity The Term Loans and the Exchange Notes will
mature on the ninth anniversary of the
Maturity Date (the "Final Maturity Date").
Conditions Precedent The obligation of each of the Interim Lenders
to convert the Interim Loans to Term Loans
will be subject to the following conditions:
1. No Defaults. No event of default, or
event which with the giving of notice or
the lapse of time, or both, shall have
occurred and be continuing under the
Interim Loan Agreement or any other Loan
Document and no payment default shall
have occurred and be continuing under
the Senior Credit Facility.
2. Payment of Fees and Accrued Interest.
The Company shall have paid in
immediately available funds all accrued
and unpaid interest with respect to the
Interim Loans and all fees then due and
owing, in accordance with the terms of
the Loan Documents.
B-1
3. Shelf Registration. The Shelf
Registration Statement (as defined under
the heading "Registration Rights" below)
with respect to the Exchange Notes shall
have been filed with the Securities and
Exchange Commission.
Interest Rate The Term Loans and the Exchange Notes will
bear interest at a fixed increasing rate
equal to the Initial Rollover Rate (as
defined below) plus the Rollover Spread (as
defined below). The interest rate in effect
at any time shall not exceed 17% per annum.
To the extent interest payable on the Term
Loans or the Exchange Notes on any quarterly
interest payment date is at a rate that
exceeds 14% per annum, the Company shall have
the option to pay such excess interest (i) by
capitalizing such interest as additional Term
Loans, in the case of the Term Loans, and
(ii) by issuing additional Exchange Notes
having a principal amount equal to the amount
of such interest, in the case of Exchange
Notes. Notwithstanding the foregoing,
interest will accrue on any overdue amount
(whether interest or principal), to the
extent lawful, at a rate per annum equal to
200 basis points over the then current
interest rate, until such amount (plus all
accrued and unpaid interest) is paid in full.
"Initial Rollover Rate" shall be determined
as of the Maturity Date of the Interim Loans
and shall equal the interest rate borne by
the Interim Loans on the day immediately
preceding the Maturity Date plus 100 basis
points.
"Rollover Spread" shall mean, with respect to
any Term Loans or Exchange Notes, zero basis
points during the 90-day period commencing on
the Maturity Date. The Rollover Spread shall
increase by 100 basis points upon each 90-day
anniversary of the Maturity Date, except with
respect to Exchange Notes as to which the
interest rate has been fixed as provided
below. If any Exchange Note is transferred to
any person other than a person who was an
Interim Lender on the Maturity Date, then the
transferring Interim Lender shall have the
right, upon five days prior notice to the
Company, to unilaterally fix the interest
rate on such Exchange Note at a coupon not
exceeding the then prevailing interest rate
thereon.
Interest on the Term Loans and Exchange Notes
will be payable quarterly in arrears on the
first business day of each fiscal quarter of
the Company, on the Maturity Date of the Term
Loans and Exchange Notes and on the date of
any prepayment thereof.
Subordination Same as Interim Loans.
Guarantees Same as Interim Loans.
B-2
Collateral Same as Interim Loans.
Mandatory Repayment Same as Interim Loans, but not applicable to
any Exchange Notes with respect to which the
interest rate was fixed upon the transfer
thereof (as provided above).
Change of Control Same as Interim Loans.
Optional Repayment Except as set forth below, the Term Loans and
Exchange Notes may be repaid or redeemed, in
whole or in part, at the option of the
Company at any time upon five business days'
prior written notice at a price equal to 100%
of the principal amount thereof, plus accrued
fees and all accrued and unpaid interest to
the date of repayment.
Any Exchange Note with respect to which the
interest rate was fixed upon the transfer
thereof (as provided above) will be entitled
to call protection for a period determined by
the transferring Interim Lender in its sole
discretion at the time such interest rate was
fixed (such non-call period will continue for
at least five years after the Maturity Date).
Thereafter such Exchange Note will be
redeemable at the Company's option, in whole
or in part, at par plus accrued fees and all
accrued and unpaid interest to the date of
redemption plus a premium equal, initially,
to one half of the interest rate applicable
to the Exchange Notes on the Maturity Date
and thereafter declining ratably on each
yearly anniversary by an amount such that one
year prior to the maturity of the Exchange
Notes the premium will equal zero.
Yield Protection Same as Interim Loans.
Payments Same as Interim Loans.
Covenants Similar to the Interim Loans, except certain
covenants may be less restrictive if agreed
upon by the Administrative Agent and the
Company; and provided further that the
covenants for the Exchange Notes (after the
interest rate thereon is fixed and
appropriate call protection is in place)
shall be less restrictive and similar to
covenants that are customary for a high yield
indenture of similar credit.
Events of Default Same as Interim Loans, in the case of the
Term Loans. The Exchange Notes will have
events of default that are customary for an
indenture governing a high yield note issue
(but more restrictive in certain respects, as
determined by the Administrative Agent in its
sole discretion).
Transferability Unlimited except as otherwise provided by
law.
Defeasance Provisions None.
B-3
Amendments Same as Interim Loans.
Registration Rights Prior to the Maturity Date, the Company will
be required to file a shelf registration
statement with respect to the Exchange Notes
(a "Shelf Registration Statement"). The
filing of the Shelf Registration Statement
will be a condition precedent to the
conversion of Interim Loans to Term Loans.
The Company will pay liquidated damages in
the form of increased interest of 50 basis
points on the principal amount of Exchange
Notes outstanding to holders of Exchange
Notes (i) if the Shelf Registration Statement
is not declared effective by the SEC within
60 days of the Maturity Date, until such
Shelf Registration Statement is declared
effective, and (ii) during any period of time
(subject to customary exceptions) following
the effectiveness of the Shelf Registration
Statement that such Shelf Registration
Statement is not available for sales
thereunder. After 12 weeks, the liquidated
damages shall increase by 50 basis points,
and shall increase by 50 basis points for
each 12-week period thereafter to a maximum
increase in interest of 200 basis points
(such damages to be payable in the form of
additional Exchange Notes, if the interest
rate thereon exceeds 14% per annum). In
addition, unless and until the Company has
caused the Shelf Registration Statement to
become effective, the holders of the Exchange
Notes will have the right to "piggy-back" in
the registration of any debt or preferred
equity securities (subject to customary
scale- back provisions) that are registered
by the Company (other than on a Form S-4)
unless all the Exchange Notes will be
redeemed or repaid from the proceeds of such
securities. The Company will be required to
effect an "A/B" exchange offer to all holders
of Exchange Notes within 60 days of the
issuance of the Exchange Notes if the holders
of a majority in principal amount of the
Exchange Notes then outstanding so request.
The Merger Same as Interim Loans.
Governing Law New York.
B-4
SCHEDULE 1
Interim Lender Interim Loan Amount
-------------- -------------------
LCPI $150,000,000
