1
EXHIBIT 99(b)(1)
February 8, 1996
Lilly Industries, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Chairman
President and Chief Executive Officer
Dear Xx. Xxxxxx:
Lilly Industries, Inc. (the "Borrower") has requested credit facilities
(the "Facilities") in the aggregate principal amount of $300,000,000 (the
"Aggregate Commitment").
The Borrower has indicated that it intends to acquire a company which you
have identified to us and which you and we have described by the code name
"Sentry" (herein, the "Company") pursuant to a two-step acquisition. The first
step will consist of an all cash tender offer by means of an offer to purchase
(as amended from time to time, the "Tender Offer") to be made by a newly formed
subsidiary (the "Acquisition Sub") of the Borrower for all of the outstanding
common stock of Company (the "Stock") for total consideration in form and
amount acceptable to the Lenders (as defined below). Prior to the making of
the Tender Offer, Acquisition Sub and the Company shall have entered into a
definitive plan and agreement of merger (the "Merger Agreement") to merge
Acquisition Sub and the Company, subject to shareholder approval by the
shareholders of Acquisition Sub and the Company (the "Merger") (the Tender
Offer and the Merger, collectively the "Acquisition"). The Tender Offer will
be conditioned on the tender and purchase of at least a majority, on a fully
diluted basis, of the shares of stock of the Company (or any greater number of
shares as may be required under applicable state law or the Company's
Certificate of Incorporation or by-laws to vote for and effect a merger of the
Company and Acquisition Sub). The second step of the Acquisition will consist
of the Merger. The definitive legal structure of the Tender Offer and Merger
have not yet been determined and must be satisfactory to the Lenders.
NBD Bank, N.A. is pleased to provide you with a financing commitment for,
and to agree to act as administrative agent bank (the "Agent") in connection
with, the entire amount of the Facilities on the terms and conditions set forth
in the term sheet attached hereto ("Term Sheet") and subject to the conditions
set forth in this letter. First Chicago Capital Markets, Inc. (the
"Arranger"), an affiliate of the Agent, is pleased to provide you with its
undertaking to syndicate all or a portion of the Facilities to a syndicate of
lenders (collectively, including NBD Bank, N.A., the "Lenders"). While the
Agent's agreement herein is to provide the entire amount of the Facilities on a
fully underwritten basis, the
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CONTINUING OUR LETTER OF FEBRUARY 8, 1996
SHEET NO. 2
Arranger reserves the right to syndicate all or a portion of the Facilities to
additional Lenders with a corresponding reduction in the Agent's commitment.
Each of the Agent and the Arranger has reviewed (i) certain summary
historical financial statements of the Borrower, dated as of and for the three
and twelve-month periods ended November 30, 1995 and (ii) historical financial
statements of the Company as set forth on SEC Form 10- Q as of and for the
fiscal quarter ended September 30, 1995, which statements were prepared by the
Borrower and the Company, respectively. Neither the Agent nor the Arranger has
had the opportunity to complete its due diligence review, inspection, and
evaluation of the assets and liabilities of the Borrower and the Company and
their respective subsidiaries, and their respective financial condition and
prospects. The Agent's commitment and the Arranger's undertaking are,
therefore, subject to their respective satisfaction with the foregoing and to
their continuing satisfaction therewith and the satisfaction of such other due
diligence investigation as may be necessary for their respective evaluation of
the transaction described herein.
The Borrower agrees to (i) reimburse the Agent and the Arranger for all
out-of-pocket expenses (including the fees of outside counsel and time charges
for inside counsel) incurred in connection with this Commitment Letter, the
transactions contemplated hereby and the Agent's and the Arranger's on-going
due diligence in connection therewith, including without limitation travel
expenses and costs incurred in connection with the preparation, negotiation,
execution, administration, syndication, and enforcement of any document
relating to this transaction and its role hereunder, (ii) indemnify and hold
harmless the Agent, the Arranger, the Lenders and their respective officers,
employees, agents and directors (collectively, the "Indemnified Persons")
against any and all losses, claims, damages, or liabilities of every kind
whatsoever to which the Indemnified Persons may become subject in connection in
any way with the transaction which is the subject of this Commitment Letter,
including without limitation expenses incurred in connection with investigating
or defending against any liability or action whether or not a party thereto,
except to the extent any of the foregoing is found in a final judgment by a
court of competent jurisdiction to have arisen solely from such Indemnified
Person's gross negligence or willful misconduct; and (iii) assert no claim
against any Indemnified Persons seeking consequential damages on any theory of
liability in connection in any way with the transaction which is the subject of
this Commitment Letter. The obligations described in this paragraph are
independent of all other obligations of the Borrower hereunder and under the
Loan Documents, shall survive the expiration, revocation or termination of this
Commitment Letter, and shall be payable whether or not the financing
transactions contemplated by this Commitment Letter shall close. The Agent's
and the Arranger's respective obligations under this Commitment Letter are
enforceable solely by the party signing this Commitment Letter and may not be
relied upon by any other person. For purposes of enforcing this indemnity, the
Borrower irrevocably submits to the non-exclusive
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CONTINUING OUR LETTER OF FEBRUARY 8, 1996
SHEET NO. 3
jurisdiction of any court in which a claim arising out of or relating to the
services provided under this Commitment Letter is properly brought against the
Agent, the Arranger, or the Lenders and irrevocably waives any objection as to
venue or inconvenient forum. IF THIS COMMITMENT LETTER, THE TERM SHEET, THE
FEE LETTER (DEFINED BELOW), OR ANY ACT, OMISSION OR EVENT DESCRIBED IN THIS
PARAGRAPH BECOMES THE SUBJECT OF A DISPUTE, THE PARTIES HERETO ALL HEREBY WAIVE
TRIAL BY JURY. The Borrower agrees not to settle any claim, litigation or
proceeding relating to this transaction (whether or not the Agent or the
Arranger is a party thereto) unless such settlement releases all Indemnified
Persons from any and all liability in respect of such transaction.
The Agent's commitment and the Arranger's undertaking are subject to (i)
the preparation, execution, and delivery of a mutually acceptable credit
agreement ("Credit Agreement") and other loan documents (collectively, the
"Loan Documents") incorporating, without limitation, substantially the terms
and the conditions outlined herein and in the Term Sheet; (ii) the Agent's and
the Arranger's respective determination that (a) there is an absence of a
material adverse change in the business, condition (financial or otherwise),
operations, performance, properties, or prospects of either (x) the Borrower
and its subsidiaries taken as a whole or (y) the Company and its subsidiaries
taken as a whole from that reflected in the respective financial statements
described in the first sentence of the fourth paragraph of this letter; and (b)
there is an absence of any material adverse change prior to closing in primary
and secondary loan syndication markets or capital markets generally.
The Arranger will manage all aspects of the syndication, including,
without limitation, decisions as to the selection of institutions to be
approached and when they will be approached, when their commitments will be
accepted, which institutions will participate, the allocations of the
commitments among the Lenders and the amount and distribution of the fees
discussed herein among the Lenders. Upon the Arranger's acceptance of any such
commitment from a Lender, the Agent shall be relieved of its commitment to fund
such amount. To assist the Arranger in its syndication efforts, the Borrower
shall (a) provide and cause its advisors and management of the Company to
provide the Arranger upon request with all information deemed reasonably
necessary by it to complete successfully the syndication, including, without
limitation, all information and projections prepared by the Borrower or on the
Borrower's behalf relating to the transactions contemplated hereby; and (b)
cause its advisors and the management of the Company to actively participate in
both the preparation of an information package regarding the operations and
prospects of the Borrower and the Company and the presentation of the
information to prospective Lenders.
After the Borrower has publicly announced the transaction, the Borrower
authorizes each of the Agent and the Arranger to answer inquiries from banking
and financial services
4
CONTINUING OUR LETTER OF FEBRUARY 8, 1996
SHEET NO. 4
trade media with respect to the Facilities. By its acceptance hereof, the
Borrower hereby authorizes each of the Agent and the Arranger, at their
respective sole expense but without any prior approval by the Borrower, to
publish such tombstones and give such other general publicity to the Facilities
as each may from time to time determine in its sole discretion, provided that
neither the Agent nor the Arranger will issue any press release with respect to
the Facilities without the approval of the Borrower. The foregoing
authorization shall remain in effect unless the Borrower notifies each in
writing that such authorization is revoked.
Please indicate your acceptance of this commitment by the Agent and
undertaking by the Arranger in the space indicated below and return a copy of
this letter so executed to the Agent. This commitment and undertaking will
expire at 5 p.m. (Indianapolis time) February 15, 1996 unless on or prior to
such time the Agent shall have received a copy of this letter executed by the
Borrower together with the fees required under paragraph 1(a) of the Agent's
Fee Letter of even date herewith (the "Fee Letter"). Notwithstanding timely
acceptance of the commitment pursuant to the preceding sentence, the commitment
will automatically terminate unless definitive Loan Documents are executed on
or before May 15, 1996. In addition, the Borrower may terminate this
commitment upon five days' written notice to the Agent, provided that such
termination will not (i) relieve the Borrower of its obligation to pay any
amounts already accrued under the terms hereof or of the Fee Letter or (ii)
affect the obligations of the Borrower under numbered paragraph 4 of the Fee
Letter. By its acceptance hereof, the Borrower agrees to pay the Agent and the
Arranger the fees described in the Fee Letter.
By accepting delivery of this Commitment Letter, the Fee Letter and the
Term Sheet, the Borrower hereby agrees that, prior to executing this Commitment
Letter, the Borrower will not disclose either expressly or impliedly, without
the Agent's and the Arranger's consent, to any person any of the terms of this
Commitment Letter, the Fee Letter or Term Sheet, or the fact that this
Commitment Letter, the Fee Letter or Term Sheet or the financing proposal
represented thereby exists except that the Borrower may disclose any of the
foregoing to the Company, to any employee, financial advisor (but not to a
financial advisor which might be a provider of senior debt in this transaction)
or attorney of the Borrower or the Company to whom, in each case, it is
necessary to disclose such information so long as the Company and any such
employee, advisor or attorney is directed to observe this confidentiality
obligation. Upon the Borrower's execution of this Commitment Letter, the
Borrower may make public disclosure of the existence and the amount of the
commitment; and the Borrower may file with any applicable governmental
authority a copy of the Commitment Letter, or make such other disclosures if
such disclosure is, in the opinion of the Borrower's counsel, required by law.
If the Borrower
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CONTINUING OUR LETTER OF FEBRUARY 8, 1996
SHEET NO. 5
does not accept this commitment, the Borrower is to immediately return this
Commitment Letter, the Fee Letter and the Term Sheet (and all copies of the
foregoing) to the Agent.
This Commitment Letter and Term Sheet supersede any and all prior
versions thereof. This Commitment Letter shall be governed by the internal
laws of the State of Indiana, and may only be amended by a writing signed by
all parties hereto.
Very truly yours,
NBD BANK, N.A.,
individually and as Agent
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Title: Senior Vice President
-----------------------------------
FIRST CHICAGO CAPITAL MARKETS, INC.,
as Arranger
By: /s/ Xxxxxxxxxx Xxxxxxx
--------------------------------------
Title: Vice President
-----------------------------------
Accepted and agreed:
LILLY INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------
Title: CH., Pres., & CEO
---------------------
Date: 2/15/96
----------------------
6
March 4, 1996
Lilly Industries, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Chairman
President and Chief Executive Officer
Dear Xx. Xxxxxx:
This is in reference to our commitment letter addressed to you dated
February 8, 1996 (the "Commitment Letter") for credit facilities in the
aggregate principal amount of $300,000,000. You have asked that we modify
certain provisions set forth in the Commitment Letter and attached term sheet
(the "Term Sheet"). We hereby amend the Commitment Letter and Term Sheet as
follows:
1. The second and third sentences of the fourth paragraph of the Commitment
Letter are deleted and replaced with the following:
"The Agent and the Arranger have conducted substantial due diligence
review, inspection, and evaluation of the assets and liabilities of the
Borrower and the Company and their respective subsidiaries, and their
respective financial condition and prospects, and are satisfied with the
results to date of such due diligence. The Agent's commitment and the
Arranger's undertaking remain, however, subject to (i) the fulfillment of
the specific conditions precedent set forth in this Commitment Letter and
in the Term Sheet (both as modified by the terms of this letter amendment
to the Commitment Letter and Term Sheet dated March 4, 1996) and (ii)
their respective determinations that no information received after March
4, 1996 as to due diligence matters investigated prior to such date
indicates a change in the results of such prior due diligence
investigation which would have a Company Material Adverse Effect (as
defined in the Merger Agreement)."
2. The Term Sheet dated February 8, 1996 is deleted and replaced with the
Term Sheet dated March 4, 1996, a copy of which is attached hereto.
7
Continuing our letter of March 4, 1996
Sheet No. 2
Except as expressly set forth herein, all other terms and provisions of
the Commitment Letter, the Term Sheet and the Fee Letter delivered in
connection therewith shall remain unchanged and are hereby ratified and
confirmed by the parties hereto.
Very truly yours,
NBD BANK, N.A.,
individually and as Agent
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Title: Senior Vice President
---------------------------------
FIRST CHICAGO CAPITAL MARKETS, INC.,
as Arranger
By: /s/ Xxxxxxxxxx Xxxxxxx
------------------------------------
Title: Vice President
---------------------------------
Accepted and agreed:
LILLY INDUSTRIES, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Title: Vice President & Chief Financial Officer
----------------------------------------
Date: 3/4/96
--------------------
8
TERM SHEET
LILLY INDUSTRIES, INC.
MARCH 4, 1996
This Term Sheet is delivered together with a letter amendment to Commitment
Letter and Term Sheet of even date herewith. Capitalized terms used herein
shall have the meanings set forth in the Commitment Letter dated February 8,
1996, as amended by the aforementioned amendment.
THE FACILITIES
Borrower: Lilly Industries, Inc.
Guarantors: All direct and indirect domestic subsidiaries of
the Borrower.
Amount: $300,000,000 (the "Aggregate Commitment") comprised of
Loans and letters of credit under the facilities
described below.
Arranger: First Chicago Capital Markets, Inc.
Administrative Agent: NBD Bank, N.A. (the "Agent")
Lenders: A group of lenders to be determined (collectively,
together with the Agent in its capacity as lender, the
"Lenders").
Documentation: The Facilities will be evidenced by a Credit Agreement,
notes, guaranties, security agreements and other Loan
Documents mutually satisfactory to the Borrower and
the Lenders.
Syndication
Management: The Arranger will manage all aspects of the syndication
including, without limitation, the timing of offers to
potential Lenders, the amounts offered to potential
Lenders, the acceptance of commitments and
the compensation provided, all as set forth in the
Commitment Letter.
FACILITY A: TERM LOAN A
Amount: $175,000,000 (the "Facility A Commitment").
The Arranger, in its discretion, may reallocate
a portion of the Facility A Commitment to Facility B,
or vice versa.
Purpose: To provide funds for the purchase of "Sentry" pursuant
to the Acquisition and for payment of expenses
incurred in connection with the Acquisition.
Maturity: Six years from the Closing Date.
First Chicago Capital Markets, Inc. Page 1 NBD Bank, N.A.
9
Amortization: Quarterly installments of principal in amounts to be
determined.
FACILITY B: TERM LOAN B
Amount: $50,000,000 (the "Facility B Commitment"). The
Arranger, in its discretion, may reallocate a
portion of the Facility B Commitment to Facility A, or
vice versa.
Purpose: To provide funds for the purchase of "Sentry" pursuant
to the Acquisition and for payment of expenses
incurred in connection with the Acquisition.
Maturity: Up to seven and one-half years from the Closing Date.
Amortization: Quarterly installments of principal in amounts to be
determined.
FACILITY C: REVOLVING CREDIT/LETTER OF CREDIT FACILITY
Amount: $75,000,000 (the "Facility C Commitment")
Purpose: To provide funds for the purchase of "Sentry" pursuant
to the Acquisition and for payment of expenses
incurred in connection with the Acquisition and for
general corporate purposes of the Borrower and its
subsidiaries, with a $5,000,000 sublimit for letters of
credit.
Maturity: Six years from the date of closing of the Facilities
(the "Closing Date").
Borrowing Base: The aggregate outstanding amount of Loans and letters
of credit under Facility C shall not at any
time exceed the Borrowing Base. The Borrowing Base
shall be comprised of percentages (to be negotiated) of
eligible inventory and of eligible accounts receivable.
Eligibility criteria are to be determined. At any time
when Level 6 pricing is in effect, the Borrowing Base
limitation and the requirements to deliver Borrowing
Base reports shall be suspended (until such time, if
any, as Level 6 pricing is no longer in effect).
Letters of Credit: Standby letters of credit will be issued by NBD Bank,
N.A. for the account of the Borrower in an
aggregate stated amount not to exceed $5,000,000.
Lenders will hold pro rata risk participations in each
letter of credit.
First Chicago Capital Markets, Inc. Page 2 NBD Bank, N.A.
10
FEES
The Borrower will pay the following fees:
Commitment Fee: A commitment fee in the amount set forth on Exhibit A
on the average daily unborrowed portion of the
Facility C Commitment payable quarterly in arrears to
the Lenders (including the Agent) ratably from the
Closing Date until termination of the Facility C
Commitment.
Agent and
Other Fees: Such fees payable to the Arranger and the Agent as are
specified in the fee letter among the Agent, the
Arranger, and the Borrower.
L/C Fees: In connection with each letter of credit issued under
Facility C, a letter of credit fee at a rate equal to
the Applicable Margin for Eurodollar Loans as set
forth on Exhibit A on the undrawn stated amount of each
letter of credit, payable quarterly in arrears to the
Agent for the account of the Lenders. In addition, a
letter of credit fronting fee payable to NBD Bank, N.A.
in its capacity as issuer in the amount set forth in
the Agent's Fee Letter and, in connection with the
issuance of or any draw under any letter of credit,
customary processing and other fees.
INTEREST RATES
At the Borrower's option:
Term Loan A and Revolver:
ABR plus the Applicable Margin
Eurodollar Rate plus the Applicable Margin
Term Loan B:
ABR plus 1.25% per annum
Eurodollar Rate plus 2.25% per annum
"ABR" means the Alternate Base Rate and is the larger
of the Prime Rate or the federal funds rate plus
0.50% per annum.
"Applicable Margin" is based on the ratio of the
Borrower's total indebtedness to EBITDA (except during
the first six months of the Facilities), all as set
forth on Exhibit A.
First Chicago Capital Markets, Inc. Page 3 NBD Bank, N.A.
11
"Eurodollar Rate" means the average of the rates
offered by the Reference Lenders in the London
interbank market for deposits in the amount of, and for
a maturity corresponding to, the Agent's portion of the
loan, as adjusted for maximum statutory reserves.
"Prime Rate" means the rate of interest announced by
the Agent from time to time as its prime rate, changing
when and as said prime rate changes.
Eurodollar Rate interest periods shall be one, two,
three, or six months. Interest shall be payable in
arrears on the last day of each interest period and, in
the case of an interest period longer than three
months, quarterly, and upon any prepayment. Interest
and fees will be computed for actual days elapsed on a
360-day year basis.
The Credit Agreement will include customary provisions
relating to yield protection, availability, and
capital adequacy. After default, the interest rate
will be equal to the ABR plus 2% per annum.
The Eurodollar Rate will not be made available, at the
Agent's sole option, for the first 90 days following
the initial funding of the loans.
SECURITY
Each of the Facilities will be secured by a first perfected security interest
in all of the Borrower's assets other than real estate (with a negative pledge
on the Borrower's real estate) and, through secured guaranties, in all of its
direct and indirect domestic subsidiaries' assets (including, without
limitation, any domestic subsidiaries comprised of assets acquired in the
Acquisition). The assets of the Borrower to be pledged as collateral will
include all of the stock of all of its direct and indirect domestic
subsidiaries. In addition to the foregoing, the Borrower will pledge as
collateral 65% of the stock of all of its direct and indirect foreign
subsidiaries. The collateral will secure interest rate swaps or hedge
obligations owing to any Lender.
PREPAYMENTS
Mandatory--
Sale of Assets: Upon the sale, transfer, or other disposition of any
assets (other than the sale of inventory in the
ordinary course of business), permitted under the
Credit Agreement, the Borrower shall make a mandatory
prepayment in an amount equal to 100% of the proceeds
(net of income taxes and expenses of
First Chicago Capital Markets, Inc. Page 4 NBD Bank, N.A.
12
sale) realized from any such sale, transfer, or other
disposition, which shall be applied pro rata to
Facilities A and B until paid in full.
Excess Cash Flow: Upon delivery of its audited financial statements
in each year commencing with the fiscal year ending
November 30, 1996, the Borrower shall make a mandatory
prepayment in an amount equal to (i) at any time when
the Leverage Ratio is 3.0 to 1.0 or greater, 80% and
(ii) at any other time (subject to the following
proviso), 50%, of the Excess Cash Flow (as hereinafter
defined), if positive, for the most recently ended
fiscal year, which shall be applied pro rata to
Facilities A and B until paid in full, provided that,
if the Leverage Ratio as reflected in the audited
financial statements would qualify the Borrower for
Level 6 pricing, no mandatory prepayment shall be
required for such year. "Excess Cash Flow" means, for
any period of determination, for the Borrower and its
subsidiaries on a consolidated basis: (a) the sum of
(i) net income plus (ii) amortization, depreciation,
and other non-cash charges; minus (b) the sum of (i)
capital expenditures, (ii) principal payments made on
all indebtedness for borrowed money (exclusive of
mandatory prepayments made for Excess Cash Flow during
such period), (iii) any increase or decrease (as the
case may be), as of the last day of a fiscal year from
the last day of the previous fiscal year in the excess
of current assets over current liabilities and (iv) any
cash dividends paid by the Borrower in accordance with
the terms of the Credit Agreement.
Debt or Equity
Issuance: Upon the issuance of any subordinated indebtedness,
common stock, preferred stock, warrant, or other
equity (excluding any stock issued pursuant to stock
option or other employee benefit plans, within limits
to be negotiated), the Borrower shall make a mandatory
prepayment equal to (i) in the case of indebtedness,
100% and (ii) in the case of equity, 75%, of the
proceeds thereof, which shall be applied pro rata to
Facilities A and B until paid in full.
Voluntary
Prepayments: Facility A and Facility B may be prepaid in whole or in
part without premium on one day's notice, provided that
such payments will be in amounts of at least $5,000,000
and multiples of $1,000,000 in excess thereof; and the
Facility C Commitment may be permanently reduced
without premium on one day's notice, provided such
payments will be in an amount of at least $5,000,000
and multiples of $1,000,000 in excess thereof.
First Chicago Capital Markets, Inc. Page 5 NBD Bank, N.A.
13
Allocation of
Prepayments: Any mandatory prepayments which are not accepted by the
Lenders under Facility A shall be paid to the Lenders
under Facility B until Facility B is paid in full. Any
mandatory prepayments which are not accepted by the
Lenders under Facility B shall be paid to the Lenders
under Facility A until Facility A is paid in full. All
prepayments to be applied to either of Facilities A or
B shall be applied to the principal installments
thereof in the inverse order of maturity.
CONDITIONS OF LENDING
The Loan Documents shall be in form and substance acceptable to the Lenders.
The Credit Agreement shall include, without limitation, conditions precedent,
representations and warranties, covenants, events of default, indemnification
(of the Agent, the Arranger, and the Lenders), and other provisions customary
for such financings.
CONDITIONS PRECEDENT
Usual conditions to each loan (including absence of default or unmatured
default, lack of material adverse change from (i) in the case of the Borrower
and its subsidiaries taken as a whole, November 30, 1995, (ii) in the case of
the Company and its subsidiaries taken as a whole, December 31, 1995 and (iii)
in the case of the Company, the Borrower and their respective subsidiaries
taken as a whole on a combined basis after giving effect to the Acquisition,
that reflected in the consolidated pro forma financial statements to be
delivered to the Agent prior to the Closing Date. Additional conditions
precedent to initial loan will include without limitation those set forth
below.
Initial Funding: Initial funding shall occur no later than May 15, 1996.
Approval: Evidence satisfactory to the Agent and the Required
Lenders (defined below) that the Borrower's directors
and the Company's directors and shareholders shall
have approved the Acquisition; and all regulatory and
legal approvals for the Acquisition shall have been
obtained, including, without limitation, any filings
required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976.
Litigation: Absence of injunction or temporary restraining order
which, in the judgment of the Agent or the Required
Lenders, would prohibit the making of the loans or the
consummation of the Acquisition; and absence of
litigation which would reasonably be expected to result
in a material adverse effect on (i) the Borrower and
its subsidiaries, taken as a whole or (ii) the Company
and its subsidiaries, taken as a whole.
First Chicago Capital Markets, Inc. Page 6 NBD Bank, N.A.
14
Due Diligence: The Agent and the Arranger have conducted substantial
due diligence review, inspection, and evaluation of
the assets and liabilities of the Borrower and the
Company and their respective subsidiaries, and their
respective financial condition and prospects, and are
satisfied with the results to date of such due
diligence. The obligations of the Lenders to make the
initial loan remain, however, subject to the Agent's
and the Arranger's determination that no information
received after March 4, 1996 as to due diligence
matters investigated prior to such date indicates a
change in the results of such prior due diligence
investigation which would have a Company Material
Adverse Effect (as defined in the Merger Agreement).
All financial, accounting, and tax aspects of the
Acquisition must be acceptable.
Tender Offer: The terms of the tender offer shall be substantially
as set forth in the draft tender offer documents
delivered to the Agent and the Arranger on March 4,
1996, and the tender offer shall not be amended (except
with respect to the expiration date thereof, which
shall not be extended past a date which would allow the
initial funding for the purpose of purchasing tendered
shares to take place by May 15, 1996, or other minor
amendments of a type to be agreed upon by the Agent and
the Borrower) without the consent of the Required
Lenders. Without limiting the foregoing, the Lenders'
obligation to fund shall be conditioned upon the
tendering of a majority of the shares of stock of the
Company (or any greater number of shares as may be
required under applicable state law or the Company's
certificate of incorporation or by-laws to vote for and
effect the merger).
Merger Agreement: The Merger Agreement shall be in the form delivered to
the Agent and the Arranger on March 4, 1996 (which form
specifies cash consideraton of $23.00 per share for the
common stock of the Company), the representations and
warranties in the Merger Agreement shall be true and
correct on the date of the Acquisition closing (except
for failures of such representations and warranties to
be true and correct which could not, individually or in
the aggregate, reasonably be expected to result in a
Company Material Adverse Effect), and the conditions
therein shall have been satisfied and the Required
Lenders must have received an opinion of counsel
satisfactory to the Required Lenders as to the
enforceability of the Merger Agreement and its
compliance with all applicable law.
Financial Statements: The Agent and the Required Lenders shall have received
such information as the Agent may reasonably request
to confirm
First Chicago Capital Markets, Inc. Page 7 NBD Bank, N.A.
15
the tax, legal, and business assumptions made in the
pro forma financial statements provided to the
Agent and the Required Lenders.
Fairness Opinion: Receipt of copy of a fairness opinion from the
Borrower's investment banker addressed to the
Borrower's board of directors, relating to the terms of
the Acquisition.
Valuation: The Agent and the Required Lenders shall have received a
certificate from the chief financial officer of the
Borrower in form reasonably satisfactory to them
supporting the conclusions that after giving effect to
the Acquisition, the Borrower and its subsidiaries
(including, without limitation, the Company), on a
consolidated basis, are solvent and will be solvent
subsequent to incurring the indebtedness in connection
with the Acquisition, will be able to pay their debts
and liabilities as they become due, and will not be
left with unreasonably small capital with which to
engage in their businesses.
Environment: The Agent and the Arranger have received environmental
review reports as to certain environmental hazards and
liabilities affecting the Borrower's and the Company's
consolidated assets and are satisfied with the results
of such reports and with the Borrower's plans with
respect thereto. The obligations of the Lenders to
make the initial loan remain, however, subject to the
Agent's and the Arranger's determination that no
information received after March 4, 1996 as to such
environmental hazards or liabilities investigated prior
to such date indicates a change in the results of such
prior environmental investigation which would have a
Company Material Adverse Effect.
Existing Facilities: Prepayment of all obligations under existing
loan facilities of the Borrower or the Company (other
than those under the Facilities).
Legal: All legal (including tax implications) and regulatory
matters shall be satisfactory to the Required Lenders.
Regulations: Compliance with all applicable requirements of
Regulations G, T, U, and X of the Board of Governors
of the Federal Reserve System.
No Default; No Material
Adverse Change: No default or unmatured default shall exist on the
funding date and no material adverse change in the
business, condition (financial or otherwise),
operations, performance, properties, or prospects of
(i) the Borrower and its subsidiaries, taken as a
First Chicago Capital Markets, Inc. Page 8 NBD Bank, N.A.
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whole, since November 30, 1995 or (ii) the Company and
its subsidiaries, taken as a whole, since December
31, 1995, shall have occurred.
Customary Documents: Receipt of other customary closing documentation
including, without limitation, legal opinions of
the Borrower's counsel, acceptable to the Agent.
COVENANTS
Covenants: The Credit Agreement will contain customary covenants
including, without limitation, restrictions
(subject to exceptions, as appropriate, to be
negotiated) on the following:
- liens and encumbrances
- dividends/restricted payments (dividends will be
permitted unless the payment thereof would
cause the violation of other covenants)
- guarantees
- sale and leaseback transactions
- sale of assets
- consolidations and mergers
- investments and acquisitions
- capital expenditures
- loans and advances
- indebtedness and additional indebtedness
- compliance with pension, environmental, and
other laws
- operating leases
- transactions with affiliates
- changes in line of business
- hedging of interest rates
- prepayment of other debt
- permit inspection of records and assets
Financial Covenants: The Credit Agreement will contain financial covenants
containing limitations to be negotiated including,
without limitation, covenants pertaining to:
**[COVENANT LEVELS?]**
- leverage ratio (defined as the ratio of total
funded indebtedness to EBITDA)
- interest coverage
- fixed charge coverage (defined as the ratio of
(i) EBITDA minus capital expenditures to (ii) the
sum of interest expense plus scheduled principal
payments plus taxes plus rental expense plus
dividends paid)
First Chicago Capital Markets, Inc. Page 9 NBD Bank, N.A.
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REPRESENTATIONS AND WARRANTIES
Usual representations and warranties in connection with each loan shall be
included in the Credit Agreement including, but not limited to, absence of
material adverse change, absence of material litigation, absence of default or
unmatured default, representations regarding environmental issues, priority of
the Lenders' liens, compliance with all material requirements of law and
contracts, and compliance with Regulations G, T, U, and X.
DEFAULTS
Customary events of default including, without limitation, cross-default to
occurrence of a default (whether or not resulting in acceleration) under any
other agreement governing indebtedness of the Borrower or any of its
subsidiaries and change of control.
ASSIGNMENTS AND PARTICIPATIONS
Permitted subject to approval of the Agent and the Borrower (such approval not
to be unreasonably withheld) in minimum amounts of $5,000,000.
REQUIRED LENDERS
Defined as Lenders holding 66-2/3% of the Aggregate Commitment or, if the
Aggregate Commitment has been terminated, 66-2/3% of the outstanding Loans and
participations in letters of credit.
OTHER
This commitment is, and the Loan Documents will be, governed by the law of the
State of Indiana. This term sheet is intended as an outline only and does not
purport to summarize all the conditions, covenants, representations,
warranties, and other provisions which would be contained in definitive legal
documentation for the financing contemplated hereby. The commitment of the
Agent and the other Lenders is subject to negotiation and execution of
definitive Loan Documents in form and substance satisfactory to the Agent and
the other Lenders and their respective counsel.
First Chicago Capital Markets, Inc. Page 10 NBD Bank, N.A.
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EXHIBIT A
INTEREST RATES--APPLICABLE MARGIN
The Applicable Margin is determined by the ratio of (a) total indebtedness
(including contingent liabilities) to (b) EBITDA (the "Leverage Ratio") as per
the following schedule:
APPLICABLE MARGIN
-----------------------------------------------------------------------------------------------
COMMITMENT
LEVERAGE ABR EURODOLLAR FEE
-----------------------------------------------------------------------------------------------
Level 1 > 3.5 0.75% 1.75% 0.50%
Level 2 > 3.0 to less than or equal to 3.5 0.50% 1.50% 0.50%
Level 3 > 2.5 to less than or equal to 3.0 0.25% 1.25% 0.375%
Level 4 > 2.0 to less than or equal to 2.5 0 1.00% 0.375%
Level 5 > 1.5 to less than or equal to 2.0 0 0.75% 0.375%
Level 6 less than or equal to 1.5 0 0.50% 0.25%
provided that, notwithstanding the then-current Leverage Ratio, Level 1 pricing
shall be in effect on Facilities A and C for the first six months following the
Closing Date.
"EBITDA" means the sum of consolidated net income plus, to the extent deducted
in determining consolidated net income, taxes paid or accrued, minus
extraordinary gains, plus extraordinary losses, plus total interest expense,
plus depreciation, plus amortization.
First Chicago Capital Markets, Inc. Page 11 NBD Bank, N.A.
