99(a)(1)
XXXXXX COMMERCIAL PAPER INC. XXXXXX BROTHERS INC.
3 WORLD FINANCIAL CENTER 3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285 XXX XXXX, XXX XXXX 00000
October 17, 1999
COMMITMENT LETTER
Bruckmann, Xxxxxx, Xxxxxxxx & Co., Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
OSI Acquisition Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
This commitment letter agreement (together with all exhibits and schedules
hereto, the "COMMITMENT LETTER") will confirm the understanding and agreement
among Xxxxxx Commercial Paper Inc., as Administrative Agent under both the
Credit Facilities and the Interim Loan Agreement referred to below, ("LCPI" or
the "ADMINISTRATIVE AGENT"), Xxxxxx Brothers Inc., as exclusive advisor,
bookmanager and lead arranger ("XXXXXX BROTHERS"), Bruckmann, Xxxxxx, Xxxxxxxx &
Co., Inc. (collectively with certain of its employees, directors and their
affiliates, the "SPONSOR") and OSI Acquisition Inc., a newly formed wholly owned
subsidiary of the Sponsor (the "COMPANY") in connection with the proposed
financing for the acquisition of all of the issued and outstanding common stock
(except for that portion of common stock retained by members of the management
or their designees) of X'Xxxxxxxx Industries Holdings, Inc., a Delaware
corporation (together with each of its subsidiaries, the "ACQUIRED BUSINESS").
We understand that the Company proposes to sign an amended agreement with the
Acquired Business (the "ACQUISITION AGREEMENT") whereby the Company will acquire
all of the issued and outstanding common stock (except for that portion of
common stock retained by members of the management or their designees) of the
Acquired Business through a merger with and into the Acquired Business (the
"ACQUISITION"). As used below, the defined term "Company" shall mean both the
Company prior to the Acquisition and the Company together with the Acquired
Business, after giving effect to the Acquisition.
You have advised us that the total funds needed to finance the Acquisition
(including fees and expenses (which will not exceed $24.5 million) and the
refinancing of approximately $17.3 million of existing debt of the Acquired
Business) will be approximately $358.1 million (including $24.7 million of
senior preferred stock) and that such funds will be provided as follows: (i)
$125.0 million of borrowings by the Company under the Senior Term Loan
Facilities, with an additional $40.0 million Revolving Credit Facility which the
Sponsor anticipates will not be drawn at closing (collectively, the "CREDIT
FACILITIES")
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OSI Acquisition Inc.
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among the Company, LCPI and the financial institutions party thereto, (ii)
the issuance by X'Xxxxxxxx Industries, Inc. of $110.0 million in aggregate
principal amount of Senior Subordinated Notes due 2009 and the issuance by
X'Xxxxxxxx Industries Holdings, Inc. of Senior Discount Notes due 2009 yielding
gross proceeds of $25.0 million (collectively, the "NOTES") and (iii) up to
$58.9 million of equity securities (the "EQUITY FINANCING") to be contributed to
the Company in cash by the Sponsor or its affiliates or retained by members of
the management of the Acquired Business. Following the Acquisition, the Company
and its respective subsidiaries will not have any debt or equity outstanding
except as described in this paragraph and $24.7 million of senior preferred
stock issued as part of the merger consideration.
1. THE COMMITMENTS.
(a) You have requested (i) that LCPI (collectively with each other
financial institution that becomes a lender under the Credit Facilities, "SENIOR
LENDERS") commit to provide the entire amount of the Credit Facilities upon the
terms and subject to the conditions set forth or referred to in this Commitment
Letter and in the Summary of Terms of Credit Facilities attached hereto as
Exhibit A (the "CREDIT FACILITIES TERM SHEET") and (ii) that LCPI (collectively
with each other investor that becomes a lender under the Interim Loans (as
defined below), the "INTERIM LENDERS;" the Interim Lenders and the Senior
Lenders being referred to herein collectively as the "LENDERS") commit to
provide the Company $135.0 million in interim loans (the "INTERIM LOANS"), upon
the terms and subject to the conditions set forth or referred to in this
Commitment Letter and in the Summary of Terms of Interim Loans attached hereto
as Exhibit B (the "INTERIM LOANS TERM SHEET").
(b) Based on the foregoing, LCPI is pleased to confirm by this
Commitment Letter its commitment to you (the "SENIOR LOAN COMMITMENT") to
provide or cause one of its affiliates to provide the entire amount of the
Credit Facilities.
(c) Based on the foregoing, LCPI is pleased to confirm by this
Commitment Letter its commitment to you (the "INTERIM LOAN COMMITMENT"), to
provide or cause one of its affiliates to provide the entire amount of the
Interim Loans. 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 Interim Loan Commitments or for any other reason,
that the documentation contemplated by this Commitment Letter will be
appropriately modified to provide for an issuance of interim notes having terms
as nearly identical as practicable to those of the Interim Loans.
(d) Pursuant to an Engagement Letter, dated as of October 17, 1999
(the "ENGAGEMENT LETTER"), among you and Xxxxxx Brothers, as further
consideration for the Interim Loan Commitments, you have engaged Xxxxxx Brothers
to act as your exclusive underwriter, exclusive initial purchaser and/or
exclusive placement agent in connection with the sale of the Permanent
Securities (as defined in the Engagement Letter) and in connection with certain
other matters.
(e) It is agreed that Xxxxxx Brothers will act as the sole and
exclusive advisor, bookmanager and lead arranger for the Credit Facilities and
the Interim Loans and that LCPI will act as the sole and exclusive
Administrative Agent for the Credit Facilities and the Interim Loans. Each of
Xxxxxx Brothers and LCPI will perform the duties and exercise the authority
customarily performed and exercised by it in its respective role. You agree that
no other agents, co-agents, arrangers or bookmanager will be appointed, no other
titles will be awarded and no compensation (other than that expressly
contemplated by
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OSI Acquisition Inc.
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the Credit Facilities Term Sheet or the Fee Letters referred to below) will be
paid in connection with the Credit Facilities or the Interim Loans unless you
and we shall so agree.
(f) The commitments and agreements of the Lenders described herein
are subject to the negotiation, execution and delivery on or before November 30,
1999 of definitive documentation with respect to the Credit Facilities and the
Interim Loans, satisfactory to the Lenders and their respective counsel and to
the other conditions set forth or referred to in the Credit Facilities Term
Sheet, the Interim Loan Term Sheet and the Funding Conditions attached hereto as
Exhibit C. Those matters that are not covered by the provisions hereof or of the
Credit Facilities Term Sheet or the Interim Loan Term Sheet are subject to the
approval and agreement of the applicable Lenders, the Sponsor and the Company.
2. FEES AND EXPENSES. In consideration of the execution and delivery of
this Commitment Letter by LCPI as a Senior Lender, you agree jointly and
severally to pay the fees and expenses set forth in Annex A-I to the Credit
Facilities Term Sheet and in the Credit Facilities Fee Letter, dated the date
hereof, in each case, as provided therein and subject to paragraph 9 hereof. In
consideration of the execution and delivery of this Commitment Letter by each of
the Interim Lenders, you agree jointly and severally, but subject to paragraph 9
hereof, to pay the fees and expenses contemplated by the Interim Loan Fee
Letter, dated the date hereof (each of the Interim Loan Fee Letter and the
Credit Facilities Fee Letter being referred to as a "FEE LETTER" and
collectively as the "FEE LETTERS").
3. INDEMNIFICATION.
(a) The Sponsor and the Company hereby jointly and severally agree
to indemnify and hold harmless each of LCPI, Xxxxxx Brothers, the other Interim
Lenders and each of their respective affiliates and each of their respective
officers, directors, employees, affiliates, 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 Credit Facilities, the
Interim Loans, the Term Loans, the Exchange Notes, the use of the proceeds
therefrom, the Acquisition, any of the other transactions, or securities
contemplated by this Commitment Letter or the Engagement Letter, any other
transaction related thereto 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 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 lawsuit,
investigation, claim or other proceeding 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 found by a
final, non-appealable judgment of a court of competent jurisdiction that such
loss, claim, damage, liability or expense resulted directly from the gross
negligence or willful misconduct of such indemnified person. In no event will
any indemnified person be liable for consequential damages as a result of any
failure to fund any of the Credit Facilities or the Interim Loans contemplated
hereby or otherwise in connection with the Credit Facilities or Interim Loans.
(b) The Sponsor and the Company further agree that, without the
prior written consent of LCPI as Senior Lender and each of the Interim Lenders,
which consent will not be unreasonably withheld, none of them will 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
Bruckmann, Xxxxxx, Xxxxxxxx & Co.
OSI Acquisition Inc.
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includes an explicit and unconditional release from the party bringing such
lawsuit, claim or other proceeding of all indemnified persons.
(c) The Sponsor, the Company and the 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 such indemnified person, then, whether or not a Senior
Lender or an Interim Lender is the indemnified person, the Sponsor and the
Company, on the one hand, and the Senior Lenders or the Interim Lenders, as the
case may be, 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
Sponsor and the Company, on the one hand, and the Senior Lenders or the Interim
Lenders, as the case may be, 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 Sponsor
and the Company, on the one hand, and the Senior Lenders or 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 a Senior Lender
or an Interim Lender pursuant to this paragraph exceed the amount of the fees
actually received by such Senior Lender or Interim Lender under this Commitment
Letter or the applicable Fee Letter.
4. EXPIRATION OF COMMITMENT. Each Lender agrees to hold its respective
Commitment available for you until the earlier of (i) the termination of the
Acquisition Agreement, (ii) the consummation of the Acquisition without the
funding of the Credit Facilities or Interim Loans, as the case may be, and (iii)
5:00 p.m., New York City time, on November 30, 1999. The date and time of
expiration of the Senior Loan Commitment and the Interim Loan Commitment is
sometimes referred to herein as the "COMMITMENT EXPIRATION DATE."
5. CONFIDENTIALITY.
(a) This Commitment Letter and the Engagement Letter and the terms
and conditions contained herein and therein shall not be disclosed by the
Sponsor to any person or entity (other than the Acquired Business or such of
your and their agents and advisers as need to know and agree to be bound by the
provisions of this paragraph and as required by law) without the prior written
consent of the applicable Lenders. The Fee Letters and the terms and conditions
contained therein shall not be disclosed by the Sponsor to any person or entity
(other than such of your agents and advisers as need to know and agree to be
bound by the provisions of this paragraph and as required by law) without the
prior written consent of the applicable Lenders.
(b) You acknowledge that Xxxxxx Brothers and its affiliates (the
term "Xxxxxx Brothers" being understood to refer hereinafter in this paragraph
to include such affiliates, including LCPI) may be providing debt financing,
equity capital or other services (including financial advisory services) to
other companies in respect of which you may have conflicting interests regarding
the transactions described herein and otherwise. Xxxxxx Brothers will not use
confidential information obtained from you by virtue of the transactions
contemplated by this Commitment Letter or their other relationships with you in
connection with the performance by Xxxxxx Brothers of services for other
companies, and Xxxxxx Brothers will not furnish any such information to other
companies. You also acknowledge that Xxxxxx Brothers has no obligation to use in
connection with the transactions contemplated by this Commitment
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OSI Acquisition Inc.
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Letter, or to furnish to you, confidential information obtained from other
companies.
6. ASSIGNMENT AND SYNDICATION.
(a) The parties hereto agree that LCPI and Xxxxxx Brothers shall
have the right to syndicate the Credit Facilities, the Interim Loans and/or the
Senior Loan Commitments and the Interim Loan Commitments (collectively, the
"COMMITMENTS") to a group of financial institutions or other investors
identified by us in consultation with you. Xxxxxx Brothers will manage all
aspects of any such syndication, including decisions as to the selection of
institutions to be approached and when they will be approached, the acceptance
of commitments, the amounts offered, the amounts allocated and the compensation
provided. The Sponsor and the Company agree to use all commercially reasonable
efforts to assist Xxxxxx Brothers and LCPI in any such syndication process,
including, without limitation, (i) ensuring that the syndication efforts benefit
materially from the existing lending relationships of the Sponsor and the
Company, (ii) direct contact between senior management and advisors of the
Sponsor and the Company and the proposed Lenders, (iii) assistance in the
preparation of Confidential Information Memoranda and other marketing materials
to be used in connection with any syndication, including causing such
Confidential Information Memoranda to conform to market standards as reasonably
determined by Xxxxxx Brothers and LCPI and (iv) the hosting, with Xxxxxx
Brothers, of one or more meetings of prospective Lenders, and, in connection
with any such Lender meeting, your consultation with Xxxxxx Brothers and LCPI
with respect to the presentations to be made at such meeting, and your making
available appropriate officers and representatives to rehearse such
presentations prior to such meetings, as reasonably requested by Xxxxxx Brothers
and LCPI. You also agree that, at your expense, you will work with Xxxxxx
Brothers and LCPI to procure a rating for the Credit Facilities and/or the
Interim Loans by Xxxxx'x Investors Service, Inc. and Standard & Poor's Ratings
Group.
(b) To assist Xxxxxx Brothers and LCPI in their syndication efforts,
you agree promptly to prepare and provide to Xxxxxx Brothers and LCPI all
information with respect to the Company, the Acquired Business, the Acquisition
and the other transactions contemplated hereby, including all financial
information and projections (the "PROJECTIONS"), as they may reasonably request.
You hereby represent and covenant that (i) all information other than the
Projections (the "INFORMATION") that has been or will be made available to
Xxxxxx Brothers and LCPI by you or any of your representatives is or will be,
when furnished, complete and correct in all material respects and does not or
will not, when furnished, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements are made and (ii) the Projections that have been or will
be made available to Xxxxxx Brothers and LCPI by you or any of your
representatives have been or will be prepared in good faith based upon
reasonable assumptions. You understand that in arranging and syndicating the
Credit Facilities and the Interim Loans we may use and rely on the Information
and Projections without independent verification thereof.
(c) To ensure an orderly and effective syndication of the Senior
Loans and the Interim Loans, you agree that, from the date hereof until the
later of the termination of the syndication as determined by Xxxxxx Brothers and
90 days following the date of initial funding under the Senior Loans and the
Interim Loans, you will not, and will not permit any of your affiliates to,
syndicate or issue, attempt to syndicate or issue, announce or authorize the
announcement of the syndication or issuance of, or engage in discussions
concerning the syndication or issuance of, any debt facility or debt or
preferred equity security of the Company or any of its subsidiaries (other than
the indebtedness contemplated hereby), including any renewals or refinancings of
any existing debt facility, without the prior written consent of Xxxxxx
Brothers.
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OSI Acquisition Inc.
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Upon the Closing Date, any assignment or syndication of the Credit Facilities
and the Interim Loans shall be governed by the provisions of the definitive
documentation relating thereto.
(d) Xxxxxx Brothers and LCPI shall be entitled, after consultation
with the Company, to change the pricing, terms and structure of the Credit
Facilities if Xxxxxx Brothers and LCPI determine that such changes are advisable
to ensure a successful syndication of the Credit Facilities; PROVIDED, that in
no event will (i) the Applicable Margin be increased by more than 50 basis
points without the consent of the Company, (ii) the aggregate amortization
during the first three years of the Credit Facilities exceed $11.0 million or
(iii) the final maturity on the Tranche B Term Loan Facility be reduced to less
than six years. The provisions of this Section 6(d) shall survive the closing of
the Credit Facilities until the termination of syndication as determined by
Xxxxxx Brothers, and the Company agrees to enter into, and to cause, such
amendments to the final documentation as may be necessary or reasonably
requested by Xxxxxx Brothers to document any changes to the Credit Facilities
made pursuant to this Section 6(d).
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 any commitment hereunder or this Commitment Letter
(including any extensions) and the execution and delivery of definitive
financing documentation.
8. CHOICE OF LAW; JURISDICTION; WAIVERS.
(a) 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 Sponsor and the Company hereby irrevocably submit 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 or either of the Fee
Letters and irrevocably agree that all claims in respect of any such suit,
action or proceeding may be heard and determined in any such court. The Sponsor
and the Company hereby waive, to the fullest extent permitted by applicable law,
any objection that they 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 parties hereto hereby waive, 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 or
either of the Fee Letters.
(b) No Senior Lender or Interim Lender shall be liable in any
respect for any of the obligations or liabilities of any the other Senior Lender
or Interim Lender under this letter or arising from or relating to the
transactions contemplated hereby.
9. ACQUIRED BUSINESS TO BECOME A PARTY; TERMINATION OF CERTAIN SPONSOR
OBLIGATIONS. The Sponsor and the Company hereby agree to cause the Acquired
Business (including each of the Guarantors) to become jointly and severally
liable, effective upon the closing of the Acquisition, for any and all
liabilities and obligations of the Sponsor or the Company relating to or arising
out of any of the Sponsor's or the Company's duties, responsibilities and
obligations hereunder. The obligations of the Sponsor under Sections 2 and 3 of
this Agreement shall terminate once this Agreement has become a legal, valid and
binding agreement of the Acquired Business and such Guarantors.
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10. MISCELLANEOUS.
(a) 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. Delivery of an executed
signature page of this Commitment Letter by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
(b) Neither the Company nor the Sponsor may assign any of their
respective rights, or be relieved of any of their respective obligations,
without the prior written consent of each of the Lenders. In connection with any
syndication of all or a portion of the Senior Loan Commitments and/or the
Interim Loan Commitments, the rights and obligations of each of the Lenders
hereunder may be assigned, in whole or in part, as provided above, and upon such
assignment, such Lender shall be relieved and novated hereunder from the
obligations of such Lender with respect to any portion of its Senior Loan
Commitment or Interim Loan Commitment that has been assigned as provided above.
(c) This Commitment Letter and the attached Exhibits and Schedules
set forth the entire understanding of the parties hereto as to the scope of the
Commitment and the obligations of the Lenders hereunder. This Commitment Letter
shall supersede all prior understandings and proposals, whether written or oral,
between any of the Lenders and you relating to any financing or the transactions
contemplated hereby. This Commitment Letter shall be in addition to the
agreements of the parties contained in the Engagement Letter.
(d) This Commitment Letter has been and is made solely for the
benefit of the Sponsor, the Company, the 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.
(e) As you know, the Lenders, including Xxxxxx Brothers, may be 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.
(f) Xxxxxx Brothers also will provide financial advisory services to
the Company with respect to the transaction to which this Commitment Letter
relates. The Company agrees that Xxxxxx Brothers has the right to place
advertisements in financial and other newspapers and journals at its own expense
describing its services to the Company, provided that Xxxxxx Brothers will
submit a copy of any such advertisements to the Company for its approval, which
approval shall not be unreasonably withheld.
(g) This Commitment Letter supersedes that certain Commitment
Letter, dated April 30, 1999, by and among the parties hereto (the "Original
Commitment Letter"). This Commitment Letter speaks as of the date of the
Original Commitment Letter except with respect to any specific amendments in
which case this Commitment Letter speaks as of the date hereof.
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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:
Name: /s/ Xxxxxxx Xxxxxxxxx
Title: Authorized Signatory
XXXXXX BROTHERS INC.
By: /s/ Xxxx X. Xxxxxxxx
Name:
Title: Authorized Signatory
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OSI Acquisition Inc.
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Accepted and agreed to as of the
date first above written:
BRUCKMANN, XXXXXX, XXXXXXXX & CO., INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name:
Title: Authorized Signatory
OSI ACQUISITION INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name:
Title: Authorized Signatory
EXHIBIT A TO COMMITMENT LETTER
SUMMARY OF TERMS OF CREDIT FACILITIES
SET FORTH BELOW IS A SUMMARY OF CERTAIN OF THE TERMS OF THE
SENIOR TERM LOAN FACILITIES, THE REVOLVING CREDIT FACILITY AND THE
DOCUMENTATION RELATED THERETO. 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.
I. PARTIES
COMPANY The Company.
GUARANTORS Each of the Company's direct and indirect
subsidiaries (other than certain foreign
subsidiaries (the "GUARANTORS"; the Company
and the Guarantors, collectively, the "CREDIT
PARTIES").
ADVISOR, LEAD ARRANGER
AND BOOK MANAGER Xxxxxx Brothers Inc. (in such capacity, the
"ARRANGER").
ADMINISTRATIVE AGENT Xxxxxx Commercial Paper Inc. (in such
capacity, the "ADMINISTRATIVE AGENT").
SENIOR LENDERS A syndicate of banks, financial institutions
and other entities arranged by the
Administrative Agent after consultation with
the Company (collectively, the "SENIOR
LENDERS").
II. TYPES AND AMOUNTS OF CREDIT FACILITIES
SENIOR TERM LOAN FACILITIES Senior Term Loan Facilities (the "SENIOR TERM
LOAN FACILITIES") in an aggregate amount equal
to $125.0 million (the loans thereunder, the
"SENIOR TERM LOANS") as follows:
TRANCHE A TERM LOAN FACILITY A 6-year term loan facility (the "TRANCHE A
TERM LOAN FACILITY") in an aggregate principal
amount equal to $35.0 million (the loans
thereunder, the "TRANCHE A TERM LOANS"). The
Tranche A Term Loans shall be repayable in
quarterly installments in amounts to be agreed
upon until the date that is 6 years after the
Closing Date (as defined below).
TRANCHE B TERM LOAN FACILITY A 7 1/2-year term loan facility (tHE "TRANCHE
B Term LOAN FACILITY") in an aggregate
principal amount equal to $90.0 million (the
loans thereunder, the "TRANCHE B TERM LOANS").
The Tranche B Term
A-1
Loans shall be repayable in 30 consecutive
quarterly installments in amounts to be
agreed.
AVAILABILITY The Senior Term Loans shall be made in a
single drawing on the Closing Date (as defined
below).
PURPOSE The proceeds of the Senior Term Loans shall be
used to finance the Acquisition and to pay
related fees and expenses.
REVOLVING CREDIT FACILITY 6-year revolving credit facility (the
"REVOLVING CREDIT FACILITY");
FACILITY together with the Senior Term Loan Facilities,
(the "CREDIT FACILITIES") in an aggregate
principal amount equal to $40.0 million (the
loans thereunder, the "REVOLVING CREDIT
LOANS").
AVAILABILITY The Revolving Credit Facility shall be
available on a revolving basis during the
period commencing on the Closing Date and
ending on the sixth anniversary thereof (the
"REVOLVING CREDIT TERMINATION DATE").
LETTERS OF CREDIT A portion of the Revolving Credit Facility not
in excess of $15.0 million shall be available
for the issuance of letters of credit (the
"LETTERS OF CREDIT") by a Senior Lender to be
selected in the syndication process (in such
capacity, the "ISSUING SENIOR LENDER"). No
Letter of Credit shall have an expiration date
after the earlier of (i) one year after the
date of issuance and (ii) five business days
prior to the Revolving Credit Termination
Date; PROVIDED that any Letter of Credit with
a one-year tenor may provide for the renewal
thereof for additional one- year periods
(which shall in no event extend beyond the
date referred to in clause (ii) above).
Drawings under any Letter of Credit shall be
reimbursed by the Company (whether with its
own funds or with the proceeds of Revolving
Credit Loans) on the same business day. To the
extent that the Company does not so reimburse
the Issuing Senior Lender, the Senior Lenders
under the Revolving Credit Facility shall be
irrevocably and unconditionally obligated to
reimburse the Issuing Senior Lender on a PRO
RATA basis.
SWING LINE LOANS A portion of the Revolving Credit Facility not
in excess of $5.0 million shall be available
for swing line loans (the "SWING LINE LOANS")
from a Senior Lender to be selected in the
syndication process (in
A-2
such capacity, the "SWING LINE SENIOR LENDER")
on same-day notice. Any such Swing Line Loans
will reduce availability under the Revolving
Credit Facility on a dollar-for-dollar basis.
Each Senior Lender under the Revolving Credit
Facility shall acquire, under certain
circumstances, an irrevocable and
unconditional PRO RATA participation in each
Swing Line Loan.
MATURITY The Revolving Credit Termination Date.
PURPOSE The proceeds of the Revolving Credit Loans
shall be used to finance the working capital
needs of the Company and its subsidiaries in
the ordinary course of business.
III. CERTAIN PAYMENT PROVISIONS
FEES AND INTEREST RATES As set forth on Annex A-I.
OPTIONAL PREPAYMENTS AND
COMMITMENT REDUCTIONS Loans may be prepaid in minimum amounts to be
agreed upon. Optional prepayments of the
Senior Term Loans shall be applied to the
Tranche A Term Loans and the Tranche B Term
Loans ratably and to the installments thereof
ratably in accordance with the then
outstanding amounts thereof and may not be
reborrowed. Notwithstanding the foregoing, so
long as any Tranche A Term Loans are
outstanding, each holder of Tranche B Term
Loans shall have the right to refuse up to
100% of such prepayment allocable to its
Tranche B Term Loans and the amount so refused
will be applied to prepay the Tranche A Term
Loans.
MANDATORY PREPAYMENTS AND
COMMITMENT REDUCTIONS The following amounts shall be applied to
prepay the Senior Term Loans and reduce the
Revolving Credit Facility:
(a) 100% of the net proceeds of any sale,
issuance or incurrence of certain
indebtedness after the Closing Date by the
Company or any of its subsidiaries (subject
to certain carve outs to be agreed on);
PROVIDED, HOWEVER, that such net proceeds
shall first be applied to any outstanding
amounts owed to the Interim Lenders under
the Interim Loans or the Term Loans;
(a) 100% of the net proceeds of any sale or
other
A-3
disposition (including as a result of
casualty or condemnation) by the Company or
any of its subsidiaries of any assets
(except for the sale of inventory in the
ordinary course of business and certain
other dispositions to be agreed on); and
(a) 75% of excess cash flow (to be defined
in a mutually satisfactory manner) for each
fiscal year of the Company (commencing with
the fiscal year in which the Closing Date
occurs); PROVIDED, HOWEVER that such amount
shall be reduced to 50% during such time
that the Maximum Leverage (to be defined)
is less than 3.0 to 1.0.
All such amounts shall be applied, FIRST, to
the prepayment of the Senior Term Loans and,
SECOND, to the permanent reduction of the
Revolving Credit Facility. Each such
prepayment of the Senior Term Loans shall be
applied to the Tranche A Term Loans and the
Tranche B Term Loans and to the installments
thereof ratably in accordance with the then
outstanding amounts thereof and may not be
reborrowed. Notwithstanding the foregoing, so
long as any Tranche A Term Loans are
outstanding, each holder of Tranche B Term
Loans shall have the right to refuse up to
100% of such prepayment allocable to its
Tranche B Term Loans and the amount so refused
will be applied to prepay the Tranche A Term
Loans.
I. COLLATERAL The obligations of each Credit Party in
respect of the Credit Facilities shall be
secured by a perfected first priority security
interest in all of its tangible and intangible
assets (including, without limitation,
intellectual property, real property and all
of the capital stock of the Company and each
of its direct and indirect domestic
subsidiaries, and 2/3 of the capital stock of
certain of its first tier foreign
subsidiaries) except (i) with respect to those
assets subject to liens in connection with
Industrial Revenue Refunding Bonds issued to
refund and redeem the bonds used to finance
the cost of the acquisition and construction
of the Company's Virginia manufacturing
facility, which shall be secured by a
perfected second priority security interest
and (ii) for those assets as to which the
Administrative Agent shall determine in its
sole discretion that the costs of obtaining
such a security interest are excessive in
relation to the value of the security to be
afforded thereby.
A-4
II.CERTAIN CONDITIONS
INITIAL CONDITIONS.............. The availability of the Credit Facilities is
subject to the conditions set forth on Exhibit
C to the Commitment Letter.
ON-GOING CONDITIONS............. The making of each extension of credit shall
be conditioned upon (i) the accuracy of all
representations and warranties in the
definitive financing documentation with
respect to the Credit Facility (the "CREDIT
DOCUMENTATION") (including, without
limitation, the material adverse change and
litigation representations) and (ii) there
being no default or event of default in
existence at the time of, or after giving
effect to the making of, such extension of
credit.
III. CERTAIN DOCUMENTATION
MATTERS The Credit Documentation shall contain
representations, warranties, covenants and
events of default customary for financings of
this type and other terms deemed appropriate
by the Senior Lenders, including, without
limitation:
REPRESENTATIONS AND WARRANTIES.. Financial statements (including pro forma
financial statements); absence of undisclosed
liabilities; no material adverse change;
corporate existence; compliance with law;
corporate power and authority; enforceability
of Credit Documentation; no conflict with law
or contractual obligations; no material
litigation; no default; ownership of property;
liens; intellectual property; taxes; Federal
Reserve regulations; ERISA; Investment Company
Act; subsidiaries; environmental matters;
solvency; labor matters; accuracy of
disclosure; creation and perfection of
security interests; and Year 2000 Matters.
AFFIRMATIVE COVENANTS........... Delivery of financial statements, reports,
accountants' letters, projections, officers'
certificates and other information requested
by the Senior Lenders; payment of other
obligations; continuation of business and
maintenance of existence and material rights
and privileges; compliance with laws and
material contractual obligations; maintenance
of property and insurance; maintenance of
books and records; right of the Senior Lenders
to inspect property and books and records;
notices of defaults, litigation and other
material events; compliance with
A-5
environmental laws; further assurances
(including, without limitation, with respect
to security interests in after-acquired
property); and agreement to obtain within 90
days after the Closing Date interest rate
protection in amount and upon terms to be
agreed.
FINANCIAL COVENANTS............. Financial covenants (including, without
limitation, minimum interest and fixed charge
coverage and tangible net worth and maximum
leverage).
NEGATIVE COVENANTS.............. Limitations on: indebtedness (including
preferred stock of subsidiaries); liens;
guarantee obligations; mergers,
consolidations, liquidations and dissolutions;
sales of assets; leases; dividends and other
payments in respect of capital stock; capital
expenditures; investments, loans and advances;
optional payments and modifications of
subordinated and other debt instruments;
transactions with affiliates; sale and
leasebacks; changes in fiscal year; negative
pledge clauses; changes in lines of business.
EVENTS OF DEFAULT............... Nonpayment of principal when due; nonpayment
of interest, fees or other amounts after a
grace period to be agreed upon; material
inaccuracy of representations and warranties;
violation of covenants (subject, in the case
of certain affirmative covenants, to a grace
period to be agreed upon); cross-default;
bankruptcy events; certain ERISA events;
material judgments; actual or asserted
invalidity of any guarantee or security
document, subordination provisions or security
interest; and a change of control (the
definition of which is to be agreed).
VOTING.......................... Amendments and waivers with respect to the
Credit Documentation shall require the
approval of Senior Lenders holding not less
than a majority of the aggregate amount of the
Senior Term Loans, Revolving Credit Loans
participations in Letters of Credit and
Swingline Loans and unused commitments under
the Credit Facilities, except that (i) the
consent of each Senior Lender affected thereby
shall be required with respect to (a)
reductions in the amount or extensions of the
scheduled date of amortization or final
maturity of any Loan, (b) reductions in the
rate of interest or any fee or extensions of
any due date thereof, (c) increases in the
amount or extensions of the expiry date of any
Senior Lender's commitment and (d)
modifications to the pro rata provisions of
the Credit Documentation and (ii) the consent
of 100% of
A-6
the Senior Lenders shall be required with
respect to (a) modifications to any of the
voting percentages and (b) releases of all or
substantially all of the Guarantors or all or
substantially all of the collateral. In
addition, the consent of Senior Lenders
holding a majority of the aggregate amount of
the Tranche A Term Loans or the Tranche B Term
Loans, as the case may be, shall be required
with respect to certain modifications
affecting the Senior Term Loan Facilities.
ASSIGNMENTS AND PARTICIPATIONS.. The Senior Lenders shall be permitted to
assign and sell participations in their Loans
and commitments, subject, in the case of
assignments (other than assignments (i) by the
Administrative Agent, (ii) to another Senior
Lender or to an affiliate of a Senior Lender
or (iii) of funded Senior Term Loans), to the
consent of the Administrative Agent and the
Company (which consent in each case shall not
be unreasonably withheld). Non-pro rata
assignments shall be permitted. In the case of
partial assignments (other than to another
Senior Lender or to an affiliate of a Senior
Lender), the minimum assignment amount shall
be $5.0 million, and, after giving effect
thereto, the assigning Senior Lender shall
have commitments and Loans aggregating at
least $2.5 million, in each case unless
otherwise agreed by the Company, and the
Administrative Agent. Participants shall have
the same benefits as the Senior Lenders with
respect to yield protection and increased cost
provisions. Voting rights of participants
shall be limited to those matters with respect
to which the affirmative vote of the Senior
Lender from which it purchased its
participation would be required as described
under "Voting" above. Pledges of Loans in
accordance with applicable law shall be
permitted without restriction. Promissory
notes shall be issued under the Credit
Facilities only necessary to upon request.
YIELD PROTECTION................ The Credit Documentation shall contain
customary provisions (i) protecting the Senior
Lenders against increased costs or loss of
yield resulting from changes in reserve, tax,
capital adequacy and other requirements of law
and from the imposition of or changes in
withholding or other taxes and (ii)
indemnifying the Senior Lenders for "breakage
costs" incurred in connection with, among
other things, any prepayment of a Eurodollar
Loan (as defined in
A-7
Annex A-I) on a day other than the last day of
an interest period with respect thereto.
EXPENSES AND INDEMNIFICATION ... The Company shall pay (i) all reasonable
out-of- pocket expenses of the Administrative
Agent and the Arranger associated with the
syndication of the Credit Facilities and the
preparation, execution, delivery and
administration of the Credit Documentation and
any amendment or waiver with respect thereto
(including the reasonable fees, disbursements
and other charges of counsel) and (ii) all
out-of-pocket expenses of the Administrative
Agent and the Senior Lenders (including the
fees, disbursements and other charges of
counsel) in connection with the enforcement of
the Credit Documentation.
The Administrative Agent, the Arranger and the
Senior Lenders (and their affiliates and their
respective officers, directors, employees,
advisors and agents) will have no liability
for, and will be indemnified and held harmless
against, any loss, liability, cost or expense
incurred in respect of the financing
contemplated hereby or the use or the proposed
use of proceeds thereof (except to the extent
resulting from the gross negligence or willful
misconduct of the indemnified party).
GOVERNING LAW AND FORUM......... State of New York.
SENIOR LENDERS' COUNSEL......... Xxxxxx & Xxxxxxx.
A-8
ANNEX A-I
INTEREST AND CERTAIN FEES
INTEREST RATE OPTIONS............. The Company may elect that the Loans
comprising each borrowing bear interest at
a rate PER ANNUM equal to:
(i) the Base Rate plus the Applicable
Margin; or
(ii) the Eurodollar Rate plus the
Applicable Margin.
PROVIDED, that all Swing Line Loans shall
bear interest based upon the Base Rate.
As used herein:
"BASE RATE" means the highest of (i) the
rate of interest publicly announced by
Bankers Trust Company as its prime rate in
effect at its principal office in New York
City (the "PRIME RATE"), (ii) the
secondary market rate for three-month
certificates of deposit (adjusted for
statutory reserve requirements) PLUS 1%
and (iii) the federal funds effective rate
from time to time PLUS 0.5%. "APPLICABLE
MARGIN" means a percentage determined in
accordance with the pricing grid attached
hereto as Annex A-II. "EURODOLLAR RATE"
means the rate (adjusted for statutory
reserve requirements for eurocurrency
liabilities) at which eurodollar deposits
for one, two, three or six months (as
selected by the Company) are offered in
the interbank eurodollar market.
INTEREST PAYMENT DATES............ In the case of Loans bearing interest
based upon the Base Rate ("BASE RATE
LOANS"), quarterly in arrears. In the case
of Loans bearing interest based upon the
Eurodollar Rate ("EURODOLLAR LOANS"), on
the last day of each relevant interest
period and, in the case of any interest
period longer than three months, on each
successive date three months after the
first day of such interest period.
COMMITMENT FEES................... The Company shall pay a commitment fee
calculated at the applicable rate PER
ANNUM set forth in Annex A-II on the
average daily unused portion of the
Revolving Credit Facility, payable
quarterly in arrears. Swing Line Loans
shall, for purposes of the commitment fee
calculations only, not be deemed to be a
utilization of the Revolving Credit
Facility.
LETTER OF CREDIT FEES............. The Company shall pay a commission on all
outstanding Letters of Credit at a PER
ANNUM rate equal to the
A-I-1
Applicable Margin then in effect with
respect to Eurodollar Loans on the face
amount of each such Letter of Credit. Such
commission shall be shared ratably among
the Senior Lenders participating in the
Revolving Credit Facility and shall be
payable quarterly in arrears.
In addition to letter of credit
commission, a fronting fee calculated at a
rate PER ANNUM to be agreed upon by the
Company and the Issuing Bank on the face
amount of each Letter of Credit shall be
payable quarterly in arrears to the
Issuing Senior Lender for its own account.
In addition, customary administrative,
issuance, amendment, payment and
negotiation charges shall be payable to
the Issuing Senior Lender for its own
account.
DEFAULT RATE...................... At any time when the Company is in default
in the payment of any amount of principal
due under the Credit Facilities, such
amount shall bear interest at 2% above the
rate otherwise applicable thereto. Overdue
interest, fees and other amount shall bear
interest at 2% above the rate applicable
to Base Rate Loans.
RATE AND FEE BASIS................ All PER ANNUM rates shall be calculated on
the basis of a year of 360 days (or 365
days, in the case of Base Rate Loans the
interest rate payable on which is then
based on the Prime Rate) and the actual
number of days elapsed.
A-I-2
ANNEX A-II
PRICING GRID - SENIOR TERM LOANS AND REVOLVING CREDIT LOANS
--------------------------------------------------------------------------------
Ratio of Applicable Margin- Commitment Applicable Margin- Base Rate
Total Eurodollar Loans[2] Fee[2] Loans[2]
Debt to
EBITDA(1)
--------------------------------------------------------------------------------
Tranche A Tranche B Tranche A & Tranche B
& Revolver Revolver
> 4.0 : 1.0 3.25% 3.50% 0.50% 2.25% 2.50%
-
> 3.0 : 1.0 3.00% 3.50% 0.50% 2.00% 2.50%
-
< 3.0 : 1.0 2.50% 3.50% 0.375% 1.50% 2.50%
(1) This ratio shall be calculated based on the total debt and EBITDA of
X'Xxxxxxxx Industries, Inc. and its subsidiaries and shall exclude all debt of
X'Xxxxxxxx Industries Holdings, Inc., including the Senior Discount Notes due
2009 yielding gross proceeds of $25.0 million.
(2) Notwithstanding the foregoing grid, the Applicable Margin and Commitment Fee
Rate for Tranche A Term Loans and the Revolving Credit Loans for the period from
the Closing Date until the date of delivery to the Administrative Agent of the
Company's financial statements for the first two fiscal quarters following the
Closing Date will be 3.25% (Eurodollar Rate Loans), 2.25% (Base Rate Loans) and
0.50% (Commitment Fee Rate) respectively.
A-II-1
EXHIBIT B TO COMMITMENT LETTER
SUMMARY OF TERMS OF INTERIM LOANS
SET FORTH BELOW IS A SUMMARY OF CERTAIN OF THE TERMS OF THE INTERIM LOANS
AND THE INTERIM LOAN AGREEMENT. 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.
COMPANY The Company.
ARRANGER Xxxxxx Brothers.
ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT LCPI.
LOANS $135.0 million of Increasing Rate Loans due
2000 (the "INTERIM LOANS").
SUBORDINATION The Interim Loans and all obligations with
respect thereto will be subordinated in right
of payment to the payment in full of all
obligations of the Company under the Credit
Facilities and certain refinancings thereof on
terms satisfactory to the Lenders in their sole
discretion. The Company will not be permitted
to incur any indebtedness that is subordinated
to any borrowings under the Credit Facilities
and senior to any other indebtedness of the
Company. Nothing in the subordination
provisions will prevent any holder of Interim
Loans from receiving and retaining any proceeds
originally received by the Company or any
subsidiary of the Company that were used to
repay Interim Loans to the extent required
under the "Mandatory Repayment" provision
described below, and the same may be retained
by such holder free and clear of any claims by
holders of any debt, pursuant to these
subordination provisions or otherwise.
USE OF PROCEEDS Proceeds from the Interim Loans will be used to
fund, in part, the Acquisition.
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 November 30, 1999.
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 Exhibit B to
the Commitment Letter are satisfied, then the
Interim Loans will be automatically extended on
the Maturity Date into Term Loans due 2009 of
the Company (the "TERM LOANS") in an aggregate
principal amount equal to the
B-1
aggregate principal amount of Interim Loans so
extended. The Term Loans will have the terms
set forth in Annex B-I to the Commitment
Letter. Under certain circumstances, Term Loans
may be exchanged by the holders thereof for
Exchange Notes. The Exchange Notes will have
the Terms set forth in Annex B-I to the
Commitment Letter. 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 exchange.
INTEREST The Interim Loans will bear interest at a
variable PER ANNUM rate equal to the sum of (i)
a base rate to be selected by the Company on
the date of funding equal to either (a) the
one- or three-month London Interbank Offered
Rate, reset monthly or quarterly, as the case
may be (the "LIBOR RATE"), or (b) the Base Rate
(as defined in the Credit Facilities Term
Sheet), in each case calculated on the basis of
the actual number of days elapsed in a year of
360 days, plus (ii) a spread (the "SPREAD")
equal to (a) 600 basis points in case of the
LIBOR Rate or (b) 500 basis points in case of
the Base Rate. The Spread will increase by 50
basis points upon each 90-day anniversary of
the date of funding of the Interim Loans. The
interest rate on the Interim Loans (i) will not
at any time exceed 18% PER ANNUM and (ii) will
not at any time be less than 11% 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 limitations set
forth in this paragraph, interest will accrue
on any overdue amount (whether interest or
principal, including default interest), 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 Credit
Facilities (the "GUARANTORS"). 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 Credit Facilities.
MANDATORY REPAYMENT The Company will repay Interim Loans
with the net proceeds from (i) any direct or
indirect public offering or private placement
of the Notes, the High Yield Securities or any
other
B-2
debt securities of the Company or any of the
Company's subsidiaries or any equity securities
of the Company or any direct or indirect parent
holding company of the Company, (ii) the
incurrence of any other indebtedness by the
Company or any subsidiary of the Company or any
direct or indirect parent holding company of
the Company (other than under the Credit
Facilities and certain permitted indebtedness
as in effect on the Closing Date) and (iii) any
future issuances or sales of stock of
subsidiaries or sales of assets (subject to
customary ordinary course exceptions) by the
Company or any subsidiary of the Company,
subject, in the case of clauses (ii) and (iii)
only, to the required prior repayment of any
amount outstanding under the Credit Facilities,
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.
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).
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.
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) (other than in the case of transfers
or sales to Permitted Assignees pursuant to
which no consent is required), 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 Company or the
Administrative Agent.
AMENDMENTS Modifications to the terms of the Interim Loan
Agreement may be made with the 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
B-3
provisions of the Interim Loans, (iv) change
the subordination provisions in a manner that
would adversely affect the holders of the
Interim Loans or (v) 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).
CONDITIONS PRECEDENT The obligation of each of the Interim Lenders
to provide or cause one of its affiliates to
provide the Interim Loans will be subject to
the conditions set forth on Annex C to the
Commitment Letter.
EVENTS OF DEFAULT; REMEDIES The Interim Loan Agreement will contain such
events of default 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 Interim Loan Fee Letter. If the Company or
the Sponsor fails to comply with the provisions
of the Interim Loan 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, the issuance of
warrants and registration rights so as to
reflect the terms of the High Yield Securities
and warrants that would have been issued in
accordance with the Interim Loan Fee Letter had
the Company and the Sponsor complied
B-4
therewith.
GOVERNING LAW State of New York.
INTERIM LENDERS' COUNSEL Xxxxxx & Xxxxxxx.
B-5
ANNEX B-I
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 ANNEX B-I IS ATTACHED.
COMPANY....................... The Company.
TERM LOANS.................... On the Maturity Date, subject to satisfaction
of the conditions set forth below, the
outstanding Interim Loans will be automatically
extended 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.
EXCHANGE NOTES................ At any time on or after the Maturity Date, a
holder of Term Loans may exchange, in
connection with the transfer of a Term Loan to
any person other than a person who was an
Interim Lender on the Maturity Date and with
the consent of the Administrative Agent, all or
a portion of the Term Loans to be transferred
for Exchange Notes having a principal amount
equal to the principal amount of the Term Loan
for which it is exchanged and having a fixed
interest rate equal to the interest rate on the
Term Loan at the time of transfer. 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 on the Closing Date.
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, would become an
Event of Default shall have occurred and be
continuing under the Interim Loan Agreement,
the Engagement Letter, the Fee Letter or any
other document executed in connection
therewith (collectively, the "INTERIM LOAN
DOCUMENTATION") and no payment default shall
have occurred and be continuing under the
Credit Facilities.
1. PAYMENT OF FEES AND ACCRUED INTEREST. The
Company shall
B-I-1
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
Interim Loan Documentation.
1. 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 will bear interest at an
increasing rate equal to the Initial Rollover
Rate plus the Rollover Spread (as defined
below). The interest rate on the Term Loans in
effect at any time shall not exceed 18% PER
ANNUM or be less than 13.5% PER ANNUM. To the
extent interest payable on the Term Loans 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 by capitalizing such interest as
additional Term Loans. Notwithstanding the
limitations set forth in this paragraph,
interest will accrue on any overdue amount
(whether interest or principal, including
defaulted interest), 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.
"ROLLOVER SPREAD" shall be 50 basis points
during the 90-day period commencing on the
Maturity Date. The Rollover Spread shall
increase by 50 basis points upon each 90-day
anniversary of the Maturity Date.
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.
MANDATORY REPAYMENT........... Same as Interim Loans.
CHANGE OF CONTROL............. Same as Interim Loans.
OPTIONAL REPAYMENT............ Except as set forth below, the Term Loans 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
B-I-2
and all accrued and unpaid interest to the date
of repayment. The Exchange Notes will be
redeemable at any time, in whole or in part, at
the option of the Company, subject to a
customary make-whole premium of treasuries plus
50 basis points.
YIELD PROTECTION.............. Same as Interim Loans.
PAYMENTS...................... Same as Interim Loans.
COVENANTS..................... Same as Interim Loans, in the case of the Term
Loans. The Exchange Notes will have covenants
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).
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 with respect to Term Loans. The Exchange
Notes will have defeasance provisions customary
for high yield securities.
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 extension of Interim
Loans to Term Loans. The Company and the
Guarantors, jointly and severally, 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
B-I-3
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.
B-I-4
EXHIBIT C TO COMMITMENT LETTER
FUNDING CONDITIONS
CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS ASSIGNED TO THEM
IN THE COMMITMENT LETTER TO WHICH THIS EXHIBIT C IS ATTACHED AND OF WHICH IT
FORMS A PART. THE AVAILABILITY OF THE INTERIM LOANS AND THE CREDIT FACILITIES IS
CONDITIONED UPON SATISFACTION OF, AMONG OTHER THINGS, THE CONDITIONS PRECEDENT
SUMMARIZED BELOW (THE DATE UPON WHICH ALL SUCH CONDITIONS PRECEDENT SHALL BE
SATISFIED AND THE INTERIM LOANS AND CREDIT FACILITIES WILL BE FUNDED, THE
"CLOSING DATE") ON OR BEFORE NOVEMBER 30, 1999.
2. Each Credit Party shall have executed and delivered definitive financing
documentation with respect to the Interim Loans and the Credit Facilities
in form and substance satisfactory to the Lenders containing the terms and
conditions described herein and other terms and conditions customary for
similar transactions and the conditions thereto shall have been satisfied,
including lien searches, solvency opinions, environmental reports and
legal opinions.
3. There shall not exist (PRO FORMA for the Acquisition and the financing
thereof) any default or event of default under the Credit Facilities, the
Interim Loan Agreement or under any other material indebtedness or
agreement of the Company or the Acquired Business.
4. The Company shall have received (i) up to $58.9 million in cash or
contributed capital from the issuance or retention of its equity
securities to the Sponsor, its affiliates, or by members of the management
of the Acquired Business and (ii) and shall have issued $24.7 million of
its preferred stock, in each case, on terms satisfactory to the Lenders it
being understood that the terms and conditions on Exhibit A to the
Sponsor's bid letter dated April 30, 1999 are satisfactory. The capital
structure of each Credit Party after the Acquisition shall be as described
in the Commitment Letter.
5. The Acquisition shall have been consummated for an aggregate purchase
price not exceeding $358.1 million (including fees and expenses not
exceeding $24.5 million in the aggregate) pursuant to documentation
satisfactory to the Lenders, and no provision thereof shall have been
waived, amended, supplemented or otherwise modified.
6. The Sponsor and the Company shall have complied with all of their
obligations under and agreements in the Commitment Letter, the Engagement
Letter and the Fee Letters, including without limitation, their
obligations with respect to the marketing of High Yield Securities.
7. There shall not have occurred or become known to the Lenders any event,
development or circumstance that has caused or could reasonably be
expected to cause a material adverse condition or material adverse change
in or affecting (i) the Acquisition, (ii) the condition (financial or
otherwise), results of operation, assets, liabilities, management,
prospects or value of the Company and its subsidiaries, taken as a whole,
or the Acquired Business and its subsidiaries, taken as a whole, or that
calls into question in any material respect the projections previously
supplied to the Lenders or any of the material assumptions on which the
projections were prepared or (iii) the validity or enforceability of any
of the Credit Documentation or the documents relating to the Interim Loans
or the rights and remedies of the Administrative Agent and the Lenders
thereunder. The Lenders hereby acknowledge that the decisions in the
litigation with Tandy Corporation since April 30, 1999 do not in and of
themselves constitute such a material adverse change.
C-1
8. There shall not have occurred any material adverse change, as determined
by the Lenders in their sole discretion, since October 14, 1999, in the
financial or capital markets generally, or in the markets for bank loan or
bridge loan syndication, or high yield debt in particular or affecting the
syndication or funding of bank loans or bridge loans (or the refinancing
thereof) that may have a material adverse impact on the ability to sell or
place the Notes or the High Yield Securities or to syndicate the Credit
Facilities or the Interim Loans.
9. All governmental and third party approvals (including landlords' and other
consents) necessary or, in the discretion of the Administrative Agent,
advisable in connection with the Acquisition, the financing contemplated
hereby and the continuing operations of the Company and its subsidiaries
shall have been obtained and be in full force and effect, and all
applicable waiting periods shall have expired without any action being
taken or threatened by any competent authority that would restrain,
prevent or otherwise impose adverse conditions on the Acquisition or the
financing thereof.
10. The Lenders shall have received audited and unaudited 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,
including an audit of the twelve months ended June 30, 1999 of the
Acquired Business, and all such financial statements shall be satisfactory
in form to the Lenders.
C-2
