ICAHN ASSOCIATES CORP.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
May 1, 2001
Xxxxx X. Xxxxxxxxx
Chairman and CEO
BFMA Holding Corporation
00 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxx 00000
Dear Xx. Xxxxxxxxx:
Icahn Associates Corp. (the "Lender") is pleased to provide BFMA Holding
Corporation ("BFMA") with a commitment (the "Commitment") for $240,000,000 in
bridge financing to be used in connection with BFMA's offer to purchase Morton's
Restaurant Group, Inc. ("Morton's") pursuant to a merger of Angus Acquisition
Corp. and Morton's, refinance all of the outstanding indebtedness of Morton's,
pay all of the related transaction expenses and fund the ongoing capital needs
of Morton's. The Commitment will be in the form of a senior loan facility in the
amount of $120,000,000 (the "Senior Facility") and at least $120,000,000 of
Subordinated Bridge Notes (the "Notes") subject to the preparation, execution
and delivery of final documentation and legal opinions incorporating the terms
and conditions contained herein and in the Term Sheet and other terms and
conditions customary or otherwise not inconsistent with transactions of this
type or with the terms and conditions of the Term Sheet attached to this letter.
Marietta Corporation ("Marietta") and BFMA, jointly and severally, agree to
reimburse, indemnify and hold harmless the Lender and its affiliates and each of
their respective directors, shareholders, officers and employees (each an
"indemnified person") in connection with and from any expenses, losses, claims,
damages, or liabilities to which the Lender or such indemnified persons may
become subject, insofar as such expenses, losses, claims, damages or liabilities
(or actions or other proceedings commenced or threatened in respect thereof)
arise out of or in any way relate to or result from the actions or activities of
Marietta, BFMA or their respective affiliates in connection with the transaction
contemplated hereby or their actions, proposals, proxy contests, acquisition
offers, or stockholdings of, Morton's Restaurant Group, Inc. or its affiliates,
and to reimburse the Lender and each indemnified person, upon their demand, for
any reasonable out-of-pocket legal or other expenses incurred in connection with
any of the foregoing or investigating, defending or participating in any such
expenses, losses, claim, damage, liability, or any action or other proceeding,
whether commenced or threatened (whether or not the Lender or any such
indemnified person is a party to any action or proceeding out of which any such
expense arises), except to the extent of such indemnified person's gross
negligence or willful misconduct. After the execution and delivery of the final
documents relating to the Senior Facility and the Notes, the obligation of
Marietta and BFMA to indemnify the Lender and pay such costs shall be
exclusively governed by the final documents.
The Lender acknowledges that: (i) the terms of the Commitment may be
publicly disclosed by BFMA by filing copies of this document with the
appropriate governmental authorities and otherwise describing the terms of the
Commitment as required by law; (ii) BFMA may identify the Lender in connection
with the Commitment and the acquisition contemplated hereunder and otherwise
describe the Commitment, provided that any press release or written statement
identifying the Lender or describing the Commitment (other than previously
approved language) will be subject to the Lender's approval (which will not be
unreasonably withheld or delayed); (iii) it will cause its officers and
directors to cooperate on a
Xxxxx X. Xxxxxxxxx
May 1, 2001
Page 2
reasonable basis in connection with BFMA's efforts to consummate the acquisition
contemplated hereunder; and (iv) BFMA shall not be required to close on the
Senior Facility and the Notes.
The Commitment shall expire at 5:00 p.m. on 90 days from the date hereof
(the "Expiration Date") unless BFMA or a related entity has entered into a
merger agreement with Morton's prior to the Expiration Date, in which case the
Expiration Date shall be automatically extended for an additional 90 days
without any further payment to the Lender. This letter will not bind the Lender
unless on or prior to 5:00 p.m. on May 1, 2001 BFMA has delivered to the Lender
by wire transfer the sum of $1.5 million pursuant to instructions to be provided
by the Lender. In any event having signed this letter BFMA shall be obligated to
pay the sum of $1.5 million to the Lender.
BFMA acknowledges that, in addition to the $1.5 million payment described
above, BFMA shall be obligated to pay any additional fees, if any, due and
payable as set forth under the caption "Additional Fee" in the Term Sheet, the
terms of which shall be effective commencing with the execution of this letter
by all of the parties hereto.
This commitment letter may be executed in counterparts, each of which shall
be deemed an original and all of which counterparts shall constitute one and the
same documents.
Very truly yours,
ICAHN ASSOCIATES CORP.
/s/ Xxxxxxx Xxxxx
-----------------------------------
Xxxxxxx Xxxxx
President
Accepted this 1st day
of May, 2001
BFMA HOLDING CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxxx
Chairman and CEO
MARIETTA CORPORATION
By: /s/Xxxxx X. Xxxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxxx
Chairman and CEO
TERM SHEET
--------------------------------------------------------------------------------
Borrower/Issuer.............. The entity (the "Borrower") surviving the merger
of Angus Acquisition Corp. (the "Acquisition
Co."), an entity wholly owned by BFMA Holding
Corporation ("BFMA"), and Morton's Restaurant
Group, Inc. ("Morton's").
Lender....................... Icahn Associates Corp. or an affiliate
designated by it (the "Lender").
Aggregate Loan Amount........ $240 million, in the form of a $120 million
senior credit facility (the "Senior Facility")
and at least $120 million in subordinated bridge
notes (the "Notes").
Use of Proceeds.............. The proceeds of the Senior Facility and the
Notes will be used to fund a portion of the
necessary capital to acquire for cash all of the
common stock and related securities of Morton's
pursuant to a merger of the Acquisition Co. and
Morton's, refinance all of the debt of Morton's
and its subsidiaries, pay all of the related
transaction fees and expenses reasonably
acceptable to the Lender incurred in connection
therewith, and fund the ongoing capital needs of
the Borrower.
Closing Date................. The closing of the Senior Facility and the Notes
shall occur concurrently with the merger of the
Acquisition Co. and Morton's (the
"Acquisition").
SENIOR FACILITY
Amount of Revolver and Term.. $120 million, comprised of an $80 million term
loan (the "Term Loan") and a $40 million
revolving credit facility (the "Revolver").
Revolver..................... The Revolver will provide for $40 million on a
revolving basis (which may be borrowed, repaid
and reborrowed as needed). It shall not contain
any borrowing base restrictions and be available
in full during the period commencing on the
Closing Date and ending on the first anniversary
of the Closing Date and the outstanding balance
shall be due in full, with accrued and unpaid
interest and otherwise in compliance with the
terms hereof on the first anniversary of the
Closing Date.
Term Loan.................... The Term Loan shall be in the amount of $80
million and be available and drawn down in full
on the Closing Date. There will be no mandatory
amortization of the principal amount of the Term
Loan and the outstanding balance shall be due in
full, with accrued and unpaid interest and
otherwise in compliance with the terms hereof on
the first anniversary of the Closing Date.
Interest..................... The Term Loan and the Revolver shall both bear
interest at a floating rate equal to the
three-month London Interbank Offered Rate
("LIBOR Rate") plus 350 basis points as
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customarily calculated. The documentation will
contain customary LIBOR breakage provisions and
LIBOR borrowing mechanics, and LIBOR rate
definitions.
Interest Payment Dates ...... Interest will be compounded and payable in cash
quarterly (at the expiration of each three-month
LIBOR period) in arrears on the average daily
balance outstanding on the Revolver and the Term
Loan.
Unused Revolver Fee ......... The Lender shall be paid an unused revolver fee
equal to 50 basis points (calculated on the
basis of a 360-day year and actual days
elapsed), to be paid on the Interest Payment
Dates.
Collateral .................. The principal of and interest on the Senior
Facility will be secured by a fully perfected
first priority security interest in all of the
existing and after acquired, real and personal,
tangible and intangible, assets of the Borrower
and its subsidiaries. The Senior Facility will
also be guaranteed by BFMA and each of its
subsidiaries, with BFMA paying guarantee fees to
its subsidiaries as necessary to provide
properly binding guarantees. If guarantees are
paid by foreclosure of assets, application of
the escrow proceeds or otherwise, the
subrogation rights of the guarantor will be
subordinate to the rights and control of the
Lender in all respects. The Senior Facility will
also be collateralized as contemplated in
"Collateral" below.
Assignments and
Participations ............ The Lender may assign all or a portion of its
loans and commitments under the Senior Facility
or sell Participations therein, provided that
assignments shall be in amounts of no less than
$20 million, if assigned or participated to any
entity other than affiliates of the Lender.
Provision of Assistance ..... The Borrower shall provide all information and
make available such management, personnel and
materials as is reasonably considered necessary
for assignments or participations.
SUBORDINATED BRIDGE NOTES
Issue........................ Subordinated bridge notes (the "Notes").
Principal Amount ............ Not less than $120 million.
Maturity Date................ The Notes will be due and payable in full on the
first anniversary of the Acquisition.
Cash Interest................ The Borrower shall pay to the Lender cash
interest of 12% per annum compounded and payable
quarterly in cash in arrears on the principal
amount of the Notes outstanding on a 30/360
basis. Furthermore, Marietta Corporation, an
entity wholly owned by BFMA ("Marietta"), will
be required to pay to BFMA the maximum dividend
payments allowable under the terms of its senior
credit agreement to the extent such funds are
available. All amounts and property paid by
Xxxxxxxx to BFMA by way of dividend,
distribution, reorganization or
Page 2
otherwise will be placed in escrow with a third
party to be mutually agreed upon which will be
available to pay promptly any deficiency in cash
interest or principal or other payments due on
the Senior Facility or the Notes as long as the
Senior Facility or the Notes are outstanding.
PIK Interest................. The Borrower shall pay to the Lender PIK
interest of 14% per annum, compounded and
payable quarterly, on the principal amount of
the Notes outstanding on a 30/360 basis. At its
option, the Borrower may elect to pay the PIK
interest in cash or in the form of additional
Notes.
Collateral................... The principal of and interest on the Notes will
be secured by a second lien on all of the
existing and after acquired, real and personal,
tangible and intangible, assets of the Borrower
and its subsidiaries. The Notes will also be
guaranteed by BFMA and each of its subsidiaries,
with BFMA paying guarantee fees to its
subsidiaries as necessary to provide properly
binding guarantees. If guarantees are paid by
foreclosure of assets, application of the escrow
proceeds or otherwise, the subrogation rights of
the guarantor will be subordinate to the rights
and control of the Lender in all respects. Each
guarantee of the Senior Facility and the Notes
will include separate covenants to regulate the
activities of each company with respect to
insider transactions. BFMA will also pledge: (i)
its stock in Marietta which will constitute a
first lien on 100% of the capital stock of
Marietta while the Senior Facility or the Notes
are outstanding; and (ii) all of its stock of
the Borrower which will constitute a first lien
on not less than 60% of the capital stock of the
Borrower while the Senior Facility or the Notes
are outstanding, in each case together with all
related voting privileges to secure both the
Senior Facility and the Notes. The guarantee
from BFMA shall contain provisions that limit
the amount of total indebtedness that may be
incurred at Marietta to no more than $65
million.
Transferability ............. The Notes will be freely transferable.
**********************************************************************
Ranking/Terms of
Subordination ............. The Notes will be subordinated to no more than
$120 million of senior debt. In the event of a
senior indebtedness default which entitles the
holders of the senior indebtedness to accelerate
the maturity thereof, no payment will be made on
the Notes until the senior indebtedness has been
repaid or such default is cured in writing. The
foregoing shall in no way limit the rights or
powers of the Lender with respect to BFMA,
Marietta or any of their other subsidiaries.
Board Representation ........ As long as the Senior Facility or the Notes
remain outstanding, the Lender shall have the
right to appoint one representative to serve on
the Board of Directors of the Borrower and its
subsidiaries, BFMA and Marietta and their
respective subsidiaries to the extent that they
have boards that meet or act by consent. Such
right shall be provided in preferred stock to
Page 3
be issued by each such company. Each of these
companies will require a unanimous vote of the
board of directors in order to file for
bankruptcy or, following the occurrence of an
Event of Default, on all matters unless
otherwise permitted by the Lender, which
requirement will be set forth in the
certificates of incorporation of each such
company. The by-laws and certificates of
incorporation will provide in a manner
satisfactory to the Lender that, in the event of
an Event of Default, the Lender, through the
exercise of voting rights of stock under the
applicable security documents, will be entitled
to elect and replace the entire board. After the
closing, the by-laws and certificates of
incorporation of the Borrower and each of its
subsidiaries, BFMA and Marietta and their
respective subsidiaries may not be amended
without the unanimous approval of the board of
directors of each entity.
Repayment Terms.............. Upon repayment of the Senior Facility and the
Notes, whether in advance, at maturity, upon
acceleration or otherwise, the Lender shall be
paid all outstanding principal, together with
interest accrued and unpaid to the date fixed
for such repayment plus an amount equal to 7% of
the sum of $240 million and the principal amount
of all PIK Notes (the "Repayment Premium") plus
any and all other fees or payments outstanding
under the Senior Facility or the Notes. The
Senior Facility and the Notes may be repaid at
any time, in whole or in part.
Conditions Precedent ........ The Lender's obligation to provide the Senior
Facility and purchase the Notes will be
conditioned upon the following: (i) completion
of customary due diligence, (ii) completion of
final documentation which shall be negotiated in
good faith, (iii) completion of the Acquisition
on customary terms and (iv) an equity
contribution, in the form of common stock of the
Borrower, of not less than $20 million from BFMA
and its affiliates, a portion of which will be
in the form of cash and a portion of which will
be in the form of Morton's stock valued at the
acquisition price.
Representation and
Warranties ................ The agreements relating to the Senior Facility
and the Notes, including without limitation the
guarantees, will contain representations and
warranties customarily found in similar
financings. The agreements relating to the
Senior Facility, the Notes and the guarantees
will contain representations and warranties
regarding corporate organization and power,
absence of violation of organizational
documents, other agreements and applicable laws,
absence of material litigation, obtaining of
government and other approvals, subsidiaries,
payment of taxes, authorization and
enforceability of the documents, compliance with
other instruments, full disclosure, margin
securities, ERISA matters, accuracy of financial
statements, absence of material adverse change,
governmental permits and licenses, compliance
with laws, environmental matters and absence of
change of control provisions with respect to
liquor licenses which would interfere with the
Lender's ability to foreclose and dispose of the
collateral (and
Page 4
the Lender shall receive a legal opinion with
respect to such licenses).
Covenants.................... In addition to the provisions set forth herein,
the agreements relating to the Senior Facility
and the Notes, including without limitation the
guarantees, will contain affirmative and
negative covenants customary for similar
financings. The Senior Facility, the Notes and
the guarantees will contain certain covenants
including: (i) limitations on the incurrence of
additional indebtedness with reasonable
incurrence tests; (ii) prohibitions on
restricted payments; (iii) limitations on the
sale of assets with reasonable "carve-outs";
(iv) limitations on lines of business; (v)
limitations on transactions with affiliates;
(vii) restrictions on mergers, consolidations
and the transfer of all or substantially all of
the assets of the Borrower to another person;
(viii) a minimum pro forma EBITDA to Cash
Interest Expense coverage test and other
reasonable and customary financial covenant
tests requested by the Lender, (ix) prohibitions
on payments, compensation or other transfers to
Xxxxx Xxxxxxxxx or other affiliates or payments
or compensation to other executives outside the
ordinary course so long as the Senior Facility
and Notes are outstanding and (x) the agreement
of Xxxxx Xxxxxxxxx and Xxxxxxx Xxxxx not to
compete, directly or indirectly, either through
passive investment or otherwise, with the
specific businesses of Marietta and Xxxxxx'x. In
addition, the guaranty of BFMA will include the
covenants, representations and warranties set
forth in the Marietta loan documents, which will
apply to Marietta, the breach of which in any
material respect will constitute an Event of
Default under the Senior Facility and the Notes.
Equitable Rights............. The closing documents will provide for, upon the
occurrence of an Event of Default, the
availability of accelerated legal proceedings
and equitable and injunctive relief for the
benefit of the Lender, to the maximum extent
permitted by law.
Events of Default ........... Events of default in the Senior Facility, the
Notes and the guarantees shall include, without
limitation: (i) non-payment of the principal or
interest due on the Senior Facility or the Notes
with a one business day grace period, (ii)
materially inaccurate representations and
warranties, (iii) any material breach of
covenant, (iv) undischarged judgments in excess
of $5 million against the Borrower, (v) a
default in the payment of indebtedness of the
Borrower with a principal amount in excess of $5
million in the aggregate beyond any applicable
grace periods thereof, (vi) defaults by Xxxxxxxx
under its loan documents and (vii) bankruptcy,
dissolution or liquidation of the Borrower.
Material breaches by guarantors will also
constitute Events of Default and the documents
for the Senior Facility, the Notes and the
guarantees will contemplate that Events of
Defaults under any such documents will
constitute Events of Defaults under the Senior
Facility, the Notes and the guarantees.
Page 5
Remedies Upon an Event
of Default................. Upon the occurrence of any Event of Default, the
Warrant will be increased to include an
additional 5% of the fully diluted common stock
at the Borrower. The Lender may, at its option,
by written notice to the Borrower, declare the
Senior Facility and Notes due and payable and
proceed against the collateral. Upon the
occurrence of an Event of Default described in
(vii), the Senior Facility and Notes shall
become automatically accelerated. If an event of
default has occurred and has not been cured
within any applicable grace period, the cash
interest rate on each of the Senior Facility and
the Notes shall be increased by four percentage
points until such Event of Default has been
cured or until the Senior Facility and the Notes
have been repaid. In addition to the rights
customary in security agreements, the documents
will provide that, if the Senior Facility and
the Notes have not been fully repaid when due,
as a result of acceleration, maturity or
otherwise, then, together with any accrued and
unpaid interest and any applicable Repayment
Premium, BFMA will take all additional actions
requested by the Lender to transfer to the
Lender title to its stock in the Borrower and
Marietta together with all related voting
privileges and the Lender shall be required to
sell the Borrower and/or Marietta in an orderly
fashion. To the extent that the proceeds the
Lender receives upon the sale of the stock of
the Borrower and Marietta are sufficient to
repay the remaining balance of the Senior
Facility and the Notes together with any accrued
and unpaid interest, the Repayment Premium and
the expenses of the Lender related to
administering its collateral or any other
amounts due or owing to the Lender or expenses
of the Lender, the Lender will remit such excess
proceeds to Borrower or the guarantors as
required by law. BFMA's subrogation rights will
be subordinated to the Lender.
Warrants..................... Upon issuance of the Notes, the Borrower will
grant a warrant to the Lender to purchase shares
of common stock (the "Warrant") representing 23%
of the Borrower's fully diluted common stock
(after taking into account the shares reserved
for issuance under the Management Incentive
Program, which shares shall not exceed 15% of
the fully diluted common stock). The Warrant
will be immediately exercisable in whole or in
part. The Warrant will have a nominal exercise
price and a 7-year term. The Warrant will
contain typical anti-dilution provisions,
including provisions that provide for
adjustments for below fair-value issuances,
stock splits and combinations, reclassifications
and shares or options issued under Management
Incentive Programs. The number of shares
represented by the Warrant shall not be adjusted
for any future issuances of equity or equity
like securities at or above fair value. The
Warrant shall contain senior "piggy-back"
registration rights, demand registration rights
after the consummation of an initial public
offering, cashless exercise and tag-along
rights. The Warrant shall be exchangeable, on a
fair market value exchange ratio, for BFMA
stock, if BFMA consummates an initial public
offering in lieu of the Borrower or another
entity that is the "going public" vehicle for
Page 6
Xxxxxx'x or a portion of Xxxxxx'x business. The
Borrower and the Lender will agree upon the
value of the Warrant.
Governing Law ............... State of New York.
Miscellaneous ............... Customary provisions regarding consent to forum
in New York and service of process.
**********************************************************************
Commitment Fee: BFMA will pay the Lender a non-refundable commitment fee (the
"Commitment Fee") of $1.5 million payable upon the acceptance by BFMA and
Xxxxxxxx of the Lender's executed commitment letter to provide the Senior
Facility and purchase the Notes (the "Commitment") to which this Term Sheet is
attached (the "Commitment Letter").
Additional Fee: In the event that, within ten months after the date of the
Commitment Letter, (a) no public announcement is made regarding a Transaction
(as defined below) and any Covered Person sells, conveys or otherwise disposes
(collectively, a "Sale") of any shares of Xxxxxx'x stock beneficially owned by
such Covered Person (other than to another Covered Person) or enters into a
binding contract to do so, or (b) a public announcement is made either by
Xxxxxx'x or a third party (other than an affiliate or associate of the Lender)
involving Xxxxxx'x actual or potential participation in a merger, a stock
buyback, a change of control, special dividend or similar extraordinary event or
business combination transaction, any tender offer, or any similar or related
event that will result in the payment of consideration in exchange for Xxxxxx'x
stock (a "Transaction"), the Lender shall be entitled to additional compensation
from BFMA in an amount equal to (x) 50% of the Profits, multiplied by the number
of shares of Xxxxxx'x actually sold by all Covered Persons prior to the
ten-month date, in the case of clause (a), or (y) in the case of clause (b), the
sum of (A) 50% of the Profits, multiplied by the number of shares of Xxxxxx'x
actually sold by all Covered Persons prior to the ten-month date, and (B) 50% of
the Profits, multiplied by the number of shares of Xxxxxx'x actually sold by all
Covered Persons after the announcement of the Transaction (or a replacement
Transaction which terminates the prior Transaction) and after the ten-month date
but on or prior to the withdrawal or consummation of the Transaction (or
replacement Transaction). For purposes of this Term Sheet, Covered Persons shall
mean BFMA, those individuals and entities listed at any time in the Schedule 13D
filed by BFMA with respect to Xxxxxx'x, and their respective officers,
directors, "affiliates" and "associates" (as defined in the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder).
For purposes of this Term Sheet, Proceeds shall mean the aggregate consideration
received by Covered Persons for their Xxxxxx'x shares sold plus any dividends
received with respect to such shares, and a pro rata portion (based on the
number of shares sold by all Covered Persons to the number of shares owned by
all Covered Persons) of expenses reimbursed and breakup, termination or similar
fees received, divided by the number of Xxxxxx'x shares sold by all Covered
Persons. For purposes of this Term Sheet, Full Cost per Share shall mean the sum
of (i) the aggregate cost of the shares purchased by the Covered Persons, (ii)
actual interest costs paid by the Covered Persons on any borrowings utilized to
purchase the Xxxxxx'x shares and the implied carry costs on the remaining shares
at the broker call rate of interest calculated on the holding period of each
share, (iii) reasonable legal fees and expenses incurred by BFMA relating to its
efforts to acquire Xxxxxx'x, (iv) all fees and expenses paid to Innisfree M&A
Incorporated, (v) all fees and expenses relating to the proxy solicitation,
offer(s) and mailings to be made by BFMA and (vi) the Commitment Fee, divided by
the maximum number of Xxxxxx'x shares owned by all Covered Persons from the date
hereof. For purposes of this Term Sheet, Profits shall mean Proceeds less Full
Cost per Share. In the case of clause (a), the payment shall be made by BFMA on
the ten-month date; in the case of clause (b), the payment with respect to the
shares actually sold prior to the ten-month date shall be made by BFMA on the
ten-month date and the payment with respect to the remaining shares shall be
made by BFMA within five business days after proceeds are received, whether
through a Transaction or otherwise. Other than the Commitment Fee, there will be
no other fees required to be paid to the Lender prior to or upon the funding of
the Senior Facility and the Notes. BFMA will deliver documents evidencing all of
the foregoing calculations and will provide the Lender with full access to all
backup necessary to audit, determine and examine all such calculations. BFMA
agrees that it will take no action and will not permit Xxxxxxxx to transfer
Marietta or its assets prior to the payment in full of all obligations to the
Lender.
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