EXHIBIT B(1)
CREDIT SUISSE FIRST BOSTON
Xxxxxx Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
December 23, 1999
Xxxx Capital, Inc.
Two Xxxxxx Place
Boston, Massachusetts 02116
V.D.I. MultiMedia, Inc.
-----------------------
Senior Secured Credit Facilities and
------------------------------------
Senior Subordinated Facility Commitment Letter
----------------------------------------------
Ladies and Gentlemen:
You have advised Credit Suisse First Boston ("CSFB") that Xxxx
Capital, Inc. (the "Investors"), proposes to create a newly formed entity
reasonably satisfactory to CSFB, which will merge (the "Merger") into V.D.I.
MultiMedia, Inc., a Delaware corporation (the "Company"), in a transaction (the
"Recapitalization") that is intended to provide for recapitalization accounting
treatment. The Company is a wholly-owned subsidiary of V.D.I. MultiMedia, a
California corporation (the "Parent Company"), and prior to consummation of the
Recapitalization, the Company will be merged with and into the Parent Company
with the Company as the surviving corporation. We understand that the
Recapitalization will be accomplished through the Merger, substantially in
accordance with the provisions of the Recapitalization Agreement (as defined in
Exhibit A attached hereto) and the sources and uses set forth in Annex II to
Exhibit A attached hereto. You have further advised us that in connection with
the Recapitalization (i) the Investors will make or cause to be made an equity
contribution of approximately $65 million to the Company, (ii) the Company will
obtain senior secured credit facilities (the "Senior Facilities") in an
aggregate principal amount of up to $110 million (as more fully described in the
Summary of Principal Terms and Conditions attached hereto as Exhibit A (the
"Senior Term Sheet"), and (iii) the Company will obtain senior subordinated loan
financing (the "Senior Subordinated Facility") of $40 million, (the
Recapitalization, the Merger, the equity
investment by the Investors and management, the existing shareholder rollover
equity and the transactions referred to in the immediately preceding clauses (i)
through (iii) are collectively referred to herein as the "Transactions"). The
approximate sources and uses of the funds necessary to consummate the
Transactions are set forth on Xxxxx XX to the Senior Term Sheet.
You have requested that CSFB (i) agree to structure, arrange and
syndicate the Senior Facilities, (ii) commit to provide the Senior Facilities
and to serve as advisor, arranger, administrative agent and collateral agent
therefor, (iii) agree to structure, arrange and syndicate the Senior
Subordinated Facility (together with the Senior Facilities, the "Facilities")
and (iv) commit to provide the Senior Subordinated Facility and to serve as
advisor, arranger and administrative agent therefor. CSFB is pleased to advise
you of (i) its willingness to act as exclusive advisor, arranger, administrative
agent and collateral agent for the Senior Facilities, (ii) its commitment to
provide the entire amount of the Senior Facilities upon the terms and subject to
the conditions set forth or referred to in this commitment letter and the
exhibits hereto (the "Commitment Letter") (including, without limitation, the
conditions set forth in Exhibit C attached hereto applicable thereto) and in the
Senior Term Sheet, (iii) its willingness to act as exclusive advisor, arranger
and administrative agent for the Senior Subordinated Facility and (iv) its
commitment to provide the entire amount of the Senior Subordinated Facility upon
the terms and subject to the conditions set forth or referred to herein
(including, without limitation, the conditions set forth in Exhibit C attached
hereto applicable thereto) and in the Summary of Principal Terms and Conditions
attached as Exhibit B hereto (the "Senior Subordinated Term Street"; together
with the Senior Term Sheet, the "Term Sheets").
CSFB reserves the right and intends, prior to or after the execution
of the definitive documentation with respect to the Facilities (the "Facilities
Documents"), to syndicate all or a portion of its commitments to one or more
financial institutions (such financial institutions, together with CSFB, the
"Lenders") identified by CSFB in consultation with, and reasonably acceptable
to, you, which Lenders will become parties to the Facilities Documents. It is
agreed that CSFB will act as the sole administrative agent and advisor for, and
sole arranger and syndication manager of, the Facilities and that no additional
agents or co-agents or co-arrangers will be appointed without the prior written
consent of CSFB. CSFB hereby acknowledges that its commitment to provide the
Facilities is not subject to the completion of a successful syndication of the
Facilities; provided, however, that (i) the foregoing acknowledgment by CSFB
-------- -------
shall not affect the application or interpretation of any of the terms and
conditions set forth or referred to herein (including, without limitation, the
conditions
2
set forth in Exhibit C attached hereto) or the discretion or ability
of CSFB to exercise any rights, powers or actions available to it set forth or
referred to herein (including, without limitation, as set forth in the exhibits
attached hereto), and (ii) the inability of CSFB to successfully syndicate any
of the Facilities (A) may be considered in determining whether any of the other
terms and conditions set forth or referred to herein (including, without
limitation, the conditions set forth in Exhibit C attached hereto) have been
complied with or satisfied, in CSFB's reasonable judgment, and (B) shall be a
factor in CSFB's discretion to exercise any rights, powers or actions available
to it set forth or referred to herein (including, without limitation, as set
forth in the exhibits attached hereto).
CSFB also reserves the right to require Company to issue, in lieu of
the Senior Subordinated Facility (and, at the option of CSFB in lieu of all or a
portion of the Senior Facilities) high-yield debt securities (the "Alternative
Securities"); provided that such issuances shall be made in consultation with,
--------
and with the consent of, the Investors and Company, not to be unreasonably
withheld, it being understood that (x) the issuance of Alternative Securities in
an amount equal to at least $40 million (with any excess thereof being applied
solely to reduce the total amount of the Senior Facilities) in lieu of the
Senior Subordinated Facility shall be deemed to satisfy any condition precedent
to the Senior Facilities relating to the funding of the Senior Subordinated
Facility and (y) except as provided in this paragraph, the issuance of
Alternative Securities is not a condition for the obligations of CSFB hereunder.
In addition, CSFB also reserves the right to employ the services of
Credit Suisse First Boston Corporation ("CSFBC") in providing services
incidental to the provision of the Senior Subordinated Facility or the
Alternative Securities and any resale or refinancing of the Senior Subordinated
Loans (as defined in the Senior Subordinated Term Sheet), and you agree that,
solely in connection with the provision of such services, CSFB and CSFBC may
share with each other any confidential or other information relating to the
Investors and the Company and its subsidiaries and their respective affiliates
as from time to time they may possess.
CSFB will manage all aspects of the syndication, including decisions
as to the selection of institutions to be approached and when they will be
approached, when their commitments will be accepted, which institutions
identified by us in consultation with, and reasonably acceptable to you and the
Company, will participate in the allocations of the commitments among the
Lenders and the amount and distribution of fees among the Lenders. The
Investors understand that the Senior Facilities and the Senior Subordinated
Facility will be separately syndicated. You agree to assist CSFB
3
in forming any such syndicate and to provide the potential Lenders, promptly
upon request, with all information reasonably requested by them to complete
successfully the syndication, including but not limited to (a) an information
package, including a Confidential Information Memorandum for each of the
Facilities and other marketing materials for delivery to potential Lenders and
participants, and (b) all information and projections prepared by you or your
advisors relating to the Transactions. You also agree to participate in, and to
make appropriate senior officers and representatives of the Investors, available
(and to use commercially reasonable efforts to make senior officers and
representatives of Company available) to participate in, informational meetings
for potential Lenders and participants at such times and places as CSFB may
reasonably request and to use commercially reasonable efforts to ensure that
CSFB's syndication efforts materially benefit from the Investors and the
Company's existing lending relationships.
The Investors represent and warrant and covenant that, to the best of
their knowledge:
(a) all written information (other than financial projections) which
has been or is hereafter furnished to CSFB by you or any of your
representatives in connection with the Transactions is complete and correct
as of the date thereof in all material respects and does not 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 misleading
in light of the circumstances under which such statements were or are made;
and
(b) all financial projections that have been or are hereafter prepared
by you or on your behalf and made available to CSFB have been or will be
prepared in good faith based upon what you believe to be reasonable
assumptions (it being understood that such projections are subject to
significant uncertainties and contingencies, many of which are beyond your,
or the Company's, control and that no assurance can be given that the
projections will be realized).
The Investors agree to supplement the information and projections referred to in
clauses (a) and (b) above from time to time until completion of the syndication
so that the representations and warranties in the preceding sentence remain
correct without regard to when such information and projections were furnished.
In arranging and syndicating the Facilities, CSFB will be entitled to use and
rely on such information and projections without independent verification
thereof.
4
In connection with the syndication of the Facilities, CSFB may, in its
discretion, allocate to other Lenders portions of any fees payable to CSFB in
connection with the Facilities. You agree that neither you nor the Company nor
any of your or its affiliates will pay to any Lender any compensation or titles
of any kind for its participation in the Facilities except as expressly provided
for in this letter or in the fee letter dated the date hereof between you and
CSFB (the "Fee Letter").
The Investors agree, jointly and severally, to (or to cause Company
to) reimburse CSFB and its affiliates, upon request made from time to time, for
their reasonable out-of-pocket fees and expenses incurred in connection with the
preparation, execution and delivery of this letter, the Fee Letter, the Warrant
Letter (as defined below) and the Facilities Documents and the activities
thereunder or contemplated thereby, including without limitation syndication
expenses (other than fees allocated in accordance with the preceding paragraph)
and the reasonable fees and expenses of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
and such other outside counsel and advisors to CSFB and its affiliates approved
by you (such approval not to be unreasonably withheld) payable on the earlier of
(i) the date the commitment of CSFB hereunder is terminated or (ii) the Closing
Date. Notwithstanding the foregoing, in the event the Recapitalization is not
consummated, the Investors shall only be obligated to reimburse the foregoing
fees and expenses of CSFB to the extent the Investors are reimbursed therefore
by the Company.
The Investors also agree, jointly and severally, to (or to cause the
Company to) indemnify and hold harmless CSFB and each other Lender, their
respective affiliates and each of their respective directors, officers,
employees, agents and advisors (each, an "Indemnified Party"), from and against
any and all claims, damages, liabilities (including securities law liabilities),
losses and expenses, including reasonable fees, expenses and disbursements of
counsel, which may be incurred by or asserted against an Indemnified Party in
connection with CSFB's or any Lender's commitment or participation in the
transactions contemplated by this letter, the Facilities or any related matter
or any investigation, litigation or proceeding in connection therewith and
whether or not the Recapitalization is consummated or the Facilities are drawn
upon, except to the extent such claim, damage, loss, liability or expense is
found to have resulted from such Indemnified Party's own bad faith, gross
negligence or willful misconduct; provided, however, that in connection with any
-------- -------
such third party claim, you shall not be responsible for, or required to hold
harmless any Indemnified Party from and against, the reasonable fees, expenses
and disbursements of more than one counsel for all of the Indemnified Parties
taken together, except to the extent any such Indemnified Party requires its own
counsel in order to be adequately represented
5
in the reasonable judgment of such Indemnified Party. No Indemnified Party shall
be responsible or liable to any other party hereto or any other person for
consequential damages that may be alleged as a result of this letter or the
breach of any party's obligations hereunder.
The Investors also hereby agree, in accordance with the terms of a
separate letter dated the date hereof between you and CSFB (the "Warrant
Letter"), to make available to CSFB and the holders of Senior Subordinated
Loans, Exchange Notes or Alternative Securities, as the case may be, warrants
to acquire equity in the Company to assist in the syndication of the Senior
Subordinated Loans, Exchange Notes or Alternative Securities.
The Investors also hereby agree that CSFB shall be entitled, (i) with
your consent, not to be unreasonably withheld, to change the structure, terms,
or amounts, and (ii) in CSFB's reasonable judgment, to change the pricing, in
each case, of any or all of the facilities comprising the Senior Facilities, the
Senior Subordinated Facility or the Exchange Notes if CSFB determines that such
changes are necessary to insure the successful syndication of the Senior
Facilities or the Senior Subordinated Facility, as the case may be; provided
that the total amount of the Facilities remains unchanged.
This letter is delivered to you on the understanding that neither this
letter nor any other agreement between us related to this letter or the
Transactions, including the Term Sheets, the other exhibits hereto, the Fee
Letter, the Warrant Letter and the letter of even date herewith regarding the
engagement of CSFBC with respect to the financing and structure of the
Transactions (the "Engagement Letter"), nor any of their terms or substance
shall be disclosed, directly or indirectly, to any other person except (a) to
your officers, directors, agents and advisors who are directly involved in the
consideration of this matter (and then only on a confidential basis) or (b) as
may be compelled in a judicial or administrative proceeding or as otherwise
required by law (in which case you agree to inform us promptly thereof);
provided, however, that you may disclose (and then only on a confidential basis)
-------- -------
this letter, the term sheets and the other exhibits hereto and their terms and
substance (but not the Fee Letter, the Warrant Letter or the Engagement Letter
or their respective terms and substance) to the Company and its officers,
directors agents and advisors who are directly involved in this matter so long
as they agree to the confidentiality requirements of this letter, upon your
acceptance of this letter; provided, further, that you may disclose (and then
-------- -------
only on a confidential basis) the Fee Letter and its terms and substance solely
to Board of Directors of the Company and its legal counsel so long as they agree
to the confidentiality requirements of this letter, upon your acceptance of this
letter and the Fee Letter.
6
Our offer to provide the Facilities will terminate at 5:00 P.M., New
York time, (i) on December 24, 1999, unless on or before that time you accept
this letter by signing and returning an enclosed counterpart of this letter, the
Fee Letter, the Warrant Letter and the Engagement Letter and (ii) if so accepted
by you on or prior to such time, on April 30, 2000. Subject to the immediately
succeeding sentence, your obligations with respect to indemnification and
confidentiality shall remain in full force and effect, regardless of any
termination of the commitment of CSFB made hereunder. You agree to cause the
Company to become a party to this letter, the Fee Letter, the Warrant Letter and
the Engagement Letter on the date that the Recapitalization is consummated and
thereby assume your obligations thereunder, at which time the Investors shall be
released from such obligations.
This letter is intended to be solely for the benefit of the parties
hereto and is not intended to confer any benefits upon, or create any rights in
favor of, any person other than the parties hereto. This letter and CSFB's
commitments hereunder may not be assigned by you without the prior written
consent of CSFB, and any attempted assignment without such consent shall be
void. CSFB's commitments hereunder may be assigned by CSFB to any of its
affiliates or any Lender. Any such assignment to an affiliate shall not relieve
CSFB from any of its obligations hereunder unless and until the Facilities
Documents with respect to such assigned commitment shall have been executed and
delivered by the parties thereto, but any assignment to a Lender shall be by
novation and shall release CSFB from its commitment hereunder pro tanto. This
--- -----
letter may not be amended or modified or any provision hereof waived except in
writing signed by you and CSFB. This letter shall be governed by and construed
in accordance with the internal laws of the State of New York without giving
effect to the conflicts of laws principles thereof. This letter may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed an original and all of which together shall constitute one and
the same instrument. Delivery of an executed counterpart of a signature page of
this letter by facsimile transmission shall be effective as delivery of a
manually signed counterpart hereof.
[Remainder of this page intentionally left blank]
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We appreciate the opportunity to assist you in this very important
transaction.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
By: /s/ Xxxxxxxxxxx Xxxxxxxxxx
-----------------------------
Name: Xxxxxxxxxxx Xxxxxxxxxx
Title: Director
By: /s/ Xxxxxxx Xxxxx
--------------------------
Name: Xxxxxxx Xxxxx
Title: Director
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE,
XXXX CAPITAL, INC.
By: /s/ Xxxxxx Xxxxxxx
---------------------------
Name:
Title:
8
EXHIBIT A
V.D.I. MultiMedia
-----------------
Senior Secured Credit Facilities
--------------------------------
Summary of Principal Terms and Conditions
-----------------------------------------
Borrower: V.D.I. MultiMedia, Inc., a Delaware corporation
-------- (the "Company"), currently a wholly-owned
subsidiary of V.D.I. MultiMedia, a California
corporation (the "Parent Company"). Prior to
consummation of the Recapitalization, the
Company will be merged with and into the Parent
Company with the Company as the surviving
corporation.
Recapitalization: Pursuant to an Agreement and Plan of Merger
---------------- (the "Recapitalization Agreement"), a
corporation to be established by the Investors
will merge (the "Merger") into the Company in a
transaction (the "Recapitalization") that is
intended to provide for recapitalization
accounting treatment, all substantially in
accordance with the provisions of the
Recapitalization Agreement and the sources and
uses set forth in Annex II attached hereto. In
connection with the Recapitalization, (a) the
Company will obtain the senior secured credit
facilities (the "Senior Facilities") as
described below under the caption "Senior
Facilities" in an aggregate principal amount of
$110 million; (b) an equity contribution of
approximately $65 million will be made to the
Company by the Investors (c) the Company will
obtain senior subordinated financing
structured, arranged and syndicated by CSFB
(the "Senior Subordinated Facility") of
--------------------------------
/1/ All capialized terms used but not defined herein have the meanngs given
to them in the Commitment Letter to which this term sheet is attached.
A-1
$40 million; (d) the Company will pay
reasonable fees and expenses
(including, without limitation, reasonable
fees of outside counsel) in connection
with the foregoing in an amount
not to exceed approximately $14.0 million and
(e) the Company will refinance certain existing
indebtedness in an aggregate principal amount
of approximately $30 million (the
Recapitalization, the Merger, the equity
investment by the Investors and management, the
existing shareholder rollover equity and the
foregoing transactions are collectively
referred to herein as the "Transactions").
Sources and Uses: The approximate sources and uses of funds
---------------- necessary to consummate the Transactions are
set forth on Annex II attached hereto.
Agent: CSFB will act as administrative agent (the
----- "Agent") for a syndicate of financial
institutions identified by CSFB in consultation
with, and reasonably acceptable to, the Company
(the "Lenders"), and will perform the duties
customarily associated with such role.
Advisor and Arranger: CSFB will act as advisor and arranger for the
-------------------- Senior Facilities (the "Arranger"), and will
perform the duties customarily associated with
such roles.
Senior Facilities: (A) Senior secured term loan facility in an
----------------- aggregate principal amount of up to $65.0
million (the "Term Facility'').
(B) Senior secured revolving credit facility
(the "Revolving Facility") in an amount equal
to $45.0 million, of which up to an amount
A-2
to be agreed upon will be available in the
form of letters of credit.
Purpose: (A) The proceeds of the Term Facility will be
------- used by the Company on the date of the initial
funding under the Senior Facilities (the
"Closing Date"), together with the proceeds of
the Senior Subordinated Facility and all of the
equity sources solely (i) to finance the
Purchase Price, (ii) to repay the existing
indebtedness and (iii) to pay related fees
and expenses.
(B) The proceeds of loans under the Revolving
Facility in an amount not to exceed
approximately $17.2 million may be used,
together with the proceeds of the Equity
Contribution and the Senior Subordinated
Facility to finance the Recapitalization, repay
existing indebtedness and pay related fees and
expenses. The proceeds of any subsequent
borrowings under the Revolving Facility will be
used for general corporate purposes.
(C) Letters of credit will be used by the
Company solely for general corporate purposes.
Availability: (A) Loans under the Term Facility will be made
------------ available only on the Closing Date. Such
loans, once repaid may not be reborrowed.
(B) Loans under the Revolving Facility will be
available at any time prior to the final
maturity of the Revolving Facility. Amounts
A-3
repaid under the Revolving Facility may be
reborrowed.
(C) Letters of Credit will be available at any
time before the fifth business day prior to the
final maturity of the Revolving Facility.
Default Rate: The applicable interest rate plus 2% per annum
------------ (charged only at the written election of the
Lenders and only for amounts in payment
default).
Letters of Credit: Letters of credit under the Revolving Facility
----------------- will be issued by a New York-based Lender, as
issuing bank (in such capacity, the "Issuing
Bank"), agreed upon by the Company and the
Agent. Each letter of credit shall expire no
later than the earlier of (a) 12 months after
its date of issuance (but may, under terms to
be agreed upon, be automatically renewed) and
(b) the fifth business day prior to the final
maturity of the Revolving Facility.
Drawings under any letter of credit shall be
reimbursed by the Company on the same business
day. To the extent that the Company does not
reimburse the Issuing Bank on the same business
day, the Lenders shall be irrevocably obligated
to reimburse the Issuing Bank pro rata based
upon their respective Revolving Facility
commitments, with the amount of such
reimbursement payment being deemed to be a
drawing under the Revolving Facility.
The issuance of all letters of credit shall be
subject to the customary procedures of the
Issuing Bank.
A-4
Final Maturity and (A) Term Facility
------------------ -------------
Commitment Loans made under the Term Facility ("Term
---------- Loans") will mature on the seventh anniversary,
Reductions: of the Closing Date, and will amortize in equal
---------- quarterly installments in the aggregate annual
amounts (expressed as a percentage of the
original principal amount thereof) as set forth
below:
===============================
Year Term
Loan
===============================
1 1%
-------------------------------
2 1%
-------------------------------
3 1%
--------------------------------
4 1%
--------------------------------
5 1%
--------------------------------
6 47.5%
--------------------------------
7 47.5%
================================
(B) Revolving Facility
------------------
The Revolving Facility will mature on the
fifth anniversary of the Closing Date.
Guarantees: All obligations of the Company under the
---------- Senior Facilities will be unconditionally
guarantteed by (i) each existing and
subsequently acquired or organized domestic
subsidiary of the Company, and (ii) if there
is a parent holding company of the
A-5
Company, such parent holding company (in which
case, the capital stockof the Company held
by such parent holding company shall be
pledged as Collateral as provided below).
Security: The Senior Facilities and the related
-------- guarantees will be secured by substantially
all the assets of the Company and each
existing and subsequently acquired or
organized domestic subsidiary of the Company
(collectively, the "Collateral"), including
but not limited to (a) a first priority pledge
of all the capital stock of each existing and
subsequently acquired or organized domestic
subsidiary of the Company (65% of material
foreign subsidiaries of the Company) and (b)
perfected first priority (subject to customary
exceptions) security interests in, and
mortgages on, substantially all tangible and
intangible assets of the Company and each
existing and subsequently acquired or
organized domestic subsidiary of the Company
(including but not limited to accounts
receivable, inventory, general intangibles,
intellectual property, real property, cash and
proceeds of the foregoing).
All the above-described pledges, security
interests and mortgages shall be created on
terms, and pursuant to documentation,
reasonably satisfactory to the Lenders and the
Company, and, subject to limited customary
exceptions to be agreed upon, none of the
Collateral shall be subject to any other
pledges, security interests or mortgages.
Interest Rates As set forth on Annex I hereto.
--------------
and Fees:
--------
A-6
Mandatory Loans under the Term Facility shall be prepaid
--------- with (a) commencing with the 2001 fiscal year,
Prepayment: 50% of Consolidated Excess Cash Flow (to be
---------- defined) for each fiscal year so long as the
Leverage Ratio (as defined below) is greater
than or equal to 2.5:1 (provided that in
--------
marketing and syndicating the Senior
Facilities, such Leverage Ratio shall
initially be stated to be 3.0:1 and may be
included (in lieu of a Leverage Ratio equal
to 2.5:1) in definitive documentation only if
CSFB determines in its reasonable judgment
that a Leverage Ratio equal to 2.5:1 is not
required to successfully syndicate the
Facilities), (b) 100% of the net cash proceeds
of all non-ordinary-course asset sales or
other dispositions of property by the Company
and its subsidiaries (including insurance and
condemnation proceeds), subject to exceptions
to be agreed upon (including the right to
reinvest such proceeds in the Company's
business under certain circumstances), (c)
100% of the net cash proceeds of issuances of
debt obligations of the Company and its
subsidiaries, subject to exceptions (including
the Senior Subordinated Facility) to be agreed
upon, and (d) 50% of the net cash proceeds of
issuances of equity securities of the Company
and its subsidiaries, subject to exceptions to
be agreed upon, so long as the Leverage Ratio
is greater than or equal to 3.0:1.
Voluntary Prepayment: Voluntary prepayments will be permitted in
-------------------- whole or in part, at the option of the
Company, in minimum principal amounts to be
agreed upon, without premium or penalty, other
than payment of breakage costs (excluding
profits and Applicable Margins) and
reimbursement of the Lenders' actual
re-employment costs in the case of prepayment
of Adjusted LIBOR borrowings other than on the
last
A-7
day of the relevant Interest Period (such
breakage costs and re-employment costs,
collectively "Breakage Costs").
Application of Voluntary and mandatory prepayments shall be
-------------- made, without premium or penalty (but with
Prepayments: Breakage Costs (as defined above), and shall
----------- be applied to the Term Loans first, to
-----
amortization payments on the Loans due during
the immediately succeeding twelve month period
as directed by the Company, and second, pro
------
rata to the remaining amortization payments of
such Term Loans;
Representations Usual for facilities and transactions of this
--------------- type and others to be agreed upon by the Agent
and Warranties: and the Company (the Company's agreement not
-------------- to be unreasonably withheld), including but
not limited to accuracy of financial
statements; no material adverse change;
absence of litigation; no violation of
agreements or instruments; compliance with
laws (including employee benefits, margin
regulations and environmental laws); payment
of taxes; ownership of properties; solvency;
effectiveness of regulatory approvals; labor
matters; environmental matters; accuracy of
information; and validity, priority and
perfection of security interests in the
Collateral, in each case, if appropriate as
reasonably determined by CSFB, subject to
certain materiality qualifications reasonably
acceptable to CSFB.
Conditions Precedent The obligations of CSFB and the Lenders to
-------------------- make the Senior Facilities available on the
to Initial Borrowing: Closing Date are subject to the satisfaction
-------------------- or waiver of the
A-8
conditions set forth in Exhibit C to the
Commitment Letter.
Subject to the foregoing, the Lenders shall
make the initial Loans available to the
Company on the Closing Date bearing interest
at Adjusted LIBOR (with an interest period of
one month until syndication of the Senior
Facilities, as determined by CSFB, has been
substantially completed) plus the then
Applicable Margin so long as, on or prior to
the day that is three days prior to the
Closing Date, the Company shall have delivered
to CSFB, the other Lenders and the Agent an
executed indemnity for any Breakage Costs with
respect to such Loans that is in form and
substance reasonably satisfactory to CSFB, the
other Lenders and the Agent.
Affirmative Usual for facilities and transactions of this
----------- type and others to be agreed upon by the
Covenants: Company and the Agent (the Company's agreement
--------- not to be unreasonably withheld) (to be
applicable to the Company and its subsidiaries),
including, but not limited to, maintenance of
corporate existence and rights; performance of
obligations; delivery of audited financial,
statements other financial information and notices
of default and litigation; maintenance of
properties in good working order; maintenance
of reasonably satisfactory insurance; compliance
with laws; inspection of books and properties;
further assurances; and payment of taxes.
Negative Covenants: Usual for facilities and transactions of this
------------------ type and others to be agreed upon by the
Company and the Agent (the Company's agreement
not to be
A-9
unreasonably withheld) (to be applicable to the
Company and its subsidiaries), including, but not
limited to, limitations on dividends on, and
redemptions and repurchases of, capital stock;
limitations on prepayments, redemptions and
repurchases of subordinated debt; limitations
on liens and sale-leaseback; transactions
limitations on loans and investments;
limitations on debt; limitations on asset
sales, mergers and acquisitions (with
exceptions for certain acquisitions so
long as (i) no Default or Event of Default
is then continuing or would result therefrom,
(ii) after giving effect thereto, the
Company is in pro forma compliance with each
of the financial covenants assuming that
the maximum Leverage Ratios were 0.25x lower
(provided that in marketing and syndicating
--------
the Senior Facilities, such assumption shall
initially not be included and may be omitted
from definitive documentation only if CSFB
determines in its reasonable judgment that
such assumption is not required to
successfully syndicate the Facilities), and
(iii) after giving effect thereto, the pro
forma EBITDA attributable to the acquired
company does not exceed 25% of the pro forma
consolidated EBITDA of the Company and its
Subsidiaries); limitations on transactions
with affiliates; limitations on changes in
business conducted; limitations on amendment
of debt and other material agreements; and
limitations on capital expenditures.
Pro forma compliance with all financial
covenants and their components shall be
determined on a basis consistent with Article
11 of Regulation S-X under the Securities Act
of 1933, as amended from time to time,
together with such other pro forma adjustments
as may be reasonably acceptable to the
Administrative Agent.
A-10
Selected Financial The credit agreement relating to the Senior
------------------ Facilities (the "Credit Agreement") will
Covenants: contain financial covenants determined on a
--------- consolidated basis with respect to the Company
and its subsidiaries (with definitions of
financial terms and levels to be agreed upon),
consisting of (a) maximum ratio of Total Debt
to EBITDA ("Leverage Ratio"), (b) minimum
ratio of EBITDA to Interest Expense ("Interest
Coverage Ratio"), (c) minimum EBITDA and (d) a
capital expenditures covenant.
Events of Default: Usual for facilities and transactions of this
----------------- type (with customary cure periods) and others
to be agreed upon by the Company and the Agent
(the Company's agreement not to be
unreasonably withheld), including but not
limited to nonpayment of principal or
interest, violation of covenants,
incorrectness of representations and
warranties in any material respect, cross
default and cross-acceleration, bankruptcy,
material judgments, employee benefits, actual
or asserted invalidity of the guarantees or
the security documents and Change in Control
(the definition of which will be agreed upon).
Voting: Amendments and waivers of the Credit Agreement
------- and the other definitive credit documentation
will require the approval of the Company
and Lenders holding more than 50% of
the aggregate amount of the loans and
commitment under the Senior Facilities
(the "Required Lenders"), except that the
consent of each Lender adversely affected
thereby shall be required with respect
to (a) increases in such Lender's
commitments, (b) reductions of principal,
A-11
interest or fees, (c) extensions of scheduled
amortization or final maturity and
(d) releases of all or substantially
all of the Collateral or certain guarantors
(except where the release of Collateral or
a guarantor is made pursuant to a
transaction approved by Required Lenders
or otherwise permitted by the Loan Documents).
Cost and Yield Usual for facilities and transactions of this
-------------- type on terms to be agreed upon. In addition, the
Protection: Company will obtain interest rate hedging on not
---------- less than 30% of outstandings under the Term Facility
for a period of at least two years, in form
and substance reasonably satisfactory to Agent
and Company.
Assignments and The Lenders will be permitted to assign loans
--------------- and commitments to other financial
Participations: institutions in minimum amounts of $2.5
-------------- million without restriction (other than with
the approval of the Company (not to be
unreasonably withheld) in the case of
assignments occurring when no Event of Default
exists to any person other than a Lender or an
affiliate of the assignor). The Agent will
receive a processing and recordation fee of
$3,500, payable by the assignor and/or the
assignee, with each assignment. Assignments
will be by novation.
The Lenders will be permitted to participate
loans and commitments to other financial
institutions without restriction. Voting
rights of participants shall be limited to
matters in respect of (a) reductions of
principal, interest or fees, (b) extensions of
scheduled amortization or final maturity and
(c) releases of all or substantially all of
the Collateral or certain guarantors (except
where the release of collateral or a guarantor
is
A-12
made pursuant to a transaction approved by
the Required Lenders or otherwise permitted by
the Loan Documents).
Expenses and In addition to those reasonable out-of-pocket
------------ expenses reimbursable under the Commitment
Indemnification: Letter, all reasonable out-of-pocket costs of
--------------- the Agent (and, in the case of enforcement
costs and documentary taxes, the Lenders)
associated with the Senior Facilities are to
be paid by the Company.
The Company will indemnify the Arranger, the
Agent, the Lenders and their respective
officers, directors, employees, affiliates and
agents collectively ("indemnified persons")
and hold them harmless from and against all
reasonable costs, expenses (including
reasonable fees, disbursements and other
charges of counsel) and liabilities of any
such indemnified person arising out of or
relating to those matters set forth in the
Commitment Letter, including, without
limitation, any claim or any litigation or
other proceedings (regardless of whether any
such indemnified person is a party thereto)
that relate to the Transactions or any
transactions connected therewith, provided
--------
that none of the indemnified persons will be
indemnified for its bad faith, gross
negligence or willful misconduct.
Counsel for the Arranger Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
------------------------
and the Agent:
-------------
Governing Law New York.
-------------
and Forum:
---------
A-13
ANNEX I
TO EXHIBIT A
Interest Rates and Fees
-----------------------
Interest Rates: The interest rates under the Senior Facilities
-------------- will be, at the Company's option, either the Base
Rate or the Adjusted LIBOR plus, in each case, the
Applicable Margin. The Applicable Margin shall be
initially as set forth in the following table, and
subsequently, as set forth below under the caption
"Changes in Commitment Fees and Interest Rates":
==================================================
Applicable Margin
--------------------------------------------------
Adjusted
Base Rate LIBOR
--------------------------------------------------
Revolving Facility 2.50% 3.50%
--------------------------------------------------
Term Loans 3.00% 4.00%
==================================================
The Company may elect interest periods of 1, 2, 3,
6 months (or, if generally made available by all
Lenders, 2 weeks or 9-or 12-months) for Adjusted
LIBOR borrowings.
Calculation of interest shall be on the basis of
actual days elapsed in a year of 360 days (or 365
or 366 days, as the case may be, in the case of
Base Rate loans based on the Prime Rate) and
interest shall be payable at the end of each
interest period and, for interest periods of six
months or longer, at least every 3 months.
A-I-1
The Base Rate will be defined as the higher of the
Agent's prime lending rate and the rate 1/2 of 1%
in excess of the Federal funds effective rate.
Adjusted LIBOR will at all times include statutory
reserves.
Letter of Credit Fee: A per annum participation fee equal to the spread
-------------------- over Adjusted LIBOR from time to time in effect for
loans under the Revolving Facility will accrue on
the aggregate face amount of outstanding letters of
credit under the Revolving Facility, payable in
arrears at the end of each quarter and upon the
termination of the Revolving Facility, in each case
for the actual number of days elapsed over a 360-
day year. Such fees shall be distributed to the
Lenders pro rata in accordance with the amount of
each such Xxxxxx's Revolving Facility commitment.
In addition, the Issuing Bank shall receive a
fronting fee equal to 0.25% per annum on all
outstanding letters of credit, payable quarterly in
arrears.
Commitment Fees: Initially, 0.50% per annum of the undrawn portion
--------------- of the commitments in respect of the Revolving
Facility (subject to reduction as set forth below
under the caption "Changes in Commitment Fees and
Interest Rates''), commencing to accrue upon the
execution and delivery of the Credit Agreement and
payable quarterly in arrears and upon the
termination of any commitment.
Tax Gross Up: All payments shall be made without withholding or
------------ deduction for, or on account of, any present or
future taxes or duties imposed or levied by or on
behalf of any governmental taxing authority or, if
any such withholding or deductions are required to
be made by law, with the payment of such additional
amounts as will
A-I-2
result in holders receiving such amounts as they
would have received had no such withholding or
reduction been required. In connection with its
becoming a party to the Credit Agreement, each
Lender shall deliver such forms regarding the
applicability of U.S. withholding taxes to it as
are usual for facilities of this type. In addition,
each Lender, at the cost and expense of the
Company, shall agree, on customary terms, to take
such actions to mitigate withholdings taxes as are
not adverse to it in its sole judgment.
Changes in Commencing the date of delivery of the first
---------- quarterly financial statements after the Closing
Commitment Fees and Date, so long as no event of default shall have
------------------- occurred and be continuing, Applicable Margins in
Interest Rates: respect of Loans and commitment fees under the
-------------- Senior Facilities will be determined by reference
to the Leverage Ratio as set forth in a performance
pricing grid to be determined.
The Applicable Margin for any Base Rate Loan shall
be equal to (i) the Base Rate plus the then
Applicable Margin for that tranche of Adjusted
LIBOR Loan, minus (ii) 1.00%.
Commencing the date of delivery of the first
quarterly financial statements after the Closing
Date, the commitment fees with respect to the
undrawn portion of the commitments in respect of
the Revolving Facility will be determined by
reference to the Leverage Ratio as set forth in a
performance pricing grid to be determined.
The Leverage Ratio shall be determined as at the
last day of each fiscaL quarter; changes in
interest rates and commitment fees resulting from
changes in such ratio shall become effective on the
first day on which the financial statements
covering the quarter-end date as of which such
ratio is computed are available.
A-I-3
ANNEX II
TO EXHIBIT A
Sources and Uses of Funds
-------------------------
(in millions)
(all figures are approximate)
Uses of Funds Sources of Funds
------------- ----------------
Purchase Price of Cash On Hand
Equity and Equity 149.0 0
Options
Revolving Facility/1/ 17.2
Transaction Expenses
14.0 Term Facility 65.0
Senior Subordinated 40.0
Facility
Repayment of 30.0 Investor Equity 65.0
Indebtedness Contribution
Management Equity TBD/2/
Contribution
Rollover Equity TBD/3/
Total Uses $193.0 Total Sources $193.0
-----------------------------
/1/ $45.0 million Revolving Facility of which approximately $17.2
million will be drawn at Closing.
/2/ The amount of the Management Equity will be determined as soon as
reasonably practicable and shall be in an amount reasonably acceptable to CSFB.
/3/ The amount of the Rollover Equity will be determined as soon as
reasonably practicable. In the event that the amount of the Rollover Equity is
such that the Total Sources would (a) exceed $193.0, the amount of the Revolver
Facility drawn at Closing will be reduced such that the Total Sources equal
$193.0, and (b) be less than $193.0, the amount of the Revolver Facility drawn
at Closing will not be changed but either the Investor Equity Contribution or
the Management Equity Contribution or a combination of both such equity
contributions will be increased such that the Total Sources equal $193.0.
A-II-1
EXHIBIT B
Senior Subordinated Facility
----------------------------
Summary of Principal Terms and Conditions/1/
-----------------------------------------
Arranger and Credit Suisse First Boston ("CSFB" or the "Agent").
------------
Administrative Agent:
--------------------
Lenders: A syndicate of lenders (the "Lenders") identified
------- in consultation with and reasonably acceptable to
the Company. At the option of CSFB, the Senior
Subordinated Loans may be sold to "qualified
institutional buyers" as defined in Rule 144A of
the Securities Act of 1933 and otherwise in
compliance with Rule 144A. In such event, Company
shall fully cooperate with CSFB to consummate such
sale.
Borrower: V.D.I. MultiMedia, Inc., a Delaware corporation
-------- (the "Company"), currently a wholly-owned
subsidiary of V.D.I. MultiMedia, a California
corporation (the "Parent Company"). Prior to
consummation of the Recapitalization, the Company
will be merged with and into the Parent Company
with the Company as the surviving corporation.
Amount: $40 million aggregate principal amount.
------
Rank: The loans to be made hereunder by each of the
---- Xxxxxxx
-------------------------
/1/ All capitalized terms used but not defined herein have the meanings
given to them in the Commitment Letter to which this term sheet is attached.
B-1
(the"Senior Subordinated Loans") will be senior
subordinated, unsecured debt of the Company,
subordinated in right of payment to the Senior
Facilities (as defined in the Commitment Letter)
and to all other existing and future senior
indebtedness of the Company pursuant to customary
subordination and standstill provisions.
Guarantees: The obligations of the Company under the Senior
---------- Subordinated Loans will be unconditionally
guaranteed on a senior subordinated basis by (i)
each existing and subsequently organized domestic
subsidiary of the Company that guarantees the
Senior Facilities, and (ii) if there is a parent
holding company of the Company, such parent holding
company.
Use of Proceeds: The proceeds of the Senior Subordinated Loans will
--------------- be used by the Company, together with up to $82.2
million of the proceeds of the Senior Facilities
and the proceeds of the Equity Contribution and
cash on hand at the Company, solely (i) to finance
the Recapitalization, (ii) to repay the existing
indebtedness and (iii) to pay related fees and
expenses.
Funding: The Lenders will make the Senior Subordinated
------- Loans available on a date simultaneous with the
consummation of the other Transactions (the
"Closing Date").
Refinancing: The Company will use all reasonable best efforts
----------- to refinance the Senior Subordinated Loans as
promptly as practicable after the Closing Date,
including, without limitation, by taking the
actions described under "Affirmative
Covenants".
B-2
Maturity: The Senior Subordinated Loans will mature on the
-------- date which is 364 days after the Closing Date (as
may be extended from time to time as provided
herein, the "Senior Subordinated Maturity Date").
If any Senior Subordinated Loan is not repaid in
in full on or prior to the Senior Subordinated
Maturity Date, the Lender thereof will have the
option at any time or from time to time to
receive, in exchange for such Senior Subordinated
Loan or portion thereof, exchange notes of the
Company (the "Exchange Notes") ranking pari passu
---- -----
with the Senior Subordinated Loans and having the
terms set forth in the term sheet attached as
Annex I to this Exhibit B. If any Lender does not
exchange its Senior Subordinated Loan for Exchange
Notes on the Senior Subordinated Maturity Date,
such Lender shall be required to extend the
maturity of such loan to another date selected by
such Xxxxxx. If, on or prior to such extended
maturity, such Lender does not exchange its Senior
Subordinated Loan, such Lender shall be required
again to extend the maturity of such Senior
Subordinated Loan to another date selected by such
Xxxxxx (provided, however, that such Lender shall
-------- -------
not be required to extend the maturity of its
Senior Subordinated Loans beyond the tenth
anniversary of the Closing Date (the "Final
Maturity Date")) and this sentence shall apply to
each extended maturity of its Senior Subordinated
Loan prior to the Final Maturity Date (it being
understood that, except to the extent specifically
set forth herein, the substantive economic terms
of the Senior Subordinated Loans and the Exchange
Notes are intended to be the same). Lenders shall
not be required to exchange their respective Senior
Subordinated Loans for Exchange Notes only upon the
determination by such Lender that such exchange is
prohibited by law, rule, regulation or order
applicable to such Lender or that such exchange
would reasonably be expected to have an adverse
effect on such Lender or would otherwise be
inconsistent with such Xxxxxx's business
objectives.
B-3
Interest Rates: The Senior Subordinated Loans will bear interest
-------------- at a rate equal to the greater of (a) 13.0% per
annum and (b) Adjusted LIBOR plus 8.00%, in either
----
case, increasing by .50% at the end of each quarter
thereafter; provided, that (i) the interest rate on
--------
the Subordinated Loans in effect at any time shall
not exceed 18% per annum, and (ii) cash interest on
the Subordinated Loans shall not exceed 16% per
annum. To the extent the applicable interest rate
on the Subordinated Loans is in excess of 16% per
annum, such excess interest will be capitalized and
added to the principal amount of the Senior
Subordinated Loans.
In no event shall the interest rate on the Senior
Subordinated Loans exceed the highest lawful rate
permitted under applicable law.
Following the Senior Subordinated Maturity Date,
all outstanding Senior Subordinated Loans will
accrue interest at the rate provided for the
Exchange Notes in Annex I hereto.
Calculation of interest shall be on the basis of
actual days elapsed in a year of 360.
Interest Payments: Interest will be payable quarterly in arrears.
-----------------
Tax Gross Up: All payments shall be made without withholding or
------------ deduction for, or on account of, any present or
future taxes or duties imposed or levied by or on
behalf of any governmental taxing authority or, if
any such withholding or deductions are required to
be made by law, with the payment of such additional
amounts as will result in holders receiving such
amounts as they would have received had no such
withholding or reduction been required. In
connection with its making or acquisition of
B-4
Senior Subordinated Loans, each Lender shall
deliver such forms regarding the applicability of
U.S. withholding taxes to it as are usual for
facilities of this type. In addition, each Lender,
at the reasonable cost and expense of the Company,
shall agree, on customary terms, to take such
actions to mitigate withholding taxes as are not
adverse to it in its reasonable discretion.
Mandatory Subject to compliance with the Senior Facilities,
--------- the Senior Subordinated Loans will be required to
Prepayments: be prepaid (subject to exceptions to be agreed
----------- upon) with:
(a) subject to exceptions to be agreed upon,
100% of the net cash proceeds of the
issuance or incurrence of debt by the
Company or its subsidiaries (subject to
customary exceptions to be agreed on,
including with respect to the Senior
Facilities and certain earn-outs);
(b) a percentage to be agreed on of the net
cash proceeds from any issuance of equity
securities of the Company or its
subsidiaries in any public offering or
private placement or from any capital
contribution (subject to customary exceptions
to be agreed on, including with respect to
certain issuances to management); and
(c) certain asset sales.
Optional Prepayments: Senior Subordinated Loans may be repaid upon five
-------------------- days' prior notice to the Agent, in whole or in
part at the option of the Company, in a minimum
principal amount and in multiples to be agreed
upon, at any time on or prior to the first
anniversary of the Closing Date, at the principal
amount thereof, plus accrued and unpaid
B-5
interest, if any, to the repayment date, and
without premium or penalty at any time thereafter.
Conditions to Closing: The obligations of CSFB and the Lenders to make
--------------------- the Senior Subordinated Loans on the Closing Date
are subject to the satisfaction or waiver of the
conditions set forth in Exhibit C to the
Commitment Letter.
Representations and Customary for loans similar to the Senior
------------------- Subordinated Loans and such additional
Warranties: representations and warranties as may be agreed
---------- upon by the Agent and the Company, including: no
Default or Event of Default; absence of material
adverse change; financial statements; absence of
undisclosed material liabilities or material
contingent liabilities; compliance with laws;
solvency; no conflicts with laws, charter documents
or agreements; good standing; payment of taxes:
and ownership of properties, in each case, if
appropriate as reasonably determined by CSFB,
subject to certain materiality qualifications
reasonably acceptable to CSFB.
Affirmative Customary for loans similar to the Senior
----------- Subordinated Loans and such others as may
Covenants: reasonably be required by the Agent, including:
--------- maintenance of corporate existence and rights;
compliance with laws; performance of obligations;
maintenance of properties in good repair;
maintenance of appropriate and adequate insurance;
inspection of books and properties; payment of
taxes and other liabilities; notice of defaults,
litigation and other adverse action; delivery of
financial statements, financial projections and
compliance certificates; and further assurances.
In addition, the Company will agree to file a
registration statement under the Securities Act or
prepare an offering
B-6
memorandum covering senior notes or other debt or
equity securities of the Company (the "Refinancing
Securities") to be issued in a public offering or
private placement to refinance in full the Senior
Subordinated Facility (the "Loan Refinancing") and
to consummate such Loan Refinancing as soon as
reasonably possible after the Closing Date in an
amount sufficient to refinance all amounts
outstanding under the Senior Subordinated Facility
and on such terms and conditions (including
interest rate, yield, redemption prices and dates)
as CSFB may in its reasonable judgment determine
to be appropriate in light of prevailing
circumstances and market conditions and the
financial condition and prospects of the Company.
The indenture for the Refinancing Securities will
be substantially in the form of CSFB's standard
indenture for high-yield senior unsecured debt
securities, modified as appropriate to reflect the
terms of this transaction and the financial
condition and prospects of the Company and its
subsidiaries, and in form and substance reasonably
satisfactory to CSFB and the Company. If any
Refinancing Securities are issued in a transaction
not registered under the Securities Act to effect
the Loan Refinancing, all such Refinancing
Securities shall be entitled to the benefit of
registration rights agreements to be entered into
by the Company in customary form reasonably
acceptable to CSFB.
Negative Covenants: Customary for loans similar to the Senior
------------------ Subordinated Loans and such others as may be
agreed upon by the Agent and the Company,
including: limitations on incurrence of
indebtedness (including no senior subordinated
debt other than the Senior Subordinated Loans);
limitations on loans, liens, investments and joint
ventures; limitations on guarantees or other
contingent obligations; limitations on restricted
payments (including dividends, redemptions and
repurchases of capital stock);
B-7
limitations on fundamental changes (including
limitations on mergers, acquisitions and asset
sales); limitations on transactions with
affiliates; limitations on dividend and other
payment restrictions affecting subsidiaries;
limitations on lines of business; limitations on
amendment of indebtedness and other material
documents; and limitations on prepayment or
repurchase of other indebtedness.
Events of Default: Customary for loans similar to the Senior
----------------- Subordinated Loans and others to be agreed upon by
the Agent and the Company, including: nonpayment
of principal, interest, fees or other amounts when
due; violation of covenants; failure of any
representation or warranty to be true in all
material respects; cross-default and
cross-acceleration; Change in Control; bankruptcy
events; material judgments; ERISA; and actual or
asserted invalidity of any Senior Subordinated Loan
Document.
Yield Protection and Customary for facilities of this type.
--------------------
Increased Costs:
---------------
Assignments and The Company may not assign its rights or
--------------- obligations in connection with the definitive
Participations: documentation relating to the Participations:
-------------- Senior Subordinated Loans (the "Senior
Subordinated Loan Documents") without the prior
written consent of all the Lenders.
Lenders will have the right to assign the Senior
Subordinated Loans and their commitments (with,
so long as no Default or Event of Default has
occurred and is continuing, the consent of the
Company, such consent not to be unreasonably
withheld) and such assignments will be by
novation which will release the obligation of the
assigning Lender.
B-8
Lenders will be permitted to participate their
Senior Subordinated Loans to other financial
institutions; provided, however, that the Lenders
-------- -------
granting participations retain the voting rights
to such participated amounts. Participants will
have the same benefits as the selling Lenders
would have with regard to yield protection and
increased costs, and provision of information on
the Company and its subsidiaries.
Voting: Amendments and waivers of any provision of any
------ Senior Subordinated Loan Documents will require
the approval of the Company and Lenders holding
commitments or loans, as the case may be,
representing a majority of the aggregate amount of
commitments or loans, respectively, under the
Senior Subordinated Loan Documents, except that
the consent of all affected Lenders shall be
required with respect to (a) increases in
commitments, (b) reductions of principal, interest
or fees, (c) extensions of the maturity date and
(d) releases of certain guarantors (except where
the release of a guarantor is made pursuant to a
transaction approved by requisite Lenders or
otherwise permitted by the Senior Subordinated
Loans Documents).
Expenses and In addition to those reasonable out-of-pocket
------------ expenses reimbursable under the Commitment Letter,
Indemnification: all reasonable out-of-pocket expenses of the Agent
--------------- (and the Lenders for enforcement costs and
documentary taxes) associated with the
preparation, execution and delivery of any waiver
or modification requested by or for the benefit of
the Company (whether or not effective) of, and the
enforcement of, any Senior Subordinated Loan
Document or any document relating to the
refinancing of the Senior Subordinated Loans
(including the reasonable fees, disbursements and
other charges of counsel for the Agent) are to be
paid by the Company. The Company
B-9
will indemnify the Agent and the other Lenders and
hold them harmless from and against all reasonable
costs, expenses (including reasonable fees and
disbursements of counsel) and liabilities arising
out of or relating to those matters set forth in
the Commitment Letter, including, without
limitation, any litigation or other proceeding
(regardless of whether the Agent or any such other
Lender is a party thereto) that relate to the
Transactions, the Senior Subordinated Loans or
refinancing thereof; provided, however, that
-------- -------
neither the Agent nor any such other Lender will
be indemnified for any costs, expense or liability
to the extent resulting from such person's bad
faith, gross negligence or willful misconduct.
Counsel for the Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP.
---------------
Arranger and the
----------------
Administrative Agent:
--------------------
Governing Law and New York.
-----------------
Forum:
-----
B-10
ANNEX I
TO EXHIBIT B
Exchange Notes
--------------
Summary of Principal Terms and Conditions /1/
------------------------------------------
Issuer: The Company will issue Exchange Notes under an
------ indenture that complies with the Trust Indenture
Act (the "Indenture").
Principal Amount: The Exchange Notes will be available only in
---------------- exchange for the Senior Subordinated Loans. The
face amount of any Exchange Note will equal the
aggregate principal amount (including any accrued
interest not required to be paid in cash) of the
Senior Subordinated Loans for which it is
exchanged.
Maturity: The Exchange Notes will mature on the tenth
-------- anniversary of the Closing Date.
Interest Rate: The Exchange Notes will bear interest at a rate
------------- equal to the Initial Rate (as defined below),
increasing by .50% at the end of each quarter
thereafter; provided, that (i) the interest rate
on the Exchange Notes in effect at any time shall
not exceed 18% per annum, and (ii) cash interest
on the Exchange Notes shall not exceed 16% per
annum. To the extent the applicable interest rate
on the Exchange Notes is in excess of 16% per
annum, such excess interest will be paid by
---------------------
/1/ All capitalized terms used but not defined herein have the meanings
given to them in the Commitment Letter to which this term sheet is attached.
B-I-1
issuing additional Exchange Notes in a principal
amount equal to such excess portion of interest.
"Initial Rate" shall be determined on the Senior
Subordinated Maturity Date and shall be equal to
the greatest of (a) the interest rate borne by
the Senior Subordinated Loans on the day
immediately preceding the Senior Subordinated
Maturity Date, (b) the Treasury Rate (as defined
below) on the Senior Subordinated Maturity Date
plus 7.00% and (c) the Credit Suisse First Boston
Corporation High Yield Single B Index Rate on the
Senior Subordinated Maturity Date plus 2.00%.
"Treasury Rate" means (i) the rate borne by direct
obligations of the United States maturing on the
tenth anniversary of the Closing Date and (ii) if
there are no such obligations, the rate determined
by linear interpolation between the rates borne by
the two direct obligations of the United States
maturing closest to, but straddling, the tenth
anniversary of the Closing Date, in each case as
published by the Board of Governors of the Federal
Reserve System.
In no event shall the interest rate on the Exchange
Notes exceed the highest lawful rate permitted
under applicable law.
Tax Gross Up: Same as Senior Subordinated Loans.
------------
Rank: Exchange Notes will rank pari passu with Senior
---- ---- -----
Subordinated Loans but will be subordinated in
right of payment to all existing and future senior
indebtedness of the Company.
Mandatory Redemption: Same as Senior Subordinated Loans.
--------------------
B-I-2
Optional Redemption: The Exchange Notes will be redeemable at the
------------------- option of the Company, in whole or in part, at any
time after the fifth anniversary of the Closing
Date at par plus accrued and unpaid interest to the
----
redemption date and a call premium to be
determined; provided that a portion (to be
--------
determined) of the proceeds of a public offering
of Common Stock by the Company may be used to
redeem the Exchange Notes prior to the fifth
anniversary of the Closing Date on terms to be
agreed upon.
Registration Rights: The Company will use its reasonable best efforts to
------------------- cause to become effective an exchange offer
registration statement or a shelf registration
statement no later than 120 days from the date of
issuance of the Exchange Notes, and the Company
will use its reasonable best efforts to keep such
registration statement effective and available
(subject to customary exceptions) until it is no
longer needed to permit unrestricted resales of
such Exchange Notes, but in no event longer than
one year from the date of issuance of any such
Exchange Notes. If the registration statement
ceases to be effective or ceases to be useable in
connection with resales of such Exchange Notes
(subject to customary exceptions), cash interest
will accrue and be payable (in addition to
interest otherwise accruing on the Exchange Notes)
at a rate of 0.50% per annum until such default
shall be cured.
The Company agrees, at its expense, to assist CSFB
in connection with resales of any of the Exchange
Notes, including making its senior officers
available to CSFB, including making them available
to assist in the preparation of
B-I-3
marketing materials relating to any resales, to
participate in due diligence sessions and to
participate in road shows or other presentations to
prospective purchasers of such Exchange Notes.
Exchange Notes Escrowed: The Exchange Notes will be delivered on the Closing
----------------------- Date and held, undated, in escrow by a mutually
agreeable fiduciary.
Right to Transfer The holders of the Exchange Notes shall have
----------------- the absolute and unconditional right to transfer
Exchange Notes: such Exchange Notes to any third parties in
-------------- compliance with applicable law.
Covenants: Those typical for an indenture governing a high-
--------- yield senior subordinated note issue, including a
"change in control" put provision, and, to the
extent deemed reasonably necessary by CSFBC and
reasonably satisfactory to the Company, certain
covenants contained in the Senior Subordinated Loan
documentation.
Events of Default: Those typical for an indenture governing a high-
----------------- yield senior subordinated note issue.
Governing Law New York.
-------------
and Forum:
---------
B-I-4
EXHIBIT C
CONDITIONS/1/
----------
CSFB has conducted its due diligence with respect to the Facilities
and the Transactions and is pleased to inform you that it is satisfied with the
results thereof; however, the commitments of CSFB pursuant to the Commitment
Letter are subject to the condition that after the date of the Commitment Letter
nothing becomes known to CSFB that is inconsistent in a material and adverse
manner with anything disclosed to CSFB by or at the direction of the Investors
or the Company or any of their respective affiliates, agents, advisors or other
representatives prior to the date of the Commitment Letter or anything
previously obtained by CSFB from or at the direction of the Investors or the
Company or any of their respective affiliates, agents, advisors or other
representatives during such due diligence.
With respect to all periods prior to the merger of the Company with
and into the Parent Company with the Company as the surviving corporation, the
term "Company" shall be deemed to be, or to include, as the context may require,
-------
the Parent Company.
In addition to the foregoing, the commitments of CSFB pursuant to the
Commitment Letter are also subject to the following conditions:
(i) the preparation, execution and delivery of definitive
documentation in connection with the Facilities reasonably satisfactory to
CSFB, and the satisfaction (as reasonably determined by CSFB) of customary
closing conditions for transactions similar to the Senior Facilities and
the Senior Subordinated Facility, as applicable;
(ii) CSFB and the Lenders shall be reasonably satisfied (A) as of
the date the Recapitalization Agreement is signed (the "Signing Date"),
with the material terms and conditions of the Recapitalization Agreement
(to the extent that such terms and conditions have been provided to CSFB)
and with the form and substance of any other agreements to be executed
after the Signing Date
-----------------
/1/ All capitalized terms used but not defined herein have the meanings
given to them in the Commitment Letter to which this Exhibit C is attached.
C-1
solely to the extent that such forms have been provided to CSFB and
CSFB has acknowledged the same and (B) as of the Closing Date, with the
material terms and conditions of the Recapitalization Agreement
(including, without limitation, any schedules, disclosure schedules,
exhibits, appendices or attachments thereto) not provided to CSFB prior to
the Signing Date, with the material terms and conditions of each amendment,
modification, waiver and other change to the Recapitalization Agreement,
with the material terms and conditions of each other agreement entered into
in connection with the Transactions (other than agreements, the form and
substance of which CSFB has acknowledged as being satisfactory to it as of
the Signing Date under clause (A) above) and with all legal, tax and
accounting matters (it being understood that a failure to obtain
recapitalization accounting treatment with respect to the Transactions will
not give rise to rights on the part of CSFB hereunder) relating to the
Transactions that would reasonably be expected to have a Material Adverse
Effect, including without limitation, any such matters pertaining to
pending or potential litigation with respect to the Transactions and
requisite stockholder or governmental consents or approvals;
(iii) after giving effect to the Transactions and the other
transactions contemplated by the Commitment Letter, neither any Loan Party
nor any of their subsidiaries shall have outstanding any indebtedness for
borrowed money and/or with respect to capitalized leases or preferred
stock other than (a) the loans under the Senior Facilities, (b) the
Alternative Securities or the loans under the Senior Subordinated
Facility, and (c) other indebtedness for borrowed money and/or with
respect to capitalized leases or preferred stock to be agreed upon;
(iv) there shall not have occurred and be continuing after the date
of this letter (a) any general suspension of trading in securities on the
New York or American Stock Exchange or in the NASDAQ National Market
System (other than circuit breakers), (b) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, or (c) any other material adverse change in banking or capital
market conditions that has had a material adverse effect on the
syndication of leveraged bank credit facilities or the consummation of
high yield offerings, as the case may be, that CSFB reasonably determines
makes it impracticable to consummate the Alternative Securities Offering
(to the extent that Alternate Securities are to be issued as required
pursuant to the Commitment Letter) or successfully syndicate the Senior
Facilities or the Senior Subordinated Facility;
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(v) CSFB's satisfaction that, immediately prior to and during the
marketing period for either the syndication of (a) the Senior Facilities or
(b) the Senior Subordinated Facility, there shall be no competing issues
of debt securities or commercial bank facilities (other than the Senior
Facilities and the Senior Subordinated Facility, or other permitted
indebtedness thereunder) of any Loan Party or any of their affiliates (it
being understood that any company other than the Company and its
subsidiaries in which Xxxx Capital, Inc. has an investment shall not
constitute an affiliate of a Loan Party under this clause (v) so long as
such company would not, but for such investment, otherwise be an
affiliate of a Loan Party);
(vi) the receipt by CSFB and, if applicable, the Lenders, on or
before the closing of the Transactions, of financial statements of the
Company (including notes thereto), consisting of (a) audited and pro forma
balance sheets as of the end of each period in the 3 fiscal-year period
ended December 31, 1998 or, if such financial statements are then
available, December 31, 1999, (b) audited and pro forma statements of
operations and cash flows for each period in the 3 fiscal-year period
ended December 31, 1998 or, if such financial statements are then
available, December 31, 1999, (c) consolidated financial statements for
each period in the 3 fiscal-year period ended December 31, 1998 or, if
such financial statements are then available, December 31, 1999 and
supporting documentation satisfactory to CSFB, (d) comparable unaudited
historical and pro forma interim financial statements covering all
quarterly or other appropriate periods subsequent to the fiscal year most
recently ended, and (e) such final projections in respect of the Loan
Parties and their respective subsidiaries as CSFB may reasonably request;
and all such financial statements, historical or pro forma, delivered
pursuant to this paragraph (vi) shall be in compliance with the
requirements of Regulation S-X for a public offering registered under the
Securities Act of 1933, and all financial statements and projections
referred to in this paragraph (vi) shall not be materially inconsistent
in an adverse manner with financial statements, projections and estimates
previously provided to CSFB and, if applicable, the Lenders;
(vii) payment of fees and expenses;
(viii) since December 31, 1998, there shall not have occurred or
become known to CSFB any event or events, adverse condition or change
that,
C-3
individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect;
(ix) the Closing Date shall occur on or before April 30, 2000; and
(x) each of the Transactions shall have been consummated on the
Closing Date, substantially as contemplated by the Recapitalization
Agreement and the Commitment Letter (including, without limitation,
Annex II to Exhibit A), subject to documentation (except as expressly
provided in clause (ii) above) reasonably satisfactory in form and
to CSFB; provided, that with the consent of CSFB or after termination of
--------
CSFB's commitment by the Investors with respect to the Senior Subordinated
Facility, the Investors or the Company may seek unsecured subordinated
financing ("Other Subordinated Financing") in lieu of the Senior
Subordinated Facility or Alternative Securities so long as (a) the terms
(including, without limitation, the pricing and payment terms, maturity,
covenants, subordination provisions and defaults), documentation relating
to such Other Subordinated Financing and the resulting capital structure
of the Company and the persons providing such financing are reasonably
acceptable to CSFB in all material respects, (b) the proceeds of such Other
Subordinated Financing shall be at least $40 million, with any excess
thereof being applied solely to reduce the total amount of the Senior
Facilities, and (c) all fees and expenses required to be paid pursuant to
the Fee Letter shall have been paid; provided, further, the foregoing
-------- -------
proviso shall not release CSFB from its commitment to provide the Senior
Subordinated Facility upon the terms and subject to the conditions set
forth or referred to in the Commitment Letter (including, without
limitation, the exhibits attached to the Commitment Letter applicable
thereto) until the Investors shall have terminated such commitment or CSFB
and the Investors shall have otherwise agreed in writing.
In the event that anything arising under the first paragraph of this
Exhibit C comes to the attention of CSFB or that any of the other conditions
set forth above or in the Facilities Documents are not satisfied, CSFB reserves
the right, in its sole discretion, to either (x) suggest alternative financing
amounts or structures that ensure adequate protection for CSFB and the Lenders
(in consultation with, and as approved by, the Investors and the Company) or (y)
decline to participate in the proposed financings.
C-4
As used herein, a "Material Adverse Effect" shall mean the result of
one or more events, changes or effects which, individually or in the aggregate,
would reasonably be expected to have a material adverse effect on (i) the
business, results of operations, financial condition or prospects of the Company
and its subsidiaries, in each case, taken as a whole, or (ii) the validity or
enforceability of any of the documents entered into in connection with the
Transactions or the other transactions contemplated by the Commitment Letter or
the rights, remedies and benefits available to the parties thereunder.
C-5
