EXHIBIT 99.1
EXECUTION COPY
LEHMAN COMMERCIAL PAPER INC. LEHMAN BROTHERS INC.
745 SEVENTH AVENUE 745 SEVENTH AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10019
January 4, 2006
COMMITMENT LETTER
PERSONAL AND CONFIDENTIAL
Gentiva Health Services, Inc.
3 Huntington Quadrangle, Suite 200S
Melville, New York 11747
Ladies and Gentlemen:
This commitment letter agreement (together with all exhibits and schedules
hereto, the "COMMITMENT LETTER") will confirm the understanding and agreement
among Lehman Commercial Paper Inc. ("LCPI"), Lehman Brothers Inc. ("LEHMAN
BROTHERS" OR THE "ARRANGER") and Gentiva Health Services, Inc., a Delaware
corporation (together with each of its subsidiaries, the "COMPANY"), in
connection with the proposed financing for the acquisition of all of the issued
and outstanding common stock of The Healthfield Group, Inc., a Delaware
corporation (together with each of its subsidiaries, the "ACQUIRED BUSINESS").
We understand that the Company proposes to sign an agreement (the "ACQUISITION
AGREEMENT") to acquire all of the issued and outstanding common stock of the
Acquired Business (the "ACQUISITION"). The date on which the Acquisition is
consummated is referred to as the "CLOSING DATE."
You have advised us that the total funds needed to finance the Acquisition
(including the Company's fees and expenses (which will not exceed $22.0 million)
and the refinancing of the existing debt of the Acquired Business) will be
approximately $482.8 million and that such funds will be provided from the
following sources:
o $370.0 million of borrowings by the Company under a Senior Term Loan
Facility (collectively with a $75.0 million Revolving Credit Facility
which is expected to be undrawn on the Closing Date (other than with
respect to letters of credit issued thereunder), but not including any
future incremental credit facility, the "CREDIT FACILITIES") among the
Company, LCPI and the financial institutions party thereto;
o approximately $57.3 million of existing cash balances from the
Acquired Business and the Company; and
o approximately $55.5 million in common equity of the Company.
Following the Acquisition, neither the Company nor any of its subsidiaries will
have any debt or preferred equity outstanding other than obligations under
capital leases with aggregate balances below $3.0 million except as described in
this paragraph. As used below, the defined term "Company" will mean both the
Company prior to the Acquisition and the Company, together with the Acquired
Business, after giving effect to the Acquisition.
1. The Senior Loan Commitment.
(a) You have requested that LCPI (collectively with each other entity
that becomes a lender under the Credit Facilities, the "SENIOR LENDERS") commit
to provide the entire amount of the Credit Facilities upon the terms and subject
to the conditions set forth or referred to in this Commitment Letter and in the
Summary of Terms of Credit Facilities attached hereto as Exhibit A (the "CREDIT
FACILITIES TERM SHEET").
(b) Based on the foregoing, LCPI is pleased to confirm by this
Commitment Letter its commitment to you (the "SENIOR LOAN COMMITMENT"), to
provide or cause one or more of its affiliates to provide the entire amount of
the Credit Facilities.
(c) It is agreed that the Arranger will act as the sole book-runner
and sole arranger for the Credit Facilities and that LCPI will act as the sole
and exclusive Administrative Agent (acting in such role, the "ADMINISTRATIVE
AGENT") for the Credit Facilities. Each of the Arranger, the Administrative
Agent and LCPI will have the rights and authority customarily given to financial
institutions in such roles, but will have no duties other than those expressly
set forth herein. You agree that no other agents, co-agents, arrangers or
book-runners will be appointed, no other titles will be awarded and no
compensation (other than that expressly contemplated by the Credit Facilities
Term Sheet or the Fee Letter referred to below) will be paid in connection with
the Credit Facilities unless you and we so agree.
(d) The commitments and agreements of LCPI and the Arranger described
herein are subject to (i) there not having occurred or become known to Lehman
Brothers any event, development or circumstance since January 2, 2005 (the date
of the most recent audited financial statements delivered to the Arranger as of
the date hereof) that Lehman Brothers determines has caused or could reasonably
be expected to cause a material adverse condition or material adverse change in
or affecting (A) the Company or the Acquired Business's ability to perform their
respective obligations under the Acquisition Agreement or consummate the
Acquisition, (B) the business, properties, assets, liabilities (contingent or
otherwise), results of operations or financial condition of the Company and its
subsidiaries, taken as a whole, or the Acquired Business, taken as a whole,
other than, in each case, any effect, change, event, occurrence or state of
facts (x) relating to the economy in general or (y) relating to the industry in
which the Company or the Acquired Business, as applicable, operates in general,
not specifically relating to (or disproportionately affecting) the Company or
the Acquired Business or (C) the validity or enforceability of any of the Credit
Documentation (as defined in the Credit Facilities Term Sheet) or the rights and
remedies of the Administrative Agent and the Senior Lenders thereunder, (ii) the
Arranger not having become aware after the date hereof of any information or
other matter affecting the Company, the Acquired Business or the transactions
contemplated hereby that is inconsistent in a material and adverse manner with
any information or other matter disclosed to the Arranger prior to the date
hereof, (iii) the Arranger having been afforded a period of at least 30
consecutive days following the delivery of indicative ratings and the launch of
the general syndication of the Credit Facilities and immediately prior to the
Closing Date to syndicate the Credit Facilities, and (iv) the other conditions
set forth below or referred to in the Funding Conditions attached hereto as
Exhibit B.
2. Fees and Expenses. In consideration of the execution and delivery of
this Commitment Letter by LCPI as a Senior Lender, you agree, jointly and
severally, to pay the fees and expenses set forth in Annex A-I to the Credit
Facilities Term Sheet and in the Fee Letter dated the date hereof (the "FEE
LETTER") as and when payable in accordance with the terms thereof.
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3. Indemnification.
(a) The Company hereby agrees to indemnify and hold harmless each of
LCPI, Lehman Brothers, the other Senior Lenders and each of their respective
affiliates and all their respective officers, directors, partners, trustees,
employees, shareholders, advisors, agents, attorneys and controlling persons and
each of their respective heirs, successors and assigns (each, an "INDEMNIFIED
PERSON") from and against any and all losses, claims, damages and liabilities to
which any Indemnified Person may become subject arising out of or in connection
with this Commitment Letter, the Credit Facilities, the use of the proceeds
therefrom, the Acquisition, any of the other transactions contemplated by this
Commitment Letter, any other transaction related thereto or any claim,
litigation, investigation or proceeding relating to any of the foregoing,
regardless of whether any Indemnified Person is a party thereto, and to
reimburse each Indemnified Person promptly upon demand for all legal and other
expenses reasonably incurred by it in connection with investigating, preparing
to defend or defending, or providing evidence in or preparing to serve or
serving as a witness with respect to, any lawsuit, investigation, claim or other
proceeding relating to any of the foregoing (including, without limitation, in
connection with the enforcement of the indemnification obligations set forth
herein); provided, however, that no Indemnified Person will be entitled to
indemnity hereunder in respect of any loss, claim, damage, liability or expense
to the extent that it is found by a final, non-appealable judgment of a court of
competent jurisdiction that such loss, claim, damage, liability or expense
resulted directly from the gross negligence or willful misconduct of such
Indemnified Person. In no event will any Indemnified Person be liable on any
theory of liability for indirect, special or consequential damages, lost profits
or punitive damages as a result of any failure to fund any of the Credit
Facilities contemplated hereby or otherwise in connection with the Credit
Facilities. No Indemnified Person will be liable for any damages arising from
the use by unauthorized persons of information, projections or other materials
sent through electronic, telecommunications or other information transmission
systems that are intercepted by unauthorized persons.
(b) The Company further agrees that, without the prior written
consent of each of LCPI and Lehman Brothers, which consent will not be
unreasonably withheld, it will not enter into any settlement of a lawsuit, claim
or other proceeding arising out of this Commitment Letter or the transactions
contemplated by this Commitment Letter unless such settlement includes an
explicit and unconditional release from the party bringing such lawsuit, claim
or other proceeding of all Indemnified Persons.
4. Expiration of Senior Loan Commitment. The Senior Loan Commitment will
expire at 5:00 p.m., New York City time, on January 20, 2006 unless on or prior
to such time you have executed and returned to Lehman Brothers a copy of this
Commitment Letter and the Fee Letter. If you do so execute and deliver to Lehman
Brothers this Commitment Letter and the Fee Letter, LCPI agrees to hold its
Senior Loan Commitment available for you until the earlier of (i) the
termination of the Acquisition Agreement, (ii) the consummation of the
Acquisition with or without the funding of the Credit Facilities and (iii) 5:00
p.m., New York City time, on April 30, 2006. The Senior Loan Commitment will
terminate on the Closing Date, and you agree to rely exclusively on your rights
and the commitments set forth in the Credit Documentation in respect of all
loans and extensions of credit to be made after the Closing Date.
5. Confidentiality.
(a) This Commitment Letter and the terms and conditions contained
herein may not be disclosed by the Company to any person or entity (other than
the Acquired Business and such of your and their agents and advisors as need to
know and agree to be bound by the provisions of this paragraph and as required
by law) without the prior written consent of LCPI and the Arranger. The Fee
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Letter and the terms and conditions contained therein may not be disclosed by
the Company to any person or entity (other than such of your agents and advisors
as need to know and agree to be bound by the provisions of this paragraph and as
required by law) without the prior written consent of LCPI and the Arranger.
(b) You acknowledge that Lehman Brothers and its affiliates (the term
"LEHMAN BROTHERS," when used in this paragraph, includes all such affiliates,
including LCPI) may be providing debt financing, equity capital or other
services (including financial advisory services) to other companies in respect
of which you may have conflicting interests regarding the transactions described
herein and otherwise. Lehman Brothers will not use confidential information
obtained from you by virtue of the transactions contemplated by this Commitment
Letter or their other relationships with you in connection with the performance
by Lehman Brothers of services for other companies, and Lehman Brothers will not
furnish any such information to other companies. You also acknowledge that
Lehman Brothers has no obligation to use in connection with the transactions
contemplated by this Commitment Letter, or to furnish to you, confidential
information obtained from other companies.
6. Assignment and Syndication.
(a) The parties hereto agree that Lehman Brothers will have the right
to syndicate the Credit Facilities and the Senior Loan Commitment to one or more
groups of financial institutions or other investors, identified by us after
consultation with you. Lehman Brothers will have the right to manage all aspects
of any such syndication, including decisions as to the selection of institutions
to be approached and when they will be approached, the acceptance of
commitments, the amounts offered, the amounts allocated and the compensation
provided. The Senior Loan Commitment is subject to the Company using all
commercially reasonable efforts to assist Lehman Brothers in such syndication
process, including, without limitation: (i) ensuring that the syndication
efforts benefit from the existing lending relationships of the Company and the
Acquired Business; (ii) arranging for direct contact between senior management
and other representatives and advisors of the Company and the Acquired Business,
and the proposed Senior Lenders; (iii) assisting in the preparation of
Confidential Information Memoranda and other marketing materials to be used in
connection with any syndication, including causing such Confidential Information
Memoranda to conform to market standards as reasonably determined by Lehman
Brothers and, at the request of Lehman Brothers, the preparation of versions of
the Confidential Information Memoranda that do not contain material non-public
information concerning the Company or the Acquired Business, their respective
affiliates or their securities for purposes of United States federal and state
securities laws; and (iv) hosting, with LCPI and Lehman Brothers, one or more
meetings of prospective Senior Lenders, and, in connection with any such Senior
Lender meeting, consulting with Lehman Brothers with respect to the
presentations to be made at such meeting, and making available appropriate
officers and representatives to rehearse such presentations prior to such
meetings, as reasonably requested by Lehman Brothers. You also agree that, at
your expense, you will work with Lehman Brothers to procure a rating for the
Credit Facilities by Moody's Investors Service, Inc. ("MOODY'S") and Standard &
Poor's Ratings Group ("S&P") prior to the commencement of the general
syndication of the Credit Facilities.
(b) To assist Lehman Brothers in its syndication efforts, you agree
promptly to prepare and provide to Lehman Brothers such information with respect
to the Company, the Acquired Business, the Acquisition and the other
transactions contemplated hereby as it may reasonably request, including all
financial information and projections as it may reasonably request, including a
business plan for fiscal 2005 through fiscal 2012 and a written analysis of the
business and prospects of the Company and its subsidiaries for such period, all
in form and substance reasonably satisfactory to Lehman Brothers (the
"PROJECTIONS"). You hereby represent and covenant that (i) all information other
than the Projections (the "INFORMATION") that has been or will be made available
to Lehman Brothers by you or any of your representatives is or will be, when
furnished, complete and correct in all material respects and does not or will
not, when furnished, contain any untrue statement of a material fact or omit to
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state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which such
statements are made and (ii) the Projections that have been or will be made
available to Lehman Brothers by you or any of your representatives have been or
will be prepared in good faith based upon reasonable assumptions. You understand
that in arranging and syndicating the Credit Facilities and the Senior Loan
Commitment we may use and rely on the Information and Projections without
independent verification thereof and that you will promptly notify us of any
changes in circumstances that could be expected to call into question the
continued reasonableness of any assumption underlying the Projections.
(c) To ensure an orderly and effective syndication of the Credit
Facilities and the Senior Loan Commitment, you agree that, from the date hereof
until the earlier of the termination of the syndication as determined by Lehman
Brothers and 90 days following the Closing Date, you will not, and will not
permit any of your affiliates to, syndicate or issue, attempt to syndicate or
issue, announce or authorize the announcement of the syndication or issuance of,
or engage in discussions concerning the syndication or issuance of, any debt
facility, or debt or preferred equity security of the Company or any of its
subsidiaries (other than the syndication of the Credit Facilities as
contemplated hereby), including any renewals or refinancings of any existing
debt facility, without the prior written consent of Lehman Brothers.
7. Survival. The provisions of this Commitment Letter relating to the
payment of fees and expenses, indemnification and contribution and
confidentiality and the provisions of Sections 6 and 8 hereof will survive the
expiration or termination of the Senior Loan Commitment or this Commitment
Letter (including any extensions) and the execution and delivery of definitive
financing documentation.
8. Choice of Law; Jurisdiction; Waivers.
(a) This Commitment Letter will be governed by and construed in
accordance with the laws of the State of New York. The Company hereby
irrevocably submits to the non-exclusive jurisdiction of any New York State
court or Federal court sitting in the County of New York in respect of any suit,
action or proceeding arising out of or relating to the provisions of this
Commitment Letter or the Fee Letter and irrevocably agrees that all claims in
respect of any such suit, action or proceeding may be heard and determined in
any such court. The parties hereto hereby waive any objection that they may now
or hereafter have to the laying of venue of any such suit, action or proceeding
brought in any such court, and any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
THE PARTIES HERETO HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS COMMITMENT LETTER OR THE FEE LETTER.
(b) No Senior Lender will be liable in any respect for any of the
obligations or liabilities of any other Senior Lender under this letter or
arising from or relating to the transactions contemplated hereby.
9. Miscellaneous.
(a) This Commitment Letter may be executed in one or more
counterparts, each of which will be deemed an original, but all of which taken
together will constitute one and the same instrument. Delivery of an executed
signature page of this Commitment Letter by facsimile transmission will be
effective as delivery of a manually executed counterpart hereof. This Commitment
Letter may not be amended or waived except by an instrument in writing signed by
Lehman Brothers, LCPI and you.
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(b) The Company may not assign any of its rights, or be relieved of
any of its obligations, without the prior written consent of each of the Senior
Lenders (and any purported assignment without such consent will be null and
void). In connection with any syndication of all or a portion of the Senior Loan
Commitment, the rights and obligations of each Senior Lender hereunder may be
assigned, in whole or in part, and upon such assignment and assumption by the
assignee of all obligations of such Senior Lender in respect of the portion of
the Senior Loan Commitment so assigned on the terms set forth in this Commitment
Letter or on the terms set forth in the definitive financing documents, such
Senior Lender will be relieved and novated hereunder from its obligations with
respect to such portion of the Senior Loan Commitment.
(c) This Commitment Letter and the attached Exhibits and Schedules
set forth the entire understanding of the parties hereto as to the scope of the
Senior Loan Commitment and the obligations of the Senior Lenders and Lehman
Brothers hereunder. This Commitment Letter supersedes all prior understandings
and proposals, whether written or oral, between any of the Senior Lenders and
you relating to any financing or the transactions contemplated hereby. This
Commitment Letter is in addition to the agreements of the parties contained in
the Fee Letter.
(d) This Commitment Letter has been and is made solely for the
benefit of the parties signatory hereto, the Indemnified Persons, and their
respective heirs, successors and assigns, and nothing in this Commitment Letter,
expressed or implied, is intended to confer or does confer on any other person
or entity any rights or remedies under or by reason of this Commitment Letter or
the agreements of the parties contained herein.
(e) You acknowledge that the Senior Lenders and Lehman Brothers may
be (or may be affiliated with) full service financial firms and as such from
time to time may effect transactions for their own account or the account of
customers, and hold long or short positions in debt or equity securities or
loans of companies that may be the subject of the transactions contemplated by
this Commitment Letter. You hereby waive and release, to the fullest extent
permitted by law, any claims you have with respect to any conflict of interest
arising from such transactions, activities, investments or holdings, or arising
from the failure of LCPI, Lehman Brothers or one or more Senior Lenders or any
of their respective affiliates to bring such transactions, activities,
investments or holdings to your attention.
(f) Lehman Brothers also will provide financial advisory services to
the Company with respect to the transaction to which this Commitment Letter
relates. The Company agrees that Lehman Brothers has the right to place
advertisements in financial and other newspapers and journals at its own expense
describing its services to the Company; provided that Lehman Brothers will
submit a copy of any such advertisements to the Company for its approval, which
approval will not be unreasonably withheld or delayed.
(g) You agree to provide us, prior to the Closing Date, with all
documentation and other information required by bank regulatory authorities
under applicable "know your customer" and anti-money laundering rules and
regulations, including, without limitation, the U.S.A. Patriot Act.
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EXECUTION COPY
If you are in agreement with the foregoing, kindly sign and return to
us the enclosed copy of this Commitment Letter.
Very truly yours,
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Jeffrey Abt
--------------------------------------
Name: Jeffrey Abt
Title: Authorized Signatory
LEHMAN BROTHERS INC.
By: /s/ Jeffrey Abt
--------------------------------------
Name: Jeffrey Abt
Title: Managing Director
Accepted and agreed to as of the
date first above written:
GENTIVA HEALTH SERVICES, INC.
By: /s/ John R. Potapchuk
-------------------------------
Name:John R. Potapchuk
Title: Senior Vice President &
Chief Financial Officer
Gentiva Commitment Letter Signature Page
EXECUTION COPY
EXHIBIT A TO COMMITMENT LETTER
------------------------------
SUMMARY OF TERMS OF CREDIT FACILITIES
-------------------------------------
Set forth below is a summary of certain of the terms of the Credit
Facilities and the documentation related thereto. Capitalized terms used and not
otherwise defined herein have the meanings set forth in the Commitment Letter to
which this Summary of Terms is attached and of which it forms a part.
I. PARTIES
-------
BORROWER..................... Gentiva Health Services, Inc., a
Delaware corporation (the "COMPANY").
GUARANTORS................... Each of the Company's direct and
indirect subsidiaries (other than
foreign subsidiaries of the Company)
(the "GUARANTORS"; the Company and the
Guarantors, collectively, the "CREDIT
PARTIES").
SOLE ARRANGER AND
SOLE BOOK-RUNNER............. Lehman Brothers Inc. (in such capacity,
the "ARRANGER").
SYNDICATION AGENT............ An entity to be designated by the
Arranger (in such capacity, the
"SYNDICATION AGENT").
DOCUMENTATION AGENT.......... An entity to be designated by the
Arranger (in such capacity, the
"DOCUMENTATION AGENT").
ADMINISTRATIVE AGENT......... Lehman Commercial Paper Inc. (in such
capacity, the "ADMINISTRATIVE AGENT").
SENIOR LENDERS............... A syndicate of banks, financial
institutions and other entities arranged
by the Arranger (collectively, the
"SENIOR LENDERS").
II. TYPES AND AMOUNTS OF CREDIT FACILITIES
--------------------------------------
SENIOR TERM LOAN FACILITY.... Seven-year senior term loan facility
(the "SENIOR TERM LOAN FACILITY") in an
aggregate principal amount equal to
$370.0 million (the loans thereunder,
the "TERM LOANS"). The Term Loans will
be repayable in quarterly installments
equal to 1% per annum, with the
remaining balance due on maturity.
Availability........... The Term Loans will be made in a single
drawing on the Closing Date.
Purpose................ The proceeds of the Term Loans will be
used to finance, in part, the
Acquisition, to refinance certain
existing indebtedness of the Acquired
Business and to pay related fees and
expenses.
REVOLVING CREDIT FACILITY.... Six-year revolving credit facility (the
"REVOLVING CREDIT FACILITY"; together
with the Senior Term Loan Facility, the
"CREDIT FACILITIES") in an aggregate
principal amount equal to $75.0 million
(the loans thereunder, the "REVOLVING
CREDIT LOANS").
A-1
Availability........... The Revolving Credit Facility will be
available on a revolving basis during
the period commencing on the day after
the Closing Date and ending on the sixth
anniversary of the Closing Date (the
"REVOLVING CREDIT TERMINATION DATE").
Increased
Availability........... The Company will have the right to
solicit commitments for a pre-approved
(but not pre-committed) increase of up
to $25.0 million in the Revolving Credit
Facility. Such increases in the
Revolving Credit Facility may be
provided by existing Senior Lenders or
other persons who become Senior Lenders
in connection therewith and will be
subject to customary price protection.
No Senior Lender will be obligated to
provide any such increase.
Letters of Credit ..... A portion of the Revolving Credit
Facility not in excess of $55.0 million
will be available for the issuance of
letters of credit (the "LETTERS OF
CREDIT") by one or more Senior Lenders
to be selected in the syndication
process (each such Senior Lender in such
capacity, an "ISSUING SENIOR LENDER").
The face amount of any outstanding
Letters of Credit will reduce
availability under the Revolving Credit
Facility on a dollar-for-dollar basis.
No Letter of Credit will have an
expiration date after the earlier of (i)
one year after the date of issuance,
unless the Issuing Senior Lender
otherwise agrees, and (ii) five business
days prior to the Revolving Credit
Termination Date.
Drawings under any Letter of Credit will
be reimbursed by the Company (whether
with its own funds or with the proceeds
of Revolving Credit Loans) on the next
business day. Each Senior Lender under
the Revolving Credit Facility will
acquire an irrevocable and unconditional
pro rata participation in each Letter of
Credit.
Swing Line Loans....... A portion of the Revolving Credit
Facility not in excess of an amount to
be agreed will be available for swing
line loans (the "SWING LINE LOANS") from
Lehman Commercial Paper Inc. (in such
capacity, the "SWING LINE SENIOR
LENDER") on same-day notice. Any such
Swing Line Loans will reduce
availability under the Revolving Credit
Facility on a dollar-for-dollar basis.
Each Senior Lender under the Revolving
Credit Facility will acquire an
irrevocable and unconditional pro rata
participation in each Swing Line Loan.
Maturity............... The Revolving Credit Termination Date.
A-2
PURPOSE.................... The proceeds of the Revolving Credit
Loans will be used to finance the
working capital needs and for other
general corporate purposes of the
Company and its subsidiaries.
III. CERTAIN PAYMENT PROVISIONS
--------------------------
FEES AND INTEREST RATES.......... As set forth on Annex A-I.
OPTIONAL PREPAYMENTS AND
COMMITMENT REDUCTIONS...... Loans may be prepaid and commitments
under the Revolving Credit Facility
may be reduced, in each case, in
minimum amounts to be agreed upon,
at any time, without premium or
penalty (other than customary
indemnification for "breakage costs"
incurred in connection with a
prepayment of Loans on a day other
than the last day of an interest
period with respect thereto).
Optional prepayments of the Term
Loans will be applied to the
installments thereof, first in
direct order of maturity for eight
amortization payments and
thereafter, ratably in accordance
with the then outstanding amounts
thereof and may not be reborrowed.
MANDATORY PREPAYMENTS AND
COMMITMENT REDUCTIONS ..... The following amounts will be
applied to prepay the Term Loans,
provided that prior to applying the
provisions outlined below with
respect to the prepayment of Term
Loans, the Company may, at its
option, use such net proceeds or
excess cash flow to repay any
outstanding Revolving Credit Loans:
(i) 50% of the net proceeds of any sale
or issuance of equity (other than
issuances pursuant to employee stock
plans) after the Closing Date by the
Company, reducing to zero percent of
such net proceeds if, at the time of
such sale or issuance, the
consolidated total leverage ratio of
the Company and its subsidiaries is
less than 3.0 to 1.0;
(ii) 100% of the net proceeds of any
issuance or incurrence of
indebtedness (other than
indebtedness otherwise permitted
under the Credit Documentation (as
defined below)) after the Closing
Date by the Company or any of its
subsidiaries;
(iii) 100% of the net proceeds of any sale
or other disposition (including as a
result of casualty or condemnation)
by the Company or any of its
subsidiaries of any assets with
exceptions for proceeds that are
re-invested within 180 days in
capital assets or permitted
acquisitions (except for the sale of
inventory in the ordinary course of
business and certain other
dispositions to be agreed upon); and
A-3
(iv) 50% (reducing to zero percent if the
consolidated total leverage ratio of
the Company and its subsidiaries as
of the applicable fiscal year end is
less than 3.0 to 1.0) of excess cash
flow (to be defined in a mutually
satisfactory manner) for each fiscal
year of the Company (commencing with
the fiscal year in which the Closing
Date occurs).
All such amounts will be applied to the
prepayment of the Term Loans. Each such
prepayment of the Term Loans will be applied to
the installments thereof, first in direct order
of maturity for eight amortization payments and
thereafter, ratably in accordance with the then
outstanding amounts thereof and may not be
reborrowed.
IV. COLLATERAL The obligations of each Credit Party in respect
---------- of the Credit Facilities and certain interest
rate hedge agreements provided by affiliates of
the Senior Lenders will be secured by a
perfected first priority security interest
(subject to permitted liens) in all of its
tangible and intangible assets (including,
without limitation, intellectual property,
owned real property, licenses, permits and all
of the capital stock of the Company and each of
its direct and indirect domestic subsidiaries
and 65% of the voting stock and 100% of the
non-voting stock of certain of its first-tier
foreign subsidiaries), except for those assets
as to which the Arranger determines, in its
sole discretion, that the costs of obtaining
such a security interest are excessive in
relation to the value of the security to be
afforded thereby.
V. CERTAIN CONDITIONS
------------------
INITIAL CONDITIONS....... The availability of the Credit Facilities is
subject to the conditions set forth on Exhibit
B to the Commitment Letter.
ON-GOING CONDITIONS...... The making of each extension of credit will be
conditioned upon (i) the accuracy of all
representations and warranties in the
definitive financing documentation with respect
to the Credit Facilities (the "CREDIT
DOCUMENTATION") (including, without limitation,
the material adverse change and litigation
representations) and (ii) there being no
default or event of default in existence at the
time of, or after giving effect to the making
of, such extension of credit.
A-4
VI. CERTAIN DOCUMENTATION MATTERS The Credit Documentation will
----------------------------- contain representations, warranties,
covenants and events of default
customary for financings of this
type and other terms deemed
appropriate by the Senior Lenders,
including, without limitation:
REPRESENTATIONS AND WARRANTIES........ Financial statements (including pro
forma financial statements); absence
of undisclosed liabilities; no
material adverse change; corporate
existence; compliance with law;
corporate power and authority;
enforceability of Credit
Documentation; no conflict with law
or contractual obligations; no
material litigation; no default;
ownership of property; indebtedness;
liens; intellectual property; taxes;
Federal Reserve regulations; ERISA;
Investment Company Act; licenses;
permits; regulatory approvals;
subsidiaries; environmental matters;
healthcare matters, solvency; labor
matters; accuracy of disclosure; and
creation and perfection of security
interests.
AFFIRMATIVE COVENANTS.............. Delivery of financial statements,
reports, accountants' letters,
projections, budgets and business
plan, officers' certificates and
other information requested by the
Senior Lenders; payment of other
obligations; continuation of
business and maintenance of
existence and material rights and
privileges; compliance with laws and
material contractual obligations;
maintenance of property and
insurance; maintenance of books and
records; right of the Senior Lenders
to inspect property and books and
records; notices of defaults,
litigation and other material
events; compliance with
environmental laws; compliance with
healthcare laws and further
assurances (including, without
limitation, with respect to security
interests in after-acquired
property).
FINANCIAL COVENANTS................ Financial covenants (including,
without limitation, minimum interest
coverage ratio and maximum total
leverage ratio).
NEGATIVE COVENANTS................. Limitations on: indebtedness
(including preferred stock); liens;
guarantee obligations; mergers and
acquisitions, consolidations,
liquidations and dissolutions; sales
of assets; leases; dividends and
other payments in respect of capital
stock; capital expenditures;
investments, loans and advances;
optional payments and modifications
of subordinated and other debt
instruments; amendments to material
contracts; transactions with
affiliates; sale and leasebacks;
changes in fiscal year; negative
pledge clauses; and changes in lines
of business.
EVENTS OF DEFAULT.................. Nonpayment of principal when due;
nonpayment of interest, fees or
other amounts after a grace period
to be agreed upon; material
inaccuracy of representations and
warranties; violation of covenants
(subject, in the case of certain
affirmative covenants, to a grace
period to be agreed upon);
cross-default; bankruptcy events;
certain ERISA events; material
judgments; actual or asserted
invalidity of any guarantee or
security document or security
interest; and a change of control
(the definition of which is to be
agreed).
A-5
VOTING............................. Amendments and waivers with respect
to the Credit Documentation will
require the approval of Senior
Lenders holding not less than a
majority of the aggregate amount of
the Term Loans, Revolving Credit
Loans (including participations in
Letters of Credit and Swing Line
Loans) and unused commitments under
the Credit Facilities, except that
(i) the consent of each Senior
Lender directly and adversely
affected thereby will be required
with respect to (a) reductions in
the amount or extensions of the
scheduled date of amortization or
final maturity of any loan, (b)
reductions in the rate of interest
or any fee or extensions of any due
date thereof, (c) increases in the
amount or extensions of the expiry
date of any Senior Lender's
commitment, (d) modifications to the
pro rata provisions of the Credit
Documentation or (e) modifications
to the assignment and participation
provisions of the Credit
Documentation which further restrict
assignments thereunder and (ii) the
consent of 100% of the Senior
Lenders will be required with
respect to (a) modifications to any
of the voting percentages and (b)
releases of all or substantially all
of the collateral or all or
substantially all of the Guarantees
other than in accordance with the
provisions of the Credit
Documentation. In addition, the
consent of Senior Lenders holding a
majority of the aggregate amount of
the funded and unfunded commitments
under a Credit Facility will be
required with respect to certain
modifications disproportionately
affecting such Credit Facility.
ASSIGNMENTS AND PARTICIPATIONS..... Each Senior Lender may assign any or
all of its loans and commitments to
its affiliates or to one or more
banks, financial institutions or
other entities. Except for
assignments (i) by or to the
Arranger and its affiliates, (ii) to
another Senior Lender or to an
affiliate of a Senior Lender or
(iii) of funded Term Loans,
assignments will require the consent
of the Administrative Agent and, so
long as no default or event of
default has occurred and is
continuing, the Company (which
consent in each case will not be
unreasonably withheld or delayed).
Non-pro rata assignments will be
permitted. Partial assignments
(other than to another Senior Lender
or to an affiliate of a Senior
Lender), must be at least $1.0
million unless otherwise agreed by
the Company and the Administrative
Agent. Upon assignment, the assignee
will become a Senior Lender for all
purposes under the Credit
Documentation under documentation
reasonably acceptable to the
Administrative Agent. Promissory
notes will be issued under the
Credit Facilities only upon request.
A-6
YIELD PROTECTION................... The Credit Documentation will
contain customary provisions (i)
protecting the Senior Lenders
against increased costs or loss of
yield resulting from changes in
reserve, tax, capital adequacy and
other requirements of law and from
the imposition of or changes in
withholding or other taxes and (ii)
indemnifying the Senior Lenders for
"breakage costs" incurred in
connection with, among other things,
any prepayment of a LIBOR Loan (as
defined in Annex A-I) on a day other
than the last day of an interest
period with respect thereto.
EXPENSES AND INDEMNIFICATION ...... The Company will pay (i) all
reasonable out-of-pocket expenses of
the Administrative Agent and the
Arranger associated with the
syndication of the Credit Facilities
and the preparation, negotiation,
execution, delivery and
administration of the Credit
Documentation and any amendment or
waiver with respect thereto
(including the reasonable fees,
disbursements and other charges of
counsel and the charges of
IntraLinks) and (ii) all
out-of-pocket expenses of the
Administrative Agent and the Senior
Lenders (including the fees,
disbursements and other charges of
counsel) in connection with the
enforcement of the Credit
Documentation or in any bankruptcy
case or insolvency proceeding.
The Administrative Agent, the
Syndication Agent, the Arranger and
the Senior Lenders (and their
affiliates and each of their
respective officers, directors,
partners, trustees, employees,
shareholders, advisors, agents,
attorneys and controlling persons
and each of their respective heirs,
successors and assigns) will have no
liability for, and will be
indemnified and held harmless
against, any loss, liability, cost
or expense incurred in respect of
the financing contemplated hereby or
the use or the proposed use of
proceeds thereof (except to the
extent resulting from the gross
negligence or willful misconduct of
the indemnified party).
GOVERNING LAW AND FORUM........... State of New York.
COUNSEL TO THE ADMINISTRATIVE
AGENT AND THE ARRANGER............. Latham & Watkins LLP.
A-7
EXECUTION COPY
Annex A-I
[Omitted]
A-8
EXECUTION COPY
EXHIBIT B TO COMMITMENT LETTER
------------------------------
FUNDING CONDITIONS
------------------
Capitalized terms used but not defined herein have the meanings assigned to them
in the Commitment Letter to which this Exhibit B is attached and of which it
forms a part. The availability of the Credit Facilities is conditioned upon
satisfaction of, among other things, the conditions precedent summarized below.
(a) Each Credit Party shall have executed and delivered definitive financing
documentation with respect to the Credit Facilities satisfactory to the
Administrative Agent, the Arranger and their counsel.
(b) There shall not exist (pro forma for the Acquisition and the financing
thereof) any default or event of default under the Credit Facilities or
under any other material indebtedness or agreement of the Company or the
Acquired Business.
(c) The Company shall have issued $55.5 million of its common stock to the
shareholders of the Acquired Business, on terms reasonably satisfactory to
the Arranger. The Capital Structure of the Company and its subsidiaries
after the Acquisition shall be as described in the Commitment Letter and
otherwise reasonably satisfactory to the Arranger.
(d) The Acquisition shall have been consummated for an aggregate purchase price
not exceeding $482.8 million (including fees and expenses not exceeding
$22.0 million in the aggregate) pursuant to documentation satisfactory to
the Arranger, and no material provision thereof shall have been waived,
amended, supplemented or otherwise modified without the consent of the
Arranger; it being understood and agreed that the draft Acquisition
Agreement dated January 4, 2006 is acceptable to the Arranger.
(e) The Company shall have complied with all of its obligations under and
agreements in the Commitment Letter and the Fee Letter.
(f) All governmental, regulatory and third party approvals necessary or, in the
discretion of the Arranger, advisable in connection with the Acquisition,
the financing contemplated hereby and the continuing operations of the
Company and its subsidiaries shall have been obtained and be in full force
and effect, and all applicable waiting periods shall have expired without
any action being taken or threatened by any competent authority that could
reasonably be expected to restrain, prevent or otherwise impose adverse
conditions on the Acquisition or the financing thereof.
(g) The Arranger shall have received audited and unaudited (which shall have
been reviewed by the independent accountants for the Company as provided in
Statement on Auditing Standards No. 100) financial statements of the
Company, the Guarantors and the Acquired Business and all other completed
or probable acquisitions (including pro forma financial statements) meeting
the requirements of Regulation S-X for a Form S-1 registration statement
under the Securities Act of 1933, as amended and copy of the most recent
internal financial projections with respect to fiscal year 2005 for each of
the Company and the Acquired Business, and all such financial statements
and projections must be satisfactory in form to the Arranger in its sole
discretion. Such financial statements shall show a pro forma ratio of total
funded debt to pro forma consolidated EBITDA of the Company (calculated in
accordance with Regulation S-X and including only those adjustments the
Arranger agrees are appropriate) for the most recent twelve-month period
for which internal financial statements are available, of no more than
4.50:1.00.
B-1
(h) The Arranger shall have received the results of recent lien searches with
respect to the Company and the Acquired Business, and such searches shall
not reveal any liens other than liens permitted by the Credit Documentation
or liens to be discharged substantially concurrently with the closing of
the Credit Facilities pursuant to documentation satisfactory to the
Arranger.
(i) The Senior Lenders shall have received a customary solvency certificate
from the Company's chief financial officer as to the solvency of the
Company and such legal opinions from counsel to the Company (including,
where appropriate, local counsel) as the Arranger may reasonably request.
B-2