Exhibit 10.27
[LETTERHEAD OF NATIONSBANK APPEARS HERE]
NATIONSBANK
January 29, 1997
Mr. Jay B. Lewis
Chief Financial Officer
Jones International Networks, Ltd.
9697 East Mineral Avenue
Englewood, CO 80155-3309
$25,000,000 Credit Facility consisting of a
Re: Facility A -$20,000,000 Senior Reducing Revolving Credit Facility and a
Facility B -$5,000,000 One Year Revolving Credit Facility.
Dear Jay:
NationsBank of Texas, N.A. ("NationsBank") is pleased to offer to be the agent
(in such capacity, the "Agent") for a combined $25,000,000 Credit Facility
(the "Facility") to Jones International Networks, Ltd. ("Borrower"), and to
offer its commitment to lend all $25,000,000 of the Facility, upon and subject
to the terms and conditions of this letter and the Summary of Terms and
Conditions (herein so called) attached hereto as Exhibit A, and in reliance on
oral or written materials and other information which Borrower has previously
provided to NationsBank (collectively, the "Information").
If Borrower accepts this offer as hereinafter provided, the closing of the
Facility will be conditioned upon (i) the preparation, negotiation, execution
and delivery of definitive credit documentation in form and substance
satisfactory to the Agent and the Lenders reflecting the Summary of Terms and
Conditions and containing such other terms and conditions as are usual and
customary for transactions of this nature and (ii) the absence of a material
adverse change in the financial condition, business operations, properties or
prospects of Borrower and its subsidiaries, if any, taken as a whole, or any
guarantor since December 31, 1996.
By acceptance of this offer, Borrower represents and warrants that (i) the
Information is and will be complete and correct in all material respects and
does not and will 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 materially misleading in light of the circumstances under which
such statements are or will be made and (ii) all financial projections that
have been or are hereafter prepared by Borrower and made available to
NationsBank have been or will be prepared in good faith based on reasonable
assumptions. Borrower agrees to supplement the Information and projections
referred to in clauses (i) and (ii) above from time to time until closing of
the Facility so that the representation and warranty in the preceding
sentence remains correct.
Jones International Networks, Ltd.
January 29, 1997
Page 2
By acceptance of this letter, Borrower represents and warrants to NationsBank
and NationBanc Capital Markets, Inc. ("NCMI") that all historical financial
statements and other information regarding Borrower and its subsidiaries, if
any, or any guarantor heretofore delivered to NationsBank or NCMI in
connection with the Facility are true, correct, and not misleading in any
material respect and that any projections heretofore delivered to NationsBank
or NCMI in connection with the Facilities have been prepared in good faith and
based on information believed to be true, correct and not misleading in any
material respect.
Upon acceptance of this commitment by the Borrower, the Borrower agrees to
immediately pay a structuring fee to NCMI in the amount of $50,000 (the
"Structuring Fee"). Such Structuring Fee is non-refundable whether or not the
Facilities are ever closed or a funding ever occurs under the Facilities. By
acceptance of this offer, the Borrower agrees to pay the costs and expenses,
including reasonable attorneys' fees and expenses and expenses of due
diligence, incurred before or after the date hereof by the Agent or NCMI in
connection with the Facility whether or not the Facility is ever closed or a
funding ever occurs under the Facility.
In addition, Borrower agrees to indemnify and hold harmless NationsBank, NCMI,
and their respective affiliates, officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities and expenses (including, without limitation,
reasonable fees and disbursements of counsel) which may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation
for a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with the Facility, including, without limitation,
any transaction in which the proceeds of any borrowing under the Facility are
or are to be applied, whether or not an Indemnified Party is a party thereto,
whether or not the transactions contemplated herein are consummated, and
whether or not arising out of the negligence of such Indemnified Party, except
to the extent such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
Borrower will not settle or consent to judgment with respect to any such
investigation, litigation, or proceeding without the prior written consent of
NationsBank and NCMI, unless such settlement or consent includes an
unconditional release of each Indemnified Party.
Neither this offer nor the undertaking and commitment contained herein may be
disclosed to or relied upon by any other person or entity other than your
accountants, attorneys and other advisors, without the prior written consent
of NationsBank, except that following your acceptance hereof you may make
public disclosure hereof as required by law and may disclose the terms of the
commitment to your investment advisors and to the entities who are
underwriting your initial public offering, and may disclose the terms in any
prospectus distributed in connection with the offering.
Jones International Networks, Ltd.
January 29, 1997
Page 3
This letter shall be governed by, and construed in accordance with, the laws of
the state of Texas without regard to the principles governing conflicts of laws.
This letter may be modified or amended only in writing. This letter is not
assignable by Borrower without the prior written consent of NationsBank and
NCMI. This letter supersedes and replaces any and all proposals or commitment
letters previously delivered by NationsBank or NCMI to Borrower relating to the
Facilities. This letter may be executed in any number of counterparts, each of
which shall be an original, but all of which shall constitute one instrument.
This offer will automatically expire at the close of business on February 6,
1997 unless Borrower (i) executes this letter and returns it to NationsBank
prior to that time (which may be by facsimile transmission), and (ii) delivers
the Structuring Fee to NationsBank, whereupon this letter shall become a binding
undertaking and commitment. Thereafter, this undertaking and commitment will
automatically expire at the close of business on April 7, 1997 unless definitive
credit documentation is executed and delivered prior to that time.
THIS WRITTEN AGREEMENT (WHICH INCLUDES THE SUMMARY OF TERMS AND CONDITIONS)
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Very truly yours,
NATIONSBANK OF Texas, N.A.,
Individually and as Agent
By: /s/ David G. James
--------------------------------
Title: Vice President
--------------------------
Accepted and Agreed To:
Jones International Networks, Ltd.
By: /s/ Jay B. Lewis
--------------------------------
Title: Chief Financial Officer
--------------------------
Date of Return to NationsBank: February 5, 1997
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EXHIBIT A
SUMMARY OF TERMS AND CONDITIONS
January 29, 1997
Borrower: Jones International Networks, Ltd.
Guarantors: All present and future Subsidiaries of Borrower.
Agent: NationsBank of Texas, N.A.
Arranger: NationsBanc Capital Markets, Inc.
Lenders: NationsBank of Texas and such other acceptable
banks that may become lenders from time to time.
Expected Closing: On or before April 7, 1997.
Facilities: Facility A - $20,000,000 Senior Reducing Revolving
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Credit Facility. (The "Facility A Commitment").
Facility B - $5,000,000 One Year Revolving Credit
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Facility which can be renewed once for an
additional year at the option of the Borrower
provided that the Borrower is in compliance with
all terms and conditions of the Credit Agreement
at the time of such renewal. Any further renewals
will be subject to the mutual consent of the
Borrower and the Lender. (The "Facility B
Commitment").
Maturity: Facility A: Five years from closing.
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Facility B: One year from closing or as renewed as
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outlined above, not to exceed five years from
closing.
Purpose: Facility A: To finance permitted acquisitions and
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capital expenditures and general corporate
purposes.
Facility B: To finance working capital and general
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corporate purposes.
Facility A Repayment: Facility A shall require the payment of interest
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only up to the earlier of 3/31/00, or the third
anniversary of the Closing Date. Thereafter,
availability shall be (and prepayments shall be
required so that the principal balance of
Facility A never exceeds the Facility A Commitment
as so reduced) permanently reduced in quarterly
installments as set forth as below:
Quarterly Date % Reduction
-------------- -----------
June 30, 2000 7.50%
September 30, 2000 7.50%
1
December 31, 2000 7.50%
March 31, 2001 7.50%
June 30, 2001 10.00%
September 30, 2001 10.00%
December 31, 2001 25.00%
March 31, 2002 25.00% and any remaining
balance such that
the Commitment
shall be zero.
Facility B Repayment: Facility B shall require repayment in full at
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Maturity.
Collateral: A first priority pledge of, and lien on, all assets
of the Borrower and its subsidiaries, including
stock and partnership interests. A negative pledge
on all unencumbered assets of the Borrower and its
subsidiaries. Borrower and its subsidiaries shall
agree not to agree with any other person to pledge
their respective assets.
Interest Rate: All borrowings under the Facilities shall bear
interest at a rate equal to, at the Borrower's
option, the Applicable Margin (as defined below)
above (i) NationsBank's base rate or (ii) Adjusted
LIBOR. The Applicable Margin will vary based on
the ratio of the Borrower's Leverage Ratio as
shown below:
Applicable Margin: Applicable Margin shall mean the following per
annum percentages, applicable in the following
situations:
--------------------------------------------------------
Leverage Ratio Prime Rate Basis LIBOR Basis
--------------------------------------------------------
greater than 3.50:1 2.00% 3.00%
--------------------------------------------------------
greater than 3.00:1
less than 3.50:1 1.75% 2.75%
--------------------------------------------------------
greater than 2.50:1
less than 3.00:1 1.50% 2.50%
--------------------------------------------------------
greater than 2.00:1
less than 2.50:1 1.125% 2.125%
--------------------------------------------------------
less than 2.00 0.75% 1.75%
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Fees:
Underwriting Fee: 1.75% of the Facilities payable on the Closing
Date.
Structuring Fee: $50,000 upon acceptance by the Borrower of a
Commitment.
Commitment Fee: The Lenders shall be paid a non-refundable annual
fee of 1/2 of 1% of the unused Commitment, payable
quarterly in arrears which shall accrue on the
average daily unused portion of the Facilities.
Conditions Precedent to
First Funding of Facility A Usual and customary conditions precedent, including
a requirement that at least 90% of new net equity
proceeds be expended for permitted acquisitions as
outlined in the Borrower's S-1 Registration
Statement as filed with the Securities and Exchange
Commission on November 6, 1996.
2
Acquisitions: The Borrower may make acquisitions at its sole
discretion from the proceeds of the equity
financing. At such time that the Borrower accesses
Facility A, the Borrower may make acquisitions up
to $2,000,000 in aggregate in any given fiscal year
provided that the Borrower demonstrates pro forma
compliance, thereafter all acquisitions are subject
to: (i) approval of all Lenders, which will not be
unreasonably withheld, (ii) no event of default
exists, or would result therefrom and (iii) receipt
of revised projections.
Proceeds from Equity
Offerings and Assets
Sales: 100% of the net proceeds from the sale of assets
will be used to reduce the Facility B Commitment
and then the Facility A Commitment. 100% of any net
cash proceeds will be used to reduce the Commitment
to a leverage ratio of no less than or equal to
3.0x when Total Debt to Operating Cash Flow is
greater than 3.5x and to reduce any outstandings
under the Facilities when Total Debt to Operating
Cash Flow is less than or equal to 3.5x, subject to
no Default.
Change of Control: Glenn R. Jones will retain at least 51% direct or
indirect voting interest in the Borrower.
Negative Covenants: No restricted payments with the exception of: the
Borrower may be permitted to repay intercompany
borrowings to Jones Global Group and Jones
Intercable from net proceeds of equity offering. No
investments except that the Borrower may invest in
"PIN" and "Superaudio" to the extent required under
the partnership agreements in effect as of the
Closing. No indebtedness other than: capital lease
payments, Letters of Credit (with maturities of one
year or less) and other obligations in the ordinary
course of business subject to a maximum limit of
$2,000,000.
Covenants: The definitive loan documentation shall contain
other affirmative and negative covenants which are
usual and customary for transactions of this
nature, including a requirement that any debt or
other obligations owing by Borrower to any of its
affiliates be subordinated to the Facilities on
terms and conditions acceptable to the Lenders.
Financial Covenants: Borrower shall not permit the ratio of Total Debt
to Operating Cash Flow to be greater than the
following ratios during the following periods:
Period Ratio
------ -----
Closing - 12/31/97 4.00x
1/1/98 - 9/30/98 3.50x
10/1/98 - 6/30/99 3.00x
7/1/99 - thereafter 2.50x
Borrower shall not permit the ratio of Operating
Cash Flow to Interest Expense to be less than the
following ratios during the following periods:
3
Period Ratio
------ -----
Closing - thereafter 2.50x
Borrower shall not permit the ratio of Operating
Cash Flow to Pro Forma Debt Service to be less than
the following ratios during the following periods:
Period Ratio
------ -----
Closing - thereafter 1.50x
The total Operating Cash Flow generated from "JRN",
"PIN" and "GAC" networks existing on the last day
of any fiscal quarter shall not be less than 85% of
the total Operating Cash Flow generated from "JRN",
"PIN" and "GAC" networks on the last day of the
immediately preceding fiscal quarter.
Events of Default: The definitive loan documentation shall contain
events of default which are usual and customary for
transactions of this nature.
Conditions Precedent: Usual and customary for transactions of this
nature. To include raising no less than $30MM of
net equity financing.
Expenses: Whether or not the Facilities are closed, the
Borrower shall reimburse Agent and Arranger for all
costs and expenses, including reasonable attorney's
fees and expenses, incurred by Agent and Arranger
in connection with the preparation, negotiation,
execution, delivery, syndication, amendment and
administration of the Facility, and Borrower shall
reimburse each Lender for all costs and expenses
including reasonable attorneys' fees and expenses,
incurred by such Lender in connection with the
enforcement and collection of the obligations of
Borrower or any Guarantor.
Governing Law: State of Texas
Assignments and
Participations: Usual and customary provisions.
4
Definitions: Leverage Ratio - The ratio of the Borrower's Total
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Debt to its sum of the last four fiscal quarters'
of Operating Cash Flow.
Operating Cash Flow - The sum of the last four
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fiscal quarters' net income plus interest expense,
depreciation, amortization, income taxes, deferred
items and other non-cash expenses, less non-cash
credits included in net income, plus the equity
distribution received from the Superaudio
partnership.
For purposes of calculating Operating Cash Flow
with respect to assets not owned at all times
during the four fiscal quarters preceding the date
of Operating Cash Flow, there shall be: (i)
included the Operating Cash Flow of any assets
acquired during any such four fiscal quarters for
the twelve month period preceding the date of
determination, and (ii) excluded the Operating Cash
Flow of any assets disposed of during any such four
fiscal quarters for the twelve month period
preceding the date of determination.
Total Debt - As it relates to the Borrower shall
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mean and include: (i) all funded and contingent
indebtedness of the Borrower under the Facilities,
(ii) all other funded and contingent indebtedness
for borrowed money, (iii) all letters of credit,
and (iv) all capitalized lease obligations. Total
Debt can be reduced by all available cash above
$500,000 only for quarterly covenant compliance.
Joint Ventures - The Company is a partner in two
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joint ventures, the PIN Venture and Superaudio. The
PIN Venture was organized in January 1995 and
commenced operations on February 1, 1995. The PIN
Venture owns and operates a 24-hour-a-day cable
television network for the airing of long-form
advertising ("infomercials"). As of September 1,
1996, the PIN Venture was owned 47% by a subsidiary
of the Borrower, 47% by Cox Consumer Information
Network and 6% by Adelphia Communications
Corporation. Superaudio commenced operations in
July 1990 and is a joint venture which is owned 50%
by a subsidiary of the Borrower and 50% by DMX Inc.
5