EXHIBIT (b)(1)
Commitment Letter
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August 10, 2000
Kohlberg & Company
111 Radio Circle
Mt. Kisco, NY 10549
Attention: Christopher Lacovara
Christopher Anderson
Gentlemen:
You have advised National City Bank ("National City") that a holding
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company formed by Kohlberg & Company, LLC, on behalf of its investment fund
Kohlberg Investors III, L.P., ("Kohlberg") intends to form KBII Acquisition
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Company, Inc. ("KBII" or the "Borrower") to acquire (the "Acquisition") BI
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Incorporated (following the merger of KBII into BI Incorporated, the "Company")
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for $78,900,000 plus reasonable fees and expenses. In that connection, you have
requested that National City agree to structure, arrange and syndicate senior
credit facilities in an aggregate amount of up to $47,500,000 (the "Credit
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Facilities") as described in the attached Summary of Terms and Conditions (the
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"Term Sheet") and that National City commit to provide the entire principal
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amount of the Credit Facilities and to serve as lead arranger (the "Arranger")
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for the Credit Facilities. References herein to the "Transaction" shall include
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the financings described herein, the Acquisition and all other transactions
related to the foregoing. The sources and uses required to consummate the
Transaction are set forth in the sources and uses table attached hereto as
Schedule I.
Furthermore, National City is pleased to advise you of its commitment (the
"Commitment") to provide the entire amount of the Credit Facilities upon the
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terms and subject to the conditions set forth or referred to in this commitment
letter (the "Commitment Letter") and in the fee letter (the "Fee Letter") and
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the Term Sheet attached hereto.
It is agreed that National City will act as the exclusive agent, and that
National City will act as the exclusive advisor, lead arranger and book manager,
for the Credit Facilities, and will, in such capacity, perform the duties and
exercise the authority customarily performed and exercised by it in such roles.
You agree that no other agents, co-agents or arrangers will be appointed, no
other titles will be awarded and no compensation (other than that expressly
contemplated by the Term Sheet and the Fee Letter referred to below) will be
paid in connection with the Credit Facilities unless you and we shall so agree.
We intend to syndicate the Credit Facilities to a group of financial
institutions (together with National City, the "Lenders") identified by us in
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consultation with you. National City intends to commence syndication efforts
promptly, and you agree to actively assist National City in completing
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a syndication satisfactory to us. Such assistance shall include (a) your using
commercially reasonable efforts to ensure that the syndication efforts benefit
materially from your existing lending relationships, (b) direct contact between
senior management and advisors of the Borrower, the proposed Lenders, and any
ratings agency as required by the Agent (c) assistance in the preparation of a
Confidential Information Memorandum and other marketing materials to be used in
connection with the syndication and (d) the hosting, with National City of one
or more meetings of prospective Lenders and ratings agency presentations. You
further acknowledge and agree to the disclosure by National City of information
relating to the Credit Facilities to "Gold Sheets" and other similar trade
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publications.
National City, in consultation with you, 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 will participate, the allocations of the
commitments among the Lenders and the amount and distribution of fees among the
Lenders. To assist National City in its syndication efforts, you agree promptly
to prepare and provide to National City all information to which you have access
with respect to the Borrower and the Transaction, including all financial
information and projections (the "Projections"), as we may reasonably request in
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connection with the arrangement and syndication of the Credit Facilities. You
hereby represent and covenant that (a) to the extent of your knowledge all
information other than the Projections (the "Information") that has been or will
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be made available to National City by you or any of your representatives is or
will be, when furnished, complete and correct in all material respects and does
not or will not, when furnished, contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements are made, and (b) the Projections that have been or will
be made available to National City 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 we may use
and rely on the Information and Projections without independent verification
thereof.
As consideration for the commitment of National City hereunder and the
agreement of National City to perform the services described herein, you agree
to pay to National City the fees set forth in the Term Sheet and in the Fee
Letter dated the date hereof and delivered herewith.
National City shall be entitled, after consultation with you, to change the
pricing, terms and structure of the Credit Facilities if National City
determines that such changes are advisable to insure a successful syndication of
the Credit Facilities. The commitment, undertakings and agreements of National
City hereunder is subject to the agreements in this paragraph, which shall
survive closing under the Credit Facilities and remain effective until the
completion of a successful syndication.
The commitment of National City hereunder and the agreement of National
City to perform the services described herein are subject to (a) there not
occurring or becoming known to us any material adverse condition or material
adverse change in or affecting the business, operations, property, or condition
(financial or otherwise) of the Borrower and its subsidiaries, (b) our not
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becoming aware after the date hereof of any information or other matter
(including any matter relating to financial models and underlying assumptions
relating to the Projections) affecting the Borrower or the Transaction that in
our reasonable judgment is inconsistent in a material and adverse manner with
any such material information or other material matter disclosed to us prior to
the date hereof, (c) our satisfaction that prior to and during the syndication
of the Credit Facilities there shall be no competing offering, placement or
arrangement or any debt securities or bank financing by or on behalf of the
Borrower or any affiliate thereof, (d) the negotiation, execution and delivery
of definitive documentation with respect to the Credit Facilities satisfactory
to National City and their counsel and (e) the other conditions set forth or
referred to in the Term Sheet. The terms and conditions of the commitment of
National City hereunder and of the Credit Facilities are not limited to those
set forth herein and in the Term Sheet. Those matters that are not covered by
the provisions hereof and of the Term Sheet are subject to the approval and
agreement of National City and the Borrower. In the event any of the foregoing
conditions are not satisfied, National City reserves the right to terminate its
commitment or propose alternative financing amounts or structure that assure
adequate protection for National City and the Lenders as determined by the
National City in its sole discretion.
You agree (a) to indemnify and hold harmless National City and each of its
respective affiliates and its respective officers, directors, employees,
advisors, and agents (each, an "indemnified person") from and against any and
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all losses, claims, damages and liabilities to which any such indemnified person
may become subject arising out of or in connection with this Commitment Letter,
the Credit Facilities, the use of the proceeds thereof, the Transaction or any
claim, litigation, investigation or proceeding relating to any of the foregoing,
regardless of whether any indemnified person is a party thereto, and to
reimburse each indemnified person upon demand for any legal or other expenses
incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any indemnified person,
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apply to losses, claims, damages, liabilities or related expenses to the extent
they are found by a final, non-appealable judgment of a court to arise from the
willful misconduct or gross negligence of such indemnified person, and (b) to
reimburse National City and its respective affiliates on demand for all out-of-
pocket expenses (including due diligence expenses, syndication expenses,
consultant's fees and expenses, travel expenses, and reasonable fees, charges
and disbursements of counsel) incurred in connection with the Credit Facilities
and any related documentation (including this Commitment Letter, the Term Sheet,
the Fee Letter and the definitive financing documentation) or the
administration, amendment, modification or waiver thereof. No indemnified
person shall be liable for any damages arising from the use by unauthorized
persons of Information or other materials sent through electronic,
telecommunications or other information transmission systems that are
intercepted by such persons or for any special, indirect, consequential or
punitive damages in connection with the Credit Facilities.
This Commitment Letter shall not be assignable by you without the prior
written consent of National City (and an purported assignment without such
consent shall be null and void), 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 and the indemnified
persons. This Commitment Letter may not be amended or waived except by an
instrument in writing signed
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by you and National City. All obligations of the Borrower under this Commitment
Letter and the Fee Letter shall be joint and several among the Borrower and its
subsidiaries. This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart thereof. This Commitment Letter and
the Fee letter are the only agreements that have been entered into among us with
respect to the Credit Facilities and set forth the entire understanding of the
parties with respect thereto. This Commitment Letter shall be governed by, and
construed in accordance with, the laws of the State of Ohio.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except: (a) your officers, agents and advisors who are directly
involved in the consideration of this matter, (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), and (c) the Borrower.
The reimbursement, indemnification and confidentiality provisions contained
herein and in the Fee Letter shall remain in full force and effect regardless of
whether definitive financing documentation shall be executed and delivered and
notwithstanding the termination of this Commitment Letter or the commitment of
National City hereunder.
Each party hereto irrevocably waives all right to trial by jury in any
action or proceeding arising out of or relating to this Commitment Letter or the
transactions contemplated hereby.
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If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to us executed counterparts hereof and of the Fee Letter not later
than 5:00 p.m., Eastern Standard Time, on August 10, 2000. The commitment and
agreements of National City herein will expire at such time as; i) the event
National City has not received such executed counterparts in accordance with the
immediately preceding sentence, ii) upon termination or expiration of the
purchase agreement related to the Acquisition, iii) closing of the Transaction
occurs without funding under the Commitment, iv) the commencement of the
marketing of any alternative securities or bank financing wherein National City
is not engaged as Sole Lead Arranger, v) non-compliance with respect to any of
the material terms and conditions of this Commitment Letter, the Fee Letter, the
Term Sheet or other conditions of the Commitment not set forth herein, and vi)
October 31, 2000.
National City is pleased to have been given the opportunity to assist you
in connection with this important financing.
Very truly yours,
NATIONAL CITY BANK
By: /s/ Julie I. Sabroff
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Name: Julie I. Sabroff
Title: Vice President
Accepted and agreed to as of
the date first written above by:
KOHLBERG & COMPANY, L.L.C.
By: /s/ Christopher Lacovara
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Name: Christopher Lacovara
Title: Principal
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Fee Letter
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August 10, 2000
Kohlberg & Company
111 Radio Circle
Mt. Kisco, NY 10549
Attention: Christopher Lacovara
Christopher Anderson
Gentlemen:
Reference is made to the Commitment Letter dated hereof (the "Commitment
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Letter") between us and you, regarding the Credit Facilities described therein.
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Capitalized terms used but not defined herein are used with the meanings
assigned to them in the Commitment Letter. This letter agreement is the Fee
Letter (the "Fee Letter") referred to in the Commitment Letter.
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As consideration for the agreement of National City to arrange the Credit
Facilities and the commitment of National City to provide the Credit Facilities
under the Commitment Letter, the Borrower agrees to pay to National City the
following fees:
(i) An underwriting fee in an amount equal to the greater of $1,068,750
or 2.25% of the aggregate commitments in respect of the Credit
Facilities, payable on the Closing Date.
(ii) An underwriting commitment fee of 50 basis points calculated daily on
a per annum basis on the entire amount of the Credit Facilities. Such
fee shall begin accruing 45 days after execution of this letter and
continue to accrue until the Closing Date and will be payable on the
Closing Date.
(iii) An annual Administrative Agents fee of $30,000 per annum, payable
quarterly in advance, with the first installment due on the Closing
Date, payable to National City as the Administrative Agent only.
In addition, National City and the other Lenders shall be paid any other
fees as specified in the Commitment Letter.
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You agree that, once paid, the fees or any part thereof payable hereunder and
under the Commitment Letter shall not be refundable under any circumstances,
regardless of whether the transactions or borrowings contemplated by the
Commitment Letter are consummated. All fees payable hereunder and under the
Commitment Letter shall be paid in immediately available funds and shall be in
addition to reimbursement of the out-of-pocket expenses of National City. You
agree that National City may, in its sole discretion, share all or a portion of
any of the fees payable pursuant to this Fee Letter with any of the other
Lenders.
It is understood and agreed that this Fee Letter shall not constitute or give
rise to any obligation to provide any financing; such an obligation will arise
only to the extent provided in the Commitment Letter if accepted in accordance
with its terms. This Fee Letter may not be amended or waived except by an
instrument in writing signed by National City and you. This Fee Letter shall be
governed by, and construed in accordance with, the laws of the State of Ohio.
This Fee Letter may be executed in any number of counterparts, each of which
shall be an original, and all of which, when taken together, shall constitute
one agreement. Delivery of an executed signature page of this Fee Letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.
This Fee Letter is delivered to you on the understanding that neither this
Fee Letter, the Commitment Letter or the Term Sheet nor any of their terms or
substance shall be disclosed, directly or indirectly, to any other person except
(a) to your officers, agents and advisors who are directly involved in the
consideration of this matter (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).
Very truly yours,
NATIONAL CITY BANK
By: /s/ Julie I. Sabroff
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Name: Julie I. Sabroff
Title: Vice President
Accepted and agreed to as of
the date first written above by:
KOHLBERG & COMPANY, L.L.C.
By: /s/ Christopher Lacovara
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Name: Christopher Lacovara
Title: Principal
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SCHEDULE I
SOURCES AND USES TABLE
Revolver Draw(1) $ 0.5 Net Purchase of Equity $66.1
Term Loan A(2) $15.0 Debt Redemption $12.8
Term Loan B(3) $22.5 Transaction Costs $ 6.5
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Total Senior Debt $38.0
Subordinated Debt $19.0
Common Equity $28.4
Total Sources $85.4 Total Uses $85.4
Unused Revolver $ 9.5 Unused Revolver $ 9.5
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Total Sources $94.9 Total Uses $94.9
1). $10 million 5 year secured revolving credit.
2). 5 year secured term loan
3). 7 year secured term loan
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BI Incorporated
BI Incorporated
Summary of Terms and Conditions
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Borrower: KBII Acquisition Company, Inc. and any material
Subsidiaries, as appropriate (the "Borrower").
Guarantors: KBII Holdings, Inc. and all existing and hereinafter
acquired non-borrowing operating subsidiaries of the
Borrower as appropriate (the "Guarantors").
Agent: National City Bank ("National City" or the "Agent").
Lenders: The Agent and lending institutions acceptable to the
Agent and the Borrower (collectively, the "Lenders").
Syndication The Agent will, in consultation with the Borrower,
Management: manage all aspects of the Syndication including the
amounts offered to potential lenders and the acceptance
of commitments.
Credit Facilities: $47,500,000 Senior Secured Credit Facilities consisting
of:
a) $10,000,000 Senior Secured Revolving Credit Facility
(the "Revolver") with a $[TBD] sublimit for Letters
of Credit.
b) $15,000,000 Senior Secured Term Loan A (the "Term
Loan A").
c) $22,500,000 Senior Secured Term Loan B (the "Term
Loan B").
Collectively known as the "Credit Facilities".
Purpose: To (i) refinance existing Senior Debt, (ii) finance the
acquisition of BI Incorporated's capital stock, (iii)
working capital, (iv) finance future acquisitions, and
(v) general corporate needs.
Maturity: a) Five (5) years from the date of closing.
b) Five (5) years from the date of closing.
c) Seven (7) years from the date of closing.
Availability: Usage under the Revolving Credit shall be subject to the
sum of the following:
i. 85% of eligible Accounts Receivable
ii. 60% of eligible Inventory
Final advance rates and eligibility criteria will
be subject to satisfactory collateral audit.
The full amount of the Term Loans shall be available
upon closing.
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BI Incorporated
Repayment: a) At maturity. Until maturity, the Company may borrow,
repay, and re-borrow an amount not to exceed the
lesser of the Borrowing Base or the then available
maximum commitment.
b) In equal quarterly principal payments based upon
annual reductions as follows:
Year 1 $ 1,500,000
Year 2 2,250,000
Year 3 3,000,000
Year 4 3,750,000
Year 5 4,500,000
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$15,000,000
c) In equal quarterly principal payments of $62,500
with the balance due at maturity as shown in the
following annual schedule:
Year 1 $ 225,000
Year 2 225,000
Year 3 225,000
Year 4 225,000
Year 5 225,000
Year 6 225,000
Year 7 21,150,000
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$22,500,000
Interest Rates and
Letter of Credit Fees: Outstandings under the Credit Facilities shall carry an
interest rate margin (as expressed in basis points) as
per the following table:
Facility LIBOR+ ABR+
Revolver 325 175
Term Loan A 325 175
Term Loan B 375 225
An undrawn Commitment Fee of 50 basis points shall be
payable quarterly in arrears based upon the average
daily unused amount of the Revolver.
The Borrower shall pay Letter of Credit fees equal to
the spread over LIBOR on the aggregate face amount of
the Letters of Credit issued under the Revolving Credit
Facility. In addition, the Borrower shall pay a Letter
of Credit facing fee of 1/8% to National City as the
fronting bank, payable quarterly in arrears.
Interest Periods: The Alternate Base Rate ("ABR") is the higher of the
Agent's Prime Rate or the Federal Funds Rate plus 1/2%.
Interest on the ABR borrowings is calculated on an
actual/365 day basis and is payable quarterly.
Interest on LIBOR borrowings is calculated on an
actual/360 day basis and is payable the earlier of
quarterly or on the last day of each interest rate
period. LIBOR advances will be available for periods of
one, two, three, or six months. LIBOR pricing will be
adjusted for any statutory reserves.
The Borrower may have no more than 6 LIBOR tranches,
including the ABR tranche, at any one time.
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BI Incorporated
Subsequent to an Event of Payment Default which
continues beyond any applicable cure period,
outstandings shall bear interest at 2% over the rate of
interest applicable under the ABR pricing option and
Letter of Credit fees shall be 2% above the otherwise
applicable Letter of Credit fees.
Interest Rate The Borrower will be required to enter into interest
Protection: rate protection agreements acceptable to the Agent in
the amount of $20,000,000. Any institution providing
interest rate protection must be reasonably acceptable
to the Agent. Such institution may be granted an
interest which is pari passu with that of the Lenders to
the extent of such institution's credit exposure. Such
institution shall calculate its credit exposure in a
reasonable and customary manner.
Documentation for interest rate protection shall conform
to ISDA standards and must be acceptable to the Agent
with respect to inter-creditor issues.
Yield Protection: The Borrower shall pay the Lenders such additional
amounts as will compensate the Lenders in the event
applicable law, or change in law, subjects the Lenders
to reserve requirements, capital requirements, taxes
(except for taxes on the overall net income of the
Lenders), or other charges which increase the cost or
reduce the yield to the Lenders, under customary yield
protection provisions.
Collateral: First priority perfected lien on all existing and
subsequently acquired personal property, including, but
not limited to, receivables, inventory, equipment,
furniture, fixtures, improvements, intangibles, real
property and assignment of material leases. First
priority perfected lien on 100% of the common stock of
the Borrower and any present or subsequently acquired
material subsidiaries.
Voluntary Reductions: Commitments under the Revolving Credit Facility may be
reduced or terminated, in whole or in part, at the
Borrower's option, subject to reimbursement of any costs
associated with prepayments of LIBOR advances or any
other provisions contained in the credit agreement.
Voluntary reductions of commitments under the Revolving
Credit Facility will be in minimum amounts of
$1,000,000.
Mandatory Reduction: 100% of the proceeds of material additional
indebtedness.
100% of the proceeds of any additional equity issuance,
excluding equity provided from funds managed by Kohlberg
& Co., L.L.C. and excluding equity issued in connection
with future acquisitions or financings.
100% of the proceeds of material asset sales.
100% of the proceeds from any material recovery event.
75% of Excess Cash Flow.
Excess Cash Flow is defined as EBITDA less Fixed Charges
and management fees paid to Kohlberg & Co., L.L.C. Fixed
Charges are defined as the sum of Interest Expense,
Taxes, contractual principal payments on
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BI Incorporated
Long Term Debt, contractual payments under Capital
Leases, net changes in working capital, and Capital
Expenditures.
Payments will be first applied to reduce the Term Loans
in inverse order of maturity on a pro-rata basis,
followed by reductions in the Revolving Credit
commitment. Term Loan B lenders shall have the option to
forego mandatory prepayments, in which case such
prepayments shall be applied fully to the Term Loan A
until repaid in full and then to reduce the Term Loan B.
Mandatory prepayments of the Term Loans may not be
reborrowed.
All prepayments (including voluntary prepayments) shall
be accompanied by (i) payment of accrued interest on the
amount prepaid to the date of prepayment, and (ii) in
the case of a prepayment of a LIBOR Loan, compensation
of the Lenders for break funding.
Representations and Usual and customary for facilities of this nature
Warranties: subject to materiality or other negotiated limitations,
including but not limited to the following:
a. Organization and qualification.
b. Capitalization and ownership.
c. Use of proceeds.
d. Subsidiaries.
e. Solvency.
f. Power and authority.
g. Validity, binding effect, and enforceability.
h. No conflict.
i. Absence of litigation.
j. Accuracy of financial statements.
k. No Material Adverse Change.
l. Margin stock.
m. Full disclosure.
n. Payment of taxes.
o. Consents and approvals.
p. No Event of Default; compliance with instruments.
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BI Incorporated
q. Patents, trademarks, copyrights, and licenses.
r. Insurance.
s. Security interests.
t. Mortgage liens as applicable.
u. Compliance with laws.
v. Material contracts.
w. Investment Company Act.
x. Plans and benefit arrangement.
y. Employment matters.
z. Environmental matters.
aa. Senior Debt status.
Other Representations and Warranties as appropriate.
Conditions Precedent Receipt by the Agent of the following, in form and
to Lending: substance satisfactory to the Agent and the Lenders:
a. Execution and consummation of a Definitive Merger
Agreement for the merger of the Company and KBII for
an amount not to exceed $78,900,000 plus reasonable
fees and expenses under terms and conditions
acceptable to the Agent.
b. Minimum equity contribution of $28,400,000.
c. Minimum of $38,000,000 funded under the Credit
Facilities at close.
d. Maximum ratio of senior funded debt to fiscal year
end 2000 Proforma EBITDA of 3.0x.
e. Maximum ratio of total funded debt to fiscal year
end 2000 Proforma EBITDA of 4.5x.
f. Negotiation and execution of an agreement for
subordinated indebtedness totaling $19,000,000 under
terms and conditions acceptable to the Agent.
g. Closing certificate as to accuracy of
Representations and Warranties, compliance with
covenants, and absence of an Event of Default or
Potential Event of Default.
h. Certified resolutions, incumbency certificate, and
corporate documents.
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BI Incorporated
i. All regulatory approvals and licenses, absence of any
legal or regulatory prohibitions or restrictions.
j. Delivery of all definitive organizational and
financing documents, evidence of filing of all
collateral documents and perfection of mortgages, as
required by the Agent.
k. Environmental, title, appraisals, and surveys as
required by the Agent.
l. Delivery of satisfactory legal opinion(s) of counsel.
m. No material litigation other than that previously
disclosed as of the date of this letter.
n. Evidence of required insurance.
o. Payment of all fees and expenses subject to
reimbursement.
p. Undrawn Revolving Credit availability at close
acceptable to the Agent.
Other Conditions Precedent to Lending as appropriate.
Affirmative Covenants: Usual and customary for facilities of this nature
including, but not limited to:
a. Maintenance of books, records and inspections.
b. Maintenance of insurance.
c. Payment of taxes.
d. Preservation of corporate existence, rights and
authority.
e. Maintenance of properties and equipment.
f. Compliance with statutes including environmental
laws.
g. Any material subsidiary created or acquired
subsequent to the closing of the Credit Facilities
will be added as a guarantor and appropriate asset
and stock pledges will be obtained.
Other Affirmative Covenants as appropriate.
Reporting a. Provide within 30 days after the end of each month a
Requirements: statement of operations and a borrowing base
certificate in a form satisfactory to the Agent and
signed by the Chief Executive Officer, President, or
Chief Financial Officer of the Borrower.
b. Provide within 45 days after each of the first three
fiscal quarters a consolidating and consolidated
balance sheets and consolidating and consolidated
statements of income, retained earnings, and cash
flow,
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BI Incorporated
together with a Certificate of Compliance from the
Chief Executive Officer, President, or Chief
Financial Officer of the Borrower.
c. Provide within 90 days after each fiscal year end
consolidating and consolidated audited balance
sheets and consolidating and consolidated audited
statements of income, retained earnings, and cash
flow, together with (i) a report of an independent
certified public accountant reasonably satisfactory
to the Agents, (ii) any management letters of such
accountants addressed to the Borrower, and (iii) a
Certificate of Compliance from the Chief Executive
Officer, President, or Chief Financial Officer of
the Borrower.
d. Provide annual budgets and forecasts.
e. Notice of default.
f. Other information as reasonably requested.
Other Reporting Requirements as appropriate.
Negative Covenants: Usual and customary for transactions of this nature,
including, but not limited to, the following: no
dividends, change of control, asset divestitures, liens,
transactions with affiliates, prepayment of other
indebtedness, acquisitions, and additional indebtedness.
Financial covenants including, but not limited to, the
following:
Minimum ratio of Earnings Before Interest, Taxes,
Depreciation and Amortization to Interest Expense
("EBITDA to Interest"), as measured on a rolling four
quarter basis at each applicable fiscal quarter end
according to the following schedule:
Fiscal Quarter Ending
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[TBD]
Maximum ratio of Total Funded Debt to Earnings Before
Interest, Taxes, Depreciation, and Amortization ("Total
Funded Debt to EBITDA"), as measured on a rolling four
quarter basis at each applicable fiscal quarter end
according to the following schedule:
Fiscal Quarter Ending
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[TBD]
Minimum ratio of Earnings Before Interest, Taxes,
Depreciation, and Amortization to the sum of Interest
Expense, Taxes, Capital Expenditures, scheduled
principal payments during the measurement period on Long
Term Debt, and scheduled payments during the measurement
period under Capital Leases ("Fixed Charge Coverage
Ratio"), as measured on a rolling four quarter basis at
each fiscal quarter end according to the following
schedule:
Fiscal Quarter Ending
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[TBD]
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BI Incorporated
Minimum EBITDA of $[TBD] increasing on a schedule [TBD].
Maximum Capital Expenditures as measured at the end of
each fiscal year of $[TBD].
Acquisitions limited to enterprises in the same line of
business and will be subject to pro-forma covenant
compliance with the Total Debt to EBITDA covenant at
close as measured on a pro-forma basis and restricted to
singular amounts not to exceed $2,000,000.
Evidence of required insurance including minimum
liability insurance of $25,000,000 in a form acceptable
to the Agent.
Management fees, including fees paid to Kohlberg, will
be subordinated to the Credit Facilities and be limited
to a maximum of $[TBD] per annum.
Prohibition on dividends, excluding previously outlined
permitted management fees.
Limitations on asset divestitures.
Standard prohibitions on change of control.
Other Negative Covenants as appropriate.
Events of Default: Standard Events of Default as appropriate, in each
instance subject to reasonable grace and cure periods,
including but not limited to:
a. Payment default.
b. Breach of Representations and Warranties.
c. Violation of covenant(s).
d. Bankruptcy; insolvency.
e. Cross default to other debt.
f. Loss of liability insurance coverage.
g. ERISA
Other Events of Default as appropriate.
Required Lenders: For the purpose of making amendments or waivers to the
Credit Agreement, Required Lenders shall be defined as
Lenders whose commitments under the Credit Facilities
aggregate at least 51% of the total Credit Facilities.
However, unless agreed to by all Lenders, no amendment
or waiver shall change the principal amount; reduce the
rate of interest or fees; postpone the scheduled payment
of any principal, interest, or fees; release any
collateral; or change the definition of Required
Lenders.
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BI Incorporated
Assignments and Lenders will be permitted to assign and participate
Participations: the Credit Facilities. Assignments will be in minimum
amounts of $1,000,000 and assignees will be subject to
the consent of the Borrower and the Agent; such consent
may not be unreasonably withheld and the Borrower's
right of denial will include institutions that have
higher reserve costs or withholding taxes which would
result in increased costs to the Borrower. Voting rights
to participants will be limited to an increase in
principal amount; reduction of the rate of interest or
fees; postponement of the scheduled payment of any
principal, interest, or fees; or release of any
collateral. Assignments will be subject to the payment
by the assigning Bank of a $3,500 service fee to the
Agent.
Governing Law: State of Ohio
Agent's Counsel: Benesch, Friedlander, Coplan & Aronoff LLP
This term sheet is delivered to you on the understanding that any of the terms
of substance hereunder shall not be disclosed, directly or indirectly, to any
other person except your officers, agents and advisors who are directly involved
in the consideration of this matter unless prior written consent has been given
by National City.
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