COMMERCIAL LOAN COMMITMENT LETTER
November 26, 2001
Mr. James R. Ridinger
President/CEO
Market America, Inc.
1302 Pleasant Ridge Rd.
Greensboro, NC 27409
Re: Loan Commitment to Market America, Inc.
Dear Mr. Ridinger:
First Union National Bank (hereafter "First Union" or "Bank") is pleased to
offer you a commitment to lend on the following terms and conditions:
BORROWER:
An entity to be formed (the "Borrower")
FACILITY #1
AMOUNT:
The amount of this facility shall be Ten Million dollars $10,000,000.00 in the
form of a term loan
PURPOSE:
This facility shall be used solely to facilitate the purchase of approximately
3,500,000 shares of common stock of Market America, Inc.
TERM:
This facility shall have a term of 30 months.
FACILITY STRUCTURING
INTEREST RATE:
The interest rate will be the LIBOR Market Index Rate plus 0.50%. "LIBOR Market
Index Rate", for any day, is the rate for 1 month U.S. dollar deposits as
reported on Telerate page 3750 as of 11:00 a.m., London time, on such day, or if
such day is not a London business day, then the immediately preceding London
business day (or if not so reported, then as determined by Bank from another
recognized source or interbank quotation).
OPTIONAL HEDGE:
Borrower may hedge the loan's floating interest expense by entering into an
interest rate swap (the "Swap") with First Union (or other counterparty
acceptable to First Union) contemporaneously with the closing of the loan,
pursuant to which Borrower shall receive the amount necessary to pay the
interest expense due under the loan (exclusive of default interest or other
adjustments provided for in the loan documents) and shall pay the amount that
would be equal to the interest that would accrue on the loan at a fixed rate.
First Union is willing to provide this Swap to Borrower upon mutually agreeable
terms. The actual rate is subject to market conditions at the time the Swap is
consummated. The Swap will be governed by an ISDA Master Agreement and shall be
secured by the Collateral described herein.
Mr. James R. Ridinger
Commitment Letter
November 26, 2001
Page 2
REPAYMENT:
This facility shall be repayable in monthly payments of accrued interest only
payments and beginning 9 months after the closing date monthly principal
payments of approximately $476,200.00 plus accrued interest. All remaining
principal and interest shall be due on the maturity date. The interest only
period is subject to change based upon further due diligence by Bank.
PREPAYMENT:
If Borrower selects the Optional Hedge option, then Borrower may prepay the loan
in whole or in part only if Borrower pays such additional amounts deemed
necessary by First Union to compensate First Union for any losses, costs or
expenses which First Union may be deemed to incur as a result of such
prepayments.
FEES:
COMMITMENT FEE. None
MODIFICATION FEE. Borrower shall pay to First Union a Modification fee of
$300.00 at the time any of the loan documents are modified, amended or
supplemented after closing.
FACILITY #2
AMOUNT:
The amount of this facility shall be Ten Million dollars $10,000,000.00 in the
form of a line of credit.
PURPOSE:
This facility shall be used solely to facilitate the purchase of approximately
3,500,000 shares of common stock of Market America, Inc.
TERM:
This facility shall have a term of 364 days.
FACILITY STRUCTURING
INTEREST RATE:
The interest rate will be the LIBOR Market Index Rate plus 0.30%. "LIBOR Market
Index Rate", for any day, is the rate for 1 month U.S. dollar deposits as
reported on Telerate page 3750 as of 11:00 a.m., London time, on such day, or if
such day is not a London business day, then the immediately preceding London
business day (or if not so reported, then as determined by Bank from another
recognized source or interbank quotation).
REPAYMENT:
This facility shall be repayable in monthly payments of accrued interest only
until the maturity date when all remaining principal and interest shall be due.
Borrower may borrow, repay and reborrow principal under this facility.
FEES:
AVAILABILITY FEE. Borrower shall pay to First Union quarterly an availability
fee equal to 0.20% per annum on the average daily unused available principal
under the Note for the preceding calendar quarter or portion thereof.
COMMITMENT FEE. None
MODIFICATION FEE. Borrower shall pay to First Union a Modification fee of
$300.00 at the time any of the loan documents are modified, amended or
supplemented after closing.
Mr. James R. Ridinger
Commitment Letter
November 26, 2001
Page 3
THE FOLLOWING APPLIES TO BOTH FACILITY 1 AND FACILITY 2:
COLLATERAL:
The Borrower shall grant First Union a security interest in the following
collateral:
A first priority security interest in First Union National Bank Certificates of
Deposit equal to the loan amount.
First Union will release the collateral securing Facilities 1 and 2 provided (i)
there have been no adverse actions from the "outside" shareholders and none are
anticipated; and (ii) there are no events of default under the loan documents.
The timing of such release shall be determined by First Union in it's sole
discretion
FINANCIAL STATEMENTS:
Borrower shall furnish to First Union the following financial information, in
each instance prepared in accordance with generally accepted accounting
principles consistently applied and otherwise in form and substance satisfactory
to Bank:
ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 90 days
after the close of each fiscal year, audited financial statements reflecting its
operations during such fiscal year, including, without limitation, a balance
sheet, profit and loss statement and statement of cash flows, with supporting
schedules; all on a consolidated and consolidating basis and in reasonable
detail.
PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank unaudited
management-prepared quarterly financial statements including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules, as soon as available and in any event within
30 days after the close of each such period; all in reasonable detail. Such
statements shall be certified as to their correctness by a principal financial
officer of Borrower.
CERTIFICATE OF FULL COMPLIANCE FROM ACCOUNTANT. Borrower shall deliver to First
Union, with the financial statements required above, a certification by
Borrower's its independent certified public accountant that Borrower there is in
full compliance with the Loan Documents.
COVENANTS. In addition to the covenants customarily required by First Union for
similar loans and/or similar Borrowers, the following covenants shall be
applicable to this facility:
FINANCIAL COVENANTS:
The term "Borrower" as used in this letter shall include its Subsidiaries and
Affiliates. For this letter, "Subsidiary" shall mean any corporation of which
more than 50% of the issued and outstanding voting stock is owned directly or
indirectly by Borrower, and "Affiliate" shall have the meaning as defined in 11
U.S.C. ss.101, except that the term "debtor" therein shall be replaced by the
term "Borrower."
SENIOR FUNDED DEBT TO EBITDA RATIO. Borrower shall, at all times maintain, a
Senior Funded Debt to EBITDA Ratio of not more than 1.25 to 1.00. This covenant
shall be calculated quarterly, on a rolling four quarters basis. "Senior Funded
Debt to EBITDA Ratio" shall mean the sum of all Senior Funded Debt divided by
the sum of earnings before interest, taxes, depreciation and amortization.
"Senior Funded Debt" shall mean, as applied to any person or entity, the sum of
all indebtedness for borrowed money, including, without limitation, capital
lease obligations and unreimbursed drawings under letters of credit, or any
obligation evidenced by a note, bond, debenture or other agreement of that
person or entity, excluding any debt fully subordinated to Bank on terms and
conditions acceptable to Bank.
Mr. James R. Ridinger
Commitment Letter
November 26, 2001
Page 4
DEPOSIT RELATIONSHIP. Borrower shall maintain its primary depository account and
cash management account with Bank.
LIQUIDITY REQUIREMENT. Borrower shall, at all times, maintain unencumbered
Liquid Assets of not less than $30,000,000. "Liquid Assets" shall mean the sum
of all cash, time deposits and marketable securities.
DIVIDENDS. Borrower shall not, during any fiscal year, declare or pay dividends
or make other distributions to in an amount in excess of 50% of its net income.
Said amount may be paid only after providing for the prior satisfaction of all
accrued taxes and debt service
LOANS AND ADVANCES. Borrower shall not, during any fiscal year, make loans or
advances, excepting ordinary course of business travel and expense advances, to
any person or entity.
NEGATIVE COVENANTS:
CHANGE OF CONTROL. Borrower shall not make a material change of ownership that
effectively changes control of Borrower.
JUDGMENT ENTERED. Borrower shall not permit the entry of any monetary judgment
or the assessment against, the filing of any tax lien against, or the issuance
of any writ of garnishment or attachment against any property of or debts due
Borrower that is in an amount in excess of $10,000.00 and that is not discharged
or execution is not stayed within 30 days of entry.
GUARANTEES. Borrower shall not guarantee or otherwise become responsible for
obligations of any other person or entity.
DOCUMENTS:
The facility will be evidenced by documents prepared by and acceptable to First
Union, containing such representations, warranties, affirmative and negative
covenants, indemnities, closing conditions, defaults and remedies as are
typically required by First Union and/or are customary in this type of
transaction. The failure of Borrower and First Union to reach agreement on the
loan documents shall not be deemed a breach by First Union of this commitment.
Unless First Union agrees otherwise in writing, completion of all documents is a
condition of closing.
COSTS:
On or before the closing Borrower shall pay all costs, expenses and fees
(including, without limitation, any appraisal, survey, insurance, environmental
assessment, engineering, inspections, searches, recording and attorneys' fees)
associated with this transaction.
CONDITIONS TO CLOSING:
OPINION OF COUNSEL. On or prior to the date of the initial borrowing,
Borrower will provide First Union with an opinion letter, in form and
substance satisfactory to First Union, from an attorney acceptable to First
Union. The opinion will provide, to First Union's satisfaction, that the
Borrower and any guarantor are duly organized and validly existing under
the laws of the jurisdictions where Borrower and any guarantors are
organized and qualified and have full power and authority to undertake the
activities contemplated by the loan; that all Loan Documents (as defined in
the Note) have been duly authorized, executed and delivered by Borrower and
any guarantors; that, if the loan is secured, the Loan Documents create a
first priority lien on or security interest in the Collateral (as defined
in the Loan Documents) except when otherwise specified in the opinion
letter; and that the loan and its terms do not violate any laws including,
without limitation, any usury laws or similar laws of the jurisdictions
where Borrower, any guarantors and any Collateral are located, and such
other matters and opinions as First Union reasonably requests.
Mr. James R. Ridinger
Commitment Letter
November 26, 2001
Page 5
OPERATING DOCUMENTS. On or prior to the date of any borrowing hereunder,
First Union shall have received from each Borrower and each Guarantor, as
applicable, a copy of such Borrower's or Guarantor's by-laws, partnership
agreement, or operating agreement, certified as to completeness and
accuracy by an appropriate officer, manager or partner of such Borrower or
Guarantor, as applicable.
CHARTER DOCUMENTS. First Union shall have received from each Borrower and
each Guarantor a copy of its Articles of Incorporation or Organization, as
appropriate for the legal entity and all other charter documents of such
Borrower and Guarantor, as applicable, all certified by the Secretary of
State of the state of such Borrower's or Guarantor's incorporation or
organization, as appropriate.
CERTIFICATE OF GOOD STANDING. First Union shall have received from each
Borrower and each Guarantor, as applicable, a certificate of the Secretary
of State of the state of such Borrower's or Guarantor's incorporation or
organization, as applicable, as to the good standing of such Borrower or
Guarantor.
CERTIFICATE OF INCUMBENCY. First Union shall have received from each
Borrower and each Guarantor, as applicable, a certificate of an appropriate
officer of such Borrower or Guarantor as to the incumbency an signatures of
the officers of such Borrower or Guarantor executing the Loan Documents.
First Union's obligations under this commitment are conditioned on the
fulfillment to First Union's sole satisfaction of each term and condition
referenced by this commitment. These terms and conditions are not exhaustive,
and this commitment is subject to certain other terms and closing conditions
customarily required by First Union for similar transactions and may be
supplemented prior to closing based upon First Union's investigation and/or as
disclosure of Borrower's circumstances so dictate. This commitment will expire
unless it is closed on or before June 1, 2002. This commitment letter shall not
survive closing.
First Union has made this commitment based upon the information supplied by
Borrower. First Union shall have the right to cancel this commitment, whereupon
First Union shall have no obligations hereunder, in the event of: (i) a material
adverse change in the financial condition, operations or prospects of Borrower
or any Guarantor; (ii) a material change in the accuracy of the information,
representations, exhibits or other materials submitted by Borrower in connection
with its request for financing; or (iii) loss of, damage to, a taking of, or the
presence of any hazardous substances at or on any collateral for the loan.
Borrower must immediately notify First Union of any such event.
This commitment supersedes all prior commitments and proposals with respect to
this transaction, whether written or oral, including any previous loan proposals
made by First Union or anyone acting with its authorization. No modification
shall be valid unless made in writing and signed by an authorized officer of
First Union. This commitment is not assignable, and no party other than Borrower
shall be entitled to rely on this commitment.
Please indicate your acceptance of this offer and the terms and conditions
contained herein by signing below and returning one executed copy of this
commitment letter to the undersigned. This offer of commitment shall expire
unless the acceptance is received by the undersigned on or before December 31,
2001.
Thank you for allowing First Union to be of service. Please do not hesitate to
give me a call at 378-4042 if I can be of further assistance.
Mr. James R. Ridinger
Commitment Letter
November 26, 2001
Page 6
Sincerely,
FIRST UNION NATIONAL BANK
By:
Kennedy A. Hemphill
Vice President
The above commitment is agreed to and accepted on the terms and conditions
provided in this letter.
Accepted:
-----------------------------
Borrower Name
By:
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James R. Ridinger Date
CEO
In the event First Union's document preparation staff needs to obtain additional
information for the closing of this transaction, please provide in the space
below the name and telephone number of the appropriate contact at your company:
Name:
Telephone Number: