COMMERCIAL LOAN COMMITMENT LETTER
[NOTE: ON APRIL 1, 2002, FIRST UNION NATIONAL BANK
CHANGED ITS NAME TO WACHOVIA BANK, NATIONAL ASSOCIATION]
June 3, 2002
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:
Wachovia Bank, National Association (hereafter "Wachovia" 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 Wachovia (or other counterparty acceptable
to Wachovia) 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.
Mr. James R. Ridinger
Commitment Letter
June 3, 2002
Page 2
Wachovia 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.
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 Wachovia to compensate Wachovia for any losses, costs or expenses
which Wachovia may be deemed to incur as a result of such prepayments.
FEES:
COMMITMENT FEE. None
MODIFICATION FEE. Borrower shall pay Wachovia 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 Wachovia 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
Mr. James R. Ridinger
Commitment Letter
June 3, 2002
Page 3
MODIFICATION FEE. Borrower shall pay to Wachovia a Modification fee of $300.00
at the time any of the loan documents are modified, amended or supplemented
after closing.
THE FOLLOWING APPLIES TO BOTH FACILITY 1 AND FACILITY 2:
COLLATERAL:
The Borrower shall grant Wachovia 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.
Wachovia 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; (ii) there are no Dissenting Shares outstanding; and (iii) there
are no events of default under the loan documents. The timing of such release
shall be determined by Wachovia in it's sole discretion
FINANCIAL STATEMENTS:
Borrower shall furnish to Wachovia 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
Wachovia, 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 Wachovia 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 1.00 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
Mr. James R. Ridinger
Commitment Letter
June 3, 2002
Page 4
person or entity, excluding any debt fully subordinated to Bank on terms and
conditions acceptable to Bank.
NET WORTH. Borrower shall, at all times, maintain a Net Worth equal to the
actual net worth of the Borrower immediately following the contemplated
transaction, but in no event less than $70,000,000.00. "Net Worth" shall mean
total assets minus Total Liabilities. "Total Liabilities" shall mean all
liabilities of Borrower, including capitalized leases and all reserves for
deferred taxes and other deferred sums appearing on the liabilities side of a
balance sheet of Borrower, in accordance with generally accepted accounting
principles applied on a consistent basis.
DEPOSIT RELATIONSHIP. Borrower shall maintain its primary depository account and
cash management account with First Union.
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.
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 outside counsel and
acceptable to Wachovia, containing such representations, warranties, affirmative
and negative covenants, indemnities, closing conditions, defaults and remedies
as are typically required by Wachovia and/or are customary in this type of
transaction. The failure of Borrower and Wachovia to reach agreement on the loan
documents shall not be deemed a breach by Wachovia of this commitment. Unless
Wachovia 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 Wachovia with an opinion letter, in form and substance
satisfactory to Wachovia, from an attorney acceptable to Wachovia. The
opinion will provide, to Wachovia'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
Mr. James R. Ridinger
Commitment Letter
June 3, 2002
Page 5
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 Wachovia
reasonably requests.
OPERATING DOCUMENTS. On or prior to the date of any borrowing hereunder,
Wachovia 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. Wachovia 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. Wachovia 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. Wachovia 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.
Wachovia's obligations under this commitment are conditioned on the fulfillment
to Wachovia'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
Wachovia for similar transactions and may be supplemented prior to closing based
upon Wachovia's investigation and/or as disclosure of Borrower's circumstances
so dictate. This commitment will expire unless it is closed on or before
September 30, 2002. This commitment letter shall not survive closing.
Wachovia has made this commitment based upon the information supplied by
Borrower. Wachovia shall have the right to cancel this commitment, whereupon
Wachovia 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 Wachovia 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 Wachovia or anyone acting with its authorization. No modification shall
be valid unless made in writing and signed by an authorized officer of Wachovia.
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 June 14, 2002.
Mr. James R. Ridinger
Commitment Letter
June 3, 2002
Page 6
Thank you for allowing Wachovia to be of service. Please do not hesitate to give
me a call at 378-4042 if I can be of further assistance.
Sincerely,
WACHOVIA BANK, NATIONAL ASSOCIATION
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: ________________________ ____________________
James R. Ridinger Date
CEO
In the event Wachovia'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: