EXHIBIT (b)(1)
[LOGO OF CHASE MANHATTAN BANK]
The Chase Manhattan Bank Chase Securities Inc.
1 Chase Square 270 Park Avenue
Rochester , New York 14643 New York, New York 10017
June 9, 2000
Project Mohawk
Senior Secured Credit Facilities
Commitment Letter
Welch Allyn Data Collection, Inc.
Mohawk Corp.
Mohawk Acquisition Corp.
c/o Welch Allyn Data Collection, Inc.
4619 Jordan Road
P.O. Box 187
Skaneateles Falls, New York 13153
Attention: Joseph Hennigan
Chief Financial Officer
PSC Inc.
675 Basket Road
Webster, New York 14580
Attention: William Woodard
Chief Financial Officer
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase") and Chase
Securities Inc. ("CSI") that Mohawk Corp. ("Mohawk") is seeking to acquire PSC
Inc. (the "Target") through a cash tender offer for all of the outstanding
shares of common stock, series A convertible preferred stock and warrants of the
Target (the "Tender Offer"). We understand that the Tender Offer will be
consummated by Mohawk Acquisition Corp., a subsidiary of Mohawk that has been
established for the purpose of making the Tender Offer ("Acquisition Corp."),
and that the Tender Offer will be followed by a merger between Acquisition Corp.
and the Target (the Tender Offer and such merger being collectively referred to
as the "Acquisition"), with the
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result that the Target will be a wholly owned direct subsidiary of Mohawk. In
addition, prior to or concurrently with the consummation of such merger, Welch
Allyn Data Collection, Inc. ("WADC" and, together with Mohawk and Acquisition
Corp., the "Mohawk Entities" or sometimes collectively hereinafter referred to
as "you") will become a wholly owned direct subsidiary of Mohawk. The price at
which the shares of common and preferred stock of the Target will be acquired
pursuant to the Tender Offer and the Merger will not exceed $8.45 per underlying
common share. You have advised us that the Acquisition has been approved by the
boards of directors of each of the Mohawk Entities and the Target, and such
approval has not been withdrawn or qualified in any manner adverse to the Mohawk
Entities. We understand that the total financing requirements consist of an
aggregate amount up to $305,100,000 for the Acquisition (including the fees and
expenses payable by the Mohawk Entities relating thereto), and an amount
sufficient for the refinancing of certain existing indebtedness of WADC and its
subsidiaries and, after giving effect to the Acquisition, the Target and its
subsidiaries, as shown on Schedule 1 to the Term Sheet referred to below. In
addition, you have advised us that additional financing for working capital
needs and other general corporate purposes is required for WADC, the Target and
their respective subsidiaries, after giving effect to the Acquisition. In
connection with all of the foregoing, you have requested that CSI agree to
structure, arrange and syndicate senior secured credit facilities in an
aggregate amount of up to $225,000,000 (the "Credit Facilities") and that Chase
commit to provide the entire principal amount of the Credit Facilities and to
serve as administrative agent for the Credit Facilities. The transactions
described in this paragraph, including the Acquisition and the Merger and the
financing thereof, are collectively referred to herein as the "Transactions".
CSI is pleased to advise you that it is willing to act as exclusive
advisor, lead arranger and book manager for the Credit Facilities.
Furthermore, Chase is pleased to advise you of its commitment 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 (the
"Commitment Letter"), in the Summary of Terms and Conditions attached hereto as
Exhibit A (the "Term Sheet") and in the Fee Letter dated the date hereof and
delivered herewith (the "Fee Letter"). We intend to syndicate the Credit
Facilities to a group of financial institutions identified by us in consultation
with you (together with Chase, the "Lenders"). Chase shall be relieved of its
obligation to provide the entire amount of the Credit Facilities to the extent
that the offers of Lenders other than Chase to provide any portion of the Credit
Facilities are accepted.
It is agreed that Chase will act as the sole and exclusive
Administrative Agent, and that CSI will act as the sole and exclusive advisor,
arranger and book manager, for the Credit Facilities, and each will, in such
capacities, perform the duties and exercise the authority customarily performed
and exercised by it in such roles. You agree that, except as expressly
contemplated by the Term Sheet and the Fee Letter, no other agents, co-agents,
arrangers or book managers will be appointed, no other titles will be awarded
and no compensation will be paid in connection with the Credit Facilities unless
you and we shall so agree.
CSI intends to commence syndication efforts promptly upon the
execution of this Commitment Letter, and you agree actively to assist CSI in
completing a syndication satisfactory to it. 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 Mohawk Entities and the
Target and the
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proposed Lenders, (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 CSI, of one or more meetings of
prospective Lenders.
CSI will manage all aspects of the syndication in consultation with
you, 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
CSI in its syndication efforts, you agree promptly to prepare and provide to CSI
and Chase all information with respect to the Mohawk Entities and their
respective subsidiaries, the Target and its subsidiaries and the Transactions,
including all financial information and projections (the "Projections"), as we
may reasonably request in connection with the arrangement and syndication of the
Credit Facilities. You hereby represent and covenant that (a) all information
(other than the Projections) (the "Information"), taken as a whole, that has
been or will be made available to Chase or CSI 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 (taken as a whole) 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 Chase or CSI
by you or any of your representatives have been or will be prepared in good
faith based upon reasonable assumptions at the time of preparation and at the
time made available to Chase or CSI. You agree that if, at any time from and
including the date hereof until the closing of the Credit Facilities, any of the
representations in the preceding sentence would be incorrect if the Information
and Projections were being furnished, and such representations were being made,
at such time, then you will promptly supplement the Information and the
Projections so that such representations will be correct under those
circumstances. In arranging and syndicating the Credit Facilities, Chase and
CSI will be entitled to use and rely primarily on the Information and the
Projections without responsibility for independent verification thereof.
As consideration for Chase's commitment hereunder and CSI's agreement
to perform the services described herein, you agree, jointly and severally, to
pay to Chase the non-refundable fees set forth in the Term Sheet and in the Fee
Letter.
Chase's commitment hereunder and CSI's agreement 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, condition (financial or otherwise)
or prospects of WADC and its subsidiaries, taken as a whole, or the Target and
its subsidiaries, taken as a whole, in each case since December 31, 1999, (b)
our not becoming aware after the date hereof of any information or other matter
affecting WADC and its subsidiaries, the Target and its subsidiaries or the
Transactions that, in our judgment, is inconsistent in a material and adverse
manner with any such information or other matter disclosed to us prior to the
date hereof, (c) there not having occurred a material disruption of or material
adverse change in financial, banking or capital market conditions that, in our
judgment, could materially impair the syndication of the Credit Facilities, (d)
our satisfaction that prior to and during the syndication of the Credit
Facilities there shall be no competing offering, placement or arrangement of any
debt securities or bank financing by or on behalf of the Mohawk Entities or any
of their respective subsidiaries, (e) the negotiation, execution and delivery on
or before August 31, 2000 of definitive documentation with respect to the Credit
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Facilities satisfactory to Chase and its counsel, (f) Chase's satisfaction in
all material respects with the structure of the Acquisition and the other
Transactions and all tax, legal, ERISA, environmental and accounting matters
related thereto, (g) delivery to Chase of, and Chase's satisfaction with, (i)
the unaudited interim consolidated financial statements of each of WADC and the
Target for each fiscal month after the most recent 2000 fiscal quarter for which
financial statements are available and ended at least 30 days before the Closing
Date and (ii) projections of Mohawk and its subsidiaries (including WADC, the
Target and their respective subsidiaries) for fiscal years 2000-2006 together
with related assumptions, (h) CSI's having been afforded a reasonable period
following the date hereof to syndicate the Credit Facilities and (i) the other
conditions set forth herein or referred to in the Term Sheet. The terms and
conditions of Chase's commitment 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 Chase, CSI and the Mohawk Entities.
You agree, jointly and severally, (a) to indemnify and hold harmless
Chase, CSI, their affiliates and their respective officers, directors,
employees, advisors, and agents (each, an "indemnified person") from and against
any and 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
Transactions or any related 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
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indemnity will not, as to any indemnified person, 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 Chase, CSI
and their affiliates on demand for all reasonable 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 unintended recipients of Information or other
materials distributed through electronic, telecommunications or other
information transmission systems (but excluding any such damages 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), or for any
special, indirect, consequential or punitive damages in connection with the
Credit Facilities.
You acknowledge that Chase and/or CSI 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 and otherwise. Neither Chase nor CSI will use confidential
information obtained from you by virtue of the Transactions or other
relationships with you in connection with the performance by Chase or CSI of
services for other companies, and neither Chase nor CSI will furnish any such
information to other companies. You also acknowledge that neither Chase nor CSI
has any obligation to use in connection with the Transactions, or to furnish to
you, confidential information obtained by Chase or CSI or any of their
respective affiliates from other companies.
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This Commitment Letter shall not be assignable by you without the
prior written consent of Chase and CSI (and any 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. This
Commitment Letter may not be amended or waived except by an instrument in
writing signed by you, Chase and CSI. 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 hereof. 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 law of the
State of New York.
You irrevocably and unconditionally submit to the exclusive
jurisdiction of any state or federal courts sitting in the City of New York over
any suit, action or proceeding arising out of or relating to this Commitment
Letter. You hereby agree that service of any process, summons, notice or
document by registered mail addressed to you shall be effective service of
process for any suit, action or proceeding bought in any such court. You
irrevocably and unconditionally waive any objection to the having of venue of
any such suit, action or proceeding brought in any such court and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum.
You agree that a final judgment in any such suit, action or proceeding brought
in any such court shall be conclusive and binding upon you and may be enforced
in any other courts to whose jurisdiction you are or may be subject, by suit
upon judgment. You, Chase and CSI irrevocably agree to waive trial by jury in
any suit, action, proceeding, claim or counterclaim brought by or on behalf of
any party related to or arising out of this Commitment Letter or the performance
of services hereunder.
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) to your directors, officers, employees, attorneys,
accountants, agents and advisors on a confidential and need-to-know basis or (b)
as may be compelled in a judicial or administrative proceeding or as otherwise
required by law or regulation (in which case you agree to inform us promptly
thereof), provided that the restrictions set forth in this paragraph shall cease
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to apply (except in respect of the Fee Letter and its terms and substance) after
this Commitment Letter has been accepted by you.
Chase and CSI shall have the right to review and approve all public
announcements and filings relating to the Transactions that refer to Chase, CSI
or the financing contemplated hereby before they are made (such approval not to
be unreasonably withheld or delayed).
The compensation, 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 Chase's commitment hereunder, provided that your obligations under
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this Commitment Letter, other than those arising under the fourth, fifth, sixth,
thirteenth and fourteenth paragraphs hereof, shall automatically terminate and
be superseded by the provisions of the definitive documentation relating to the
Credit Facilities upon the closing
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thereof and the consummation of the Acquisition, and you shall automatically be
released from all liability in connection therewith at such time.
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, together
with the amounts agreed upon pursuant to the Fee Letter to be payable upon the
acceptance hereof, not later than 5:00 p.m., New York City time, on June 9,
2000. Chase's commitment and CSI's agreements herein will expire at such time
in the event Chase has not received such executed counterparts in accordance
with the immediately preceding sentence.
[signature page follows]
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Chase and CSI are pleased to have been given the opportunity to assist
you in connection with this important financing.
Very truly yours,
THE CHASE MANHATTAN BANK
By: /s/ Benedict A. Smith
------------------------------
Name: Benedict A. Smith
Title: Vice President
CHASE SECURITIES INC.
By: /s/ Lisa Bryant
------------------------------
Name: Lisa Bryant
Title: Vice President
Accepted and agreed to
as of the date first
written above by:
WELCH ALLYN DATA COLLECTION, INC.
By: /s/ Joseph M. Hennigan
-------------------------------
Name: Joseph M. Hennigan
Title: Vice President and
Chief Financial Officer
MOHAWK CORP.
By: /s/ Joseph M. Hennigan
-------------------------------
Name: Joseph M. Hennigan
Title: Vice President and
Treasurer
MOHAWK ACQUISITION CORP.
By: /s/ Joseph M. Hennigan
-------------------------------
Name: Joseph M. Hennigan
Title: Vice President and
Treasurer
Exhibit A
PROJECT MOHAWK
SENIOR SECURED CREDIT FACILITIES
Summary of Terms and Conditions
June, 2000
Mohawk Corp., a Delaware corporation ("Mohawk"), proposes to acquire,
through Mohawk Acquisition Corp., a New York corporation and a wholly owned
direct subsidiary of Mohawk ("Acquisition Corp."), PSC Inc., a Delaware
corporation (the "Target"), through a cash tender offer (the "Tender Offer") for
all of the outstanding shares of common stock, series A convertible preferred
stock and warrants of the Target. The Tender Offer will be followed
concurrently by a merger between Acquisition Corp. and the Target (the "Merger")
(the Tender Offer and the Merger being collectively referred to as the
"Acquisition"), with the result that the Target will be the surviving
corporation of the Merger and a wholly owned direct subsidiary of Mohawk. In
addition, at or prior to the consummation of the Merger, Welch Allyn Data
Collection, Inc., a New York corporation ("WADC"), will become a wholly owned
direct subsidiary of Mohawk. The price at which the shares of common and
preferred stock of the Target will be acquired pursuant to the Tender Offer and
the Merger will be $8.45 per underlying common share. In order to complete the
Acquisition, and to pay fees and expenses related thereto, and to refinance
existing indebtedness of WADC and its subsidiaries and of the Target and its
subsidiaries, and to provide for the working capital needs and for other general
corporate purposes of WADC, the Target and their respective subsidiaries, the
Borrower (as defined below) will require senior secured credit facilities in an
aggregate amount of up to $225,000,000 on the terms described herein. The
Acquisition, the Merger, the financing thereof and the other transactions
contemplated hereby are herein referred to as the "Transactions". Set forth
below is a summary of the terms and conditions for the Credit Facilities (as
defined below):
I. Parties
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Borrower: Mohawk, Mohawk Acquisition Corp. or WADC, to be
determined by Chase in consultation with WADC (the
"Borrower").
Guarantors: Mohawk and each of its direct and indirect domestic
subsidiaries (including after giving effect to the
Acquisition described below, WADC, the Target and their
respective domestic subsidiaries) (the "Guarantors"; the
Borrower and the Guarantors, collectively, the "Credit
Parties").
Advisor, Lead
Arranger and
Book Manager: Chase Securities Inc. (in such capacity, the "Lead
Arranger").
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Administrative Agent: The Chase Manhattan Bank ("Chase" and, in such
capacity, the "Administrative Agent").
Syndication Agent: To be determined.
Documentation Agent: To be determined.
Lenders: A syndicate of banks, financial institutions and
other entities, including Chase, arranged by the
Lead Arranger (collectively, the "Lenders").
II. Types and Amounts of
--------------------
Credit Facilities
-----------------
1. Revolving Credit Facility
-------------------------
Type and Amount
of Facility: 5-1/2 year revolving credit facility (the "Revolving
Facility") in the amount of $75,000,000 (the loans
thereunder, the "Revolving Loans").
Availability: The Revolving Facility shall be available on a
revolving basis during the period commencing on the
Closing Date and at any time prior to the final
maturity of the Revolving Facility. Amounts repaid
or prepaid under the Revolving Facility may be
reborrowed.
Letters of Credit: A portion of the Revolving Facility not in excess of
$10,000,000 shall be available for the issuance of
letters of credit (the "Letters of Credit") by Chase
(in such capacity, the "Issuing Lender"). No Letter
of Credit shall have an expiration date after the
earlier of (a) one year after the date of issuance
and (b) five business days prior to the final
maturity of the Revolving Facility, provided that
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any Letter of Credit with a one-year tenor may
provide for the renewal thereof for additional one-
year periods (which shall in no event extend beyond
the date referred to in clause (b) above).
Drawings under any Letter of Credit shall be
reimbursed by the Borrower (whether with its own
funds or with the proceeds of Revolving Loans) on
the same business day. To the extent that the
Borrower does not so reimburse the Issuing Lender,
the Lenders under the Revolving Facility shall be
irrevocably and unconditionally obligated to
reimburse the Issuing Lender on a pro rata basis.
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Final Maturity: The Revolving Facility will mature on December 31,
2005.
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Purpose: The proceeds of the Revolving Loans shall be used
(a) to finance the Acquisition, (b) to pay the
consideration payable in respect of the Merger, (c)
to refinance, redeem or repurchase certain existing
indebtedness of Mohawk and its subsidiaries
(including WADC, the Target and their respective
subsidiaries) to be agreed, (d) to pay fees and
expenses related to the Transactions and (e) for
working capital and other general corporate
purposes of the Borrower and its subsidiaries. Not
more than $46,100,000 of the Revolving Loans shall
be utilized as of the Closing Date.
2. Term Loan Facility
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Type and Amount of
Facility: 5-1/2 year term loan facility (the "Term Loan
Facility" and, together with the Revolving
Facility, the "Credit Facilities") in the amount of
$150,000,000 (the loans thereunder, the "Term
Loans" and, together with the Revolving Loans, the
"Loans").
Availability: The Term Loans shall be made in a single drawing on
the Closing Date (as defined below). Amounts
borrowed under the Term Loan Facility that are
repaid or prepaid may not be reborrowed.
Final Maturity and
Amortization: The Term Loans will mature on December 31, 2005.
Term Loans will amortize in quarterly installments
commencing on March 31, 2001 and ending on December
31, 2005 in the following amounts:
Period Principal Amount ($)
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March 31, 2001 $ 5,000,000
June 30, 2001 5,000,000
September 30, 2001 5,000,000
December 31, 2001 5,000,000
March 31, 2002 6,250,000
June 30, 2002 6,250,000
September 30, 2002 6,250,000
December 31, 2002 6,250,000
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March 31, 2003 7,500,000
June 30, 2003 7,500,000
September 30, 2003 7,500,000
December 31, 2003 7,500,000
March 31, 2004 8,750,000
June 30, 2004 8,750,000
September 30, 2004 8,750,000
December 31, 2004 8,750,000
March 31, 2005 10,000,000
June 30, 2005 10,000,000
September 30, 2005 10,000,000
December 31, 2005 10,000,000
Purpose: The proceeds of the Term Loans shall be used to (a)
finance the Acquisition, (b) pay the consideration
payable in respect of the Merger, (c) refinance,
redeem or repurchase certain existing indebtedness
of Mohawk and its subsidiaries (including WADC, the
Target and their respective subsidiaries) to be
agreed and (d) pay fees and expenses related to the
Transactions.
III. Certain Payment Provisions
--------------------------
Fees and Interest Rates: As set forth on Annex I.
Optional Prepayments and
Commitment Reductions: Loans may be prepaid and commitments may be
reduced by the Borrower in minimum amounts to
be agreed upon. Optional prepayments of the
Term Loans shall be applied pro rata to the
remaining amortization payments under the Term
Loan Facility.
Mandatory Prepayments
and Commitment
Reductions: The following amounts shall be applied to
prepay the Term Loans and reduce the Revolving
Facility:
(a) 100% of the net cash proceeds of any sale
or issuance of equity, subject to customary
exceptions to be agreed;
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(b) 100% of net cash proceeds of issuances of debt
obligations after the Closing Date by the Borrower or
any of its subsidiaries, subject to customary
exceptions to be agreed;
(c) 100% of the net proceeds of all asset sales and
other dispositions (including as a result of casualty
or condemnation) by the Borrower or any of its
subsidiaries, subject to customary exceptions to be
agreed; and
(d) 75% of Excess Cash Flow (to be defined) for each
fiscal year of the Borrower (commencing with the fiscal
year in which the Closing Date occurs), provided that
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such percentage will be (i) 50%, if the ratio of total
debt to EBITDA is less than 3.50:1 and greater than
2:49:1 and (ii) zero, if such ratio is less than or
equal to 2.49:1.
All such amounts shall be applied, first, to the
prepayment of the Term Loans and, next, to the
permanent reduction of the Revolving Facility. Each
such prepayment of the Term Loans shall be applied pro
rata to the remaining amortization payments under the
Term Loan Facility. The Revolving Loans shall be
prepaid and the Letters of Credit shall be cash
collateralized or replaced to the extent such
extensions of credit exceed the amount of the Revolving
Facility after giving effect to the permanent reduction
thereof.
IV. Collateral
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The obligations of each Credit Party in respect of the
Credit Facilities and any interest rate or other
hedging arrangements with any Lender (or an affiliate
thereof) shall be secured by a perfected first priority
security interest in all of its tangible and intangible
assets (including, without limitation, intellectual
property, real property and all of the capital stock of
the Borrower and each of its direct and indirect
domestic subsidiaries and 65% of the first-tier foreign
subsidiaries of the Borrower and its subsidiaries),
except for those assets as to which the Administrative
Agent shall determine 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
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Initial Conditions: The availability of the Credit Facilities shall be
conditioned upon satisfaction of, among other things,
the following conditions precedent (the date upon which
all such
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conditions precedent shall be satisfied, the "Closing
Date") on or before August 31, 2000:
(a) Each Credit Party shall have executed and delivered
satisfactory definitive financing documentation with
respect to the Credit Facilities to which it is a
party, including guarantees, security agreements,
mortgages and related instruments and agreements (the
"Credit Documentation").
(b) The Borrower shall have received at least
$66,000,000 of new equity issued to investors
acceptable to the Lenders.
(c) Mohawk, Acquisition Corp. and the Target shall have
entered into the Agreement and Plan of Merger dated as
of June 5, 2000 (the "Merger Agreement"); the Lenders
shall be satisfied with the terms of the Tender Offer
and the related transactions; the Tender Offer and the
Merger shall have been approved by the respective
boards of directors (and, if required, the
shareholders) of Mohawk and the Target; the aggregate
consideration payable by the Borrower in respect of the
Acquisition shall not exceed $152,700,000 (less
$31,300,000 of assumed option proceeds); the Tender
Offer and the Merger shall have been, or shall be
concurrently, consummated in a manner satisfactory to
the Lenders (including satisfaction of the Lenders with
all determinations as to the satisfaction of the
conditions thereunder and no condition thereof shall
have been waived, amended, supplemented or otherwise
modified without the requisite Lenders' consent); all
documents and materials filed publicly by Mohawk and
the Target in connection with the Acquisition shall
have been furnished to the Administrative Agent and
such documents and materials shall be reasonably
satisfactory in form and substance to the Lenders; and
WADC will become a wholly owned direct subsidiary of
Mohawk on terms satisfactory to the Lenders. The
Lenders shall be satisfied with the structure of the
Acquisition and all other legal, tax, accounting and
ERISA matters relating to the Target and its
subsidiaries and the Transactions.
(d) The sources and uses of the funds for the
Transactions shall be as set forth on Schedule 1 hereto
or otherwise satisfactory to the Lenders, provided that
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the aggregate amount of fees, commissions and expenses
payable by Mohawk and its subsidiaries in connection
with the Transactions shall not exceed $10,500,000.
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(e) No outstanding debt of Mohawk and its subsidiaries
as of the Closing Date (after giving effect to the
initial Loans under the Credit Facilities and the
refinancing of existing debt of WADC, the Target and
their respective subsidiaries of $141,900,000), other
than the Credit Facilities.
(f) The Lenders shall be satisfied that (i) no material
adverse change shall have occurred in the business,
operations, properties, assets, financial condition or
prospects of WADC and its subsidiaries, taken as a
whole, since December 31, 1999 and (ii) no material
adverse change shall have occurred in the business,
operations, properties, assets, financial condition or
prospects of the Target and its subsidiaries, taken as
a whole, since December 31, 1999.
(g) All material governmental and third party approvals
and consents (including Hart-Scott-Rodino) necessary
or, in the reasonable discretion of the Administrative
Agent, advisable in connection with the Transactions
and the other transactions contemplated hereby and the
continuing operations of Mohawk 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 which would restrain, prevent
or otherwise impose materially adverse conditions on
the Transactions or the other transactions contemplated
hereby.
(h) There shall be no pending or threatened litigation
or proceeding affecting or relating to the Transactions
that, in the Lenders' judgment, could reasonably be
expected to (i) have a material adverse effect on the
business, operations, properties, assets, financial
condition or prospects of Mohawk and its subsidiaries,
taken as a whole, after giving effect to the
Transactions and the other transactions contemplated
hereby (other than certain litigation involving the
Target previously disclosed to the Lenders) or (ii)
result in the Merger being enjoined, prevented or
delayed or that, in the Lenders' judgment, otherwise
reasonably be expected to have a material adverse
effect on the Transactions or the Credit Facilities
that has not been settled, dismissed, vacated,
discharged or terminated prior to the Closing Date.
(i) The consummation of the Transactions shall not (i)
violate in any material respect any applicable law,
statute, rule or regulation (including without
limitation Regulations T, U and X of the Board of
Governors of the Federal
8
Reserve System) or (ii) conflict with, or result in a
default or event of default under, any material
agreement of Mohawk and its subsidiaries (including
WADC, the Target and their respective subsidiaries).
(j) The Lenders shall have received (i) satisfactory
audited consolidated financial statements of WADC for
fiscal year 1999 and unaudited consolidated financial
statements of WADC for fiscal years 1998 and 1997, (ii)
satisfactory unaudited interim consolidated financial
statements of WADC for each fiscal quarter ended after
the most recent fiscal year and at least 30 days before
the Closing Date and for each fiscal month after the
most recent 2000 fiscal quarter for which financial
statements were received by the Lenders and ended at
least 30 days before the Closing Date, (iii)
satisfactory audited consolidated financial statements
of the Target for fiscal years 1999, 1998 and 1997,
(iv) satisfactory unaudited interim consolidated
financial statements of the Target for each fiscal
quarter ended after the most recent fiscal year and at
least 30 days before the Closing Date and for each
fiscal month after the most recent 2000 fiscal quarter
for which financial statements were received by the
Lenders and ended at least 30 days before the Closing
Date, (v) a satisfactory pro forma consolidated balance
--- -----
sheet of Mohawk, adjusted to give effect to the
Transactions and the other transactions contemplated
hereby and (vi) satisfactory projections of Mohawk and
its subsidiaries (including WADC, the Target and their
respective subsidiaries) for fiscal years 2000-2006
together with related assumptions.
(k) The Lenders shall have received the results of a
recent lien search in each relevant jurisdiction with
respect to Mohawk and its subsidiaries (including WADC,
the Target and their respective subsidiaries), and such
search shall reveal no liens on any of their respective
assets, except for liens permitted by the Credit
Documentation or liens to be discharged on or prior to
the Closing Date pursuant to documentation satisfactory
to the Administrative Agent.
(l) The Lenders shall have received all reasonably
necessary documentation relating to the liens on real
property of Mohawk and its subsidiaries contemplated to
be provided in respect of the Credit Facilities,
including fee and/or leasehold mortgages, deeds of
trust or similar instruments, title insurance policies
(including such endorsements thereto as the
Administrative Agent may reasonably require), current
certified surveys, evidence of
9
zoning and other material legal compliance, appraisals,
certificates of occupancy and other permits.
(m) The Lenders shall have received a certification
satisfactory to the Administrative Agent from the chief
financial officer of the Borrower as to the solvency of
the Borrower and its subsidiaries after giving effect
to the Transactions and other transactions contemplated
hereby.
(n) The Lenders shall be satisfied with the
environmental liabilities to which Mohawk and its
subsidiaries may be subject after giving effect to the
Transactions and with the plans of Mohawk with respect
thereto, and, if required by the Administrative Agent,
the Lenders shall have received satisfactory
environmental assessments (including Phase I reports)
with respect to the real property owned or leased by
Mohawk and its subsidiaries (including WADC, the Target
and their respective subsidiaries) from an
environmental consulting firm satisfactory to the
Administrative Agent.
(o) The Lenders shall have received such legal opinions
(including from counsel to the Credit Parties
(including WADC, the Target and their respective
subsidiaries) and from special or local counsel as may
be reasonably required by the Administrative Agent),
documents and other instruments as are customary for
transactions of this type or as the Administrative
Agent or the Lenders (through the Administrative Agent)
may reasonably request.
(p) The Lenders, the Administrative Agent and the Lead
Arranger shall have received from the Borrower, as
agreed to in writing, all fees required to be paid, and
all expenses required to be paid or reimbursed for
which invoices have been presented, on or before the
Closing Date.
On-Going Conditions: The making of each extension of credit shall be
conditioned upon (a) the accuracy of all
representations and warranties in the Credit
Documentation (including, without limitation, the
material adverse change and litigation representations)
and (b) 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.
VI. Certain Documentation Matters
-----------------------------
The Credit Documentation shall contain representations,
warranties, covenants and events of default customary
for
10
financings of this type and other terms deemed
appropriate by the 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
(including intellectual property); no burdensome
restrictions; taxes; Federal Reserve regulations;
ERISA; Investment Company Act; subsidiaries;
environmental matters; solvency; labor matters;
accuracy of disclosure; and validity, perfection and
priority of security interests.
Affirmative
Covenants: Requirements for (with related definitions and
exceptions to be consistent with the Target's existing
credit facilities and with the transactions
contemplated hereby): delivery of financial statements,
reports, accountants' letters, officers' certificates
and other information requested by the Lenders; notices
of defaults, litigation and other material events;
payment of taxes and other obligations; continuation of
business and maintenance of existence and material
rights and privileges; compliance with laws (including
environmental laws) and material contractual
obligations; maintenance of property and insurance;
maintenance of books and records; right of the Lenders
to inspect property and books and records; further
assurances (including, without limitation, with respect
to security interests in after-acquired property); and
agreement to obtain within 90 days after the Closing
Date interest rate protection for a notional principal
amount equal to at least 50% of the Term Loan Facility
on terms and conditions satisfactory to the
Administrative Agent if the ratio of total debt to
EBITDA is greater than or equal to 3.0:1.
Financial Covenants: Financial covenants, including, without limitation:
(1) minimum interest coverage (with a starting level of
2.5x)
(2) minimum fixed charge coverage (with a starting
level of 1.15x) and
(3) maximum leverage (with a starting level of 4.0x),
in each case in form similar to those contained in the
Target's existing credit facilities, with related
definitions
11
and levels to be mutually agreed upon (after receipt
and review of Mohawk's projections).
Negative Covenants: Limitations (with related definitions and exceptions
to be consistent with the Target's existing credit
facilities and with the transactions contemplated
hereby) on: indebtedness (including guarantee
obligations); liens; mergers, consolidations,
liquidations and dissolutions; disposition of assets;
acquisitions (other than the Acquisition); capital
expenditures; investments, loans and advances; leases;
prepayment, redemptions and repurchases of certain
debt; dividends and other payments in respect of
capital stock; modifications of charter and by-laws and
of debt and other material agreements; transactions
with affiliates; sale and leasebacks; changes in fiscal
year; negative pledge clauses; and changes in 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; environmental matters;
material judgments; actual or asserted invalidity of
any guarantee or security document, subordination
provisions or security interest; and a change of
control (the definition of which is to be agreed).
Voting: Amendments and waivers with respect to the Credit
Documentation shall require the approval of Lenders
holding not less than a majority of the aggregate
amount of the Term Loans, Revolving Loans,
participations in Letters of Credit and unused
commitments under the Credit Facilities, except that
(a) the consent of each Lender directly affected
thereby shall be required with respect to (i)
reductions in the amount or extensions of the scheduled
date of amortization or final maturity of any Loan,
(ii) reductions in the rate of interest or any fee or
extensions of any due date thereof, (iii) increases in
the amount or extensions of the expiry date of any
Lender's commitment and (iv) modifications to the pro
rata provisions of the Credit Documentation and (b) the
consent of 100% of the Lenders shall be required with
respect to (i) modifications to any of the voting
percentages and (ii) releases of all or substantially
all of the Guarantors or all or substantially all of
the collateral.
12
Assignments and
Participations: The Lenders shall be permitted to assign and sell
participations in their Loans and commitments, subject,
in the case of assignments (other than to another
Lender or to a Lender Affiliate (defined to include (a)
with respect to any Lender, (i) an affiliate of such
Lender or (ii) any entity engaged in making,
purchasing, holding or otherwise investing in bank
loans and similar extensions of credit in the ordinary
course of its business and is administered or managed
by a Lender or an affiliate thereof and (b) with
respect to any Lender that is a fund which invests in
bank loans and similar extensions of credit, any other
fund that invests in bank loans and similar extensions
of credit and is managed by the same investment advisor
or an affiliate thereof)), to the consent of the
Administrative Agent, the Issuing Lender and the
Borrower (which consent in each case shall not be
unreasonably withheld), provided that no such consent
--------
of the Borrower shall be required after any payment or
bankruptcy default. Non-pro rata assignments shall be
permitted. In the case of partial assignments (other
than to another Lender or to a Lender Affiliate (as
defined above)), the minimum assignment amount shall be
$5,000,000 unless otherwise agreed by the Borrower and
the Administrative Agent. Participants shall have the
same benefits as the Lenders with respect to yield
protection and increased cost provisions. Voting
rights of participants shall be limited to those
matters with respect to which the affirmative vote of
the Lender from which it purchased its participation
would be required as described under "Voting" above.
Pledges of Loans in accordance with applicable law
shall be permitted without restriction. Promissory
notes shall be issued under the Credit Facilities only
upon request. The Administrative Agent will be
entitled to a processing fee of $3,500 from the
assignor or the assignee in connection with any
assignment (subject to certain exceptions to be agreed
upon).
Yield Protection: The Credit Documentation shall contain customary
provisions (a) protecting the 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 (b) indemnifying the
Lenders for "breakage costs" incurred in connection
with, among other things, any prepayment of a
Eurodollar Loan (as defined in Annex I) on a day other
than the last day of an interest period with respect
thereto.
13
Expenses and
Indemnification: The Borrower shall pay (a) all reasonable out-of-pocket
expenses of the Administrative Agent and the Lead
Arranger associated with the syndication of the Credit
Facilities and the preparation, 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 (b) all out-of-pocket expenses of the
Administrative Agent and the Lenders (including the
reasonable fees, disbursements and other charges of
counsel to the Administrative Agent and the Lenders) in
connection with the enforcement of the Credit
Documentation.
The Administrative Agent, the Lead Arranger and the
Lenders (and their affiliates and their respective
officers, directors, employees, advisors and agents)
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 they are found
by a final non-appealable judgment of a court to arise
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
Lead Arranger: Milbank, Tweed, Hadley & McCloy LLP.
Annex I
Interest and Certain Fees
-------------------------
Interest Rate Options: The Borrower may elect that the Loans comprising
each borrowing bear interest at a rate per annum equal
to:
the ABR plus the Applicable Margin; or
----
the Eurodollar Rate plus the Applicable Margin.
----
As used herein:
"ABR" means the higher of (i) the rate of interest
publicly announced by Chase as its prime rate in effect
at its principal office in New York City (the "Prime
Rate") and (ii) the federal funds effective rate from
time to time plus 0.5%.
----
"Applicable Margin" means (i) initially for 90 days,
2.25% per annum in the case of Eurodollar Loans (as
defined below) and (ii) thereafter, a percentage
determined in accordance with the Pricing Grid attached
hereto as Annex I-A (the "Pricing Grid").
"Eurodollar Rate" means the rate (adjusted for
statutory reserve requirements for eurocurrency
liabilities) at which eurodollar deposits for one, two,
three or six months (as selected by the Borrower) are
quoted on the Telerate Service. Statutory reserve
requirements for eurocurrency liabilities are presently
zero percent.
Interest Payment Dates: In the case of Loans bearing interest based upon
the ABR ("ABR Loans"), quarterly in arrears.
In the case of Loans bearing interest based upon the
Eurodollar Rate ("Eurodollar Loans"), on the last day
of each relevant interest period and, in the case of
any interest period longer than three months, on each
successive date three months after the first day of
such interest period.
Commitment Fees: The Borrower shall pay a commitment fee calculated at a
per annum percentage determined in accordance with the
Pricing Grid on the average daily unused portion of the
Credit Facilities, payable quarterly in arrears.
Letter of Credit Fees: The Borrower shall pay a commission on all
outstanding Letters of Credit at a per annum rate equal
to the Applicable Margin then in effect with respect to
Eurodollar
2
Loans under the Revolving Facility on the face amount
of each such Letter of Credit. Such commission shall be
shared ratably among the Lenders participating in the
Revolving Facility and shall be payable quarterly in
arrears.
A fronting fee equal to a per annum rate to be agreed
on the face amount of each Letter of Credit shall be
payable quarterly in arrears to the Issuing Lender for
its own account. In addition, customary
administrative, issuance, amendment, payment and
negotiation charges shall be payable to the Issuing
Lender for its own account.
Default Rate: At any time when the Borrower is in default in the
payment of any amount of principal due under the Credit
Facilities, such amount shall bear interest at 2% above
the rate otherwise applicable thereto. Overdue
interest, fees and other amounts shall bear interest at
2% above the rate applicable to ABR Loans.
Rate and Fee Basis: All per annum rates shall be calculated on the basis
of a year of 360 days (or 365/366 days, in the case of
ABR Loans the interest rate payable on which is then
based on the Prime Rate) for actual days elapsed.
Annex I-A
PRICING GRID
Project Mohawk
--------------
$225,000,000
Senior Secured Credit Facilities
=========================================================================================================
(All Amounts in Basis Points)
- ---------------------------------------------------------------------------------------------------------
Leverage Ratio ABR Applicable LIBOR Applicable Commitment
Margin Margin Fee Rate
- ---------------------------------------------------------------------------------------------------------
greater than or equal to 4.00:1 112.5 275 50
- ---------------------------------------------------------------------------------------------------------
greater than or equal to 3.50:1 less than 4.00:1 87.5 250 50
- ---------------------------------------------------------------------------------------------------------
greater than or equal to 3.00:1 less than 3.50:1 62.5 225 50
- ---------------------------------------------------------------------------------------------------------
greater than or equal to 2.50:1 less than 3.00:1 37.5 200 37.5
- ---------------------------------------------------------------------------------------------------------
greater than or equal to 2.00:1 less than 2.50:1 12.5 175 37.5
- ---------------------------------------------------------------------------------------------------------
greater than or equal to 1.50:1 less than 2.00:1 0 150 30
- ---------------------------------------------------------------------------------------------------------
less than 1.50:1 0 125 25
=========================================================================================================
Schedule 1
----------
Sources and Uses of Funds
-------------------------
(in millions of dollars)
- ----------------------------------------------------------------------------------
Sources of Funds Uses of Funds
---------------- -------------
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Cash on hand $ 11.7 Purchase Price $152.7
- ----------------------------------------------------------------------------------
Term Loans 150.0 Refinancing of 5.4
WADC's Debt
- ----------------------------------------------------------------------------------
Revolving Facility 46.1 Refinancing of 136.5
Target's Debt
- ----------------------------------------------------------------------------------
Option Proceeds 31.3 Transaction Expenses 10.5
- ----------------------------------------------------------------------------------
Equity 66.0
- ----------------------------------------------------------------------------------
Total $305.1 $305.1
- ----------------------------------------------------------------------------------