Exhibit(a)(1)
BANKERS TRUST COMPANY CREDIT SUISSE FIRST BOSTON
One Bankers Trust Plaza 11 Madison Avenue
130 Liberty Street New York, New York 10010
New York, New York 10006
February 10, 1998
Sombrero Acquisition Corp.
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10036
Attention: Mr. Josh Harris
re MTL Recapitalization/Refinancing
Bank Commitment Letter
Ladies and Gentlemen:
You have advised Bankers Trust Company ("BTCo") and Credit Suisse First
Boston ("CSFB" and, together with BTCo, each, an "Arranger" and, collectively,
the "Arrangers") that Sombrero Acquisition Corp, ("Acquisition Corp."), a
Florida corporation formed by Apollo Management, L.P. and its affiliates
(collectively, "Apollo") and one or more other investors acceptable to BTCo and
CSFB (together with Apollo, the "Equity Investors"), intends to consummate a
recapitalization (such transaction, together with the MTL Merger referred to
below, the "Recapitalization") of MTL, Inc. ("MTL"), as a result of which (x)
the Equity Investors would own approximately 90% of the issued and outstanding
shares of common stock of MTL and (y) the Holdover Shareholders (as defined
below) would own approximately 10% of the issued and outstanding shares of
common stock of MTL. As part of the Recapitalization, (i) certain existing
shareholders of MTL (the "Holdover Shareholders") would retain equity capital in
MTL with a value of approximately $8.0 million (the "Equity Retention") and (ii)
cash in an aggregate amount of approximately $187.2 million will be distributed
to the existing shareholders of MTL (other than in respect of equity being
retained pursuant to the Equity Retention and net of the exercise of options).
We understand that the Recapitalization shall be effected by means of a merger
of Acquisition Corp. with and into MTL, with MTL as the surviving corporation of
such merger (the "MTL Merger"). We further understand that in connection with
the Recapitalization, certain existing indebtedness of MTL and its subsidiaries
in an aggregate principal amount not to exceed $65.0 million, consisting of
existing capitalized lease obligations, purchase money indebtedness, MTL's
existing
senior credit facilities and certain subordinated indebtedness, will be
refinanced (the "Refinancing").
We understand that the sources of funds needed to effect the
Recapitalization and the Refinancing, to pay all fees and expenses incurred in
connection therewith and to provide for the ongoing working capital needs and
general corporate requirements of MTL and its subsidiaries shall be provided
solely through (i) at least $60.0 million from the issuance by Acquisition Corp.
of common stock (the "Common Equity Issuance") to the Equity Investors, (ii) at
least $8.0 million provided by the Holdover Shareholders pursuant to the Equity
Retention, (iii) $140.0 million from the issuance by MTL of senior subordinated
notes (the "Senior Subordinated Notes") (or, in the event the Senior
Subordinated Notes are not issued, $60.0 million from the incurrence by MTL of
the Bridge Loan (as defined in the Bridge Loan Commitment Letter of even date
herewith (the "Bridge Loan Commitment Letter")) and (iv) the incurrence by MTL
of the Senior Bank Financing described below (the financing transactions
described in preceding clauses (i), (ii), (iii) and (iv) are herein collectively
referred to as the "Financing Transactions", with the Recapitalization, the
Refinancing and the Financing Transactions being herein collectively called the
"Transaction").
BTCo and CSFB further understand that the senior secured bank financing
will be in the form of (i) a term loan facility (the "Term Loan Facility") in
the amount of $60.0 million (or, in the event the Senior Subordinated Notes are
not issued, $140.0 million), to be made available to MTL pursuant to a single
drawing on the date of the consummation of the Recapitalization (the "Initial
Borrowing Date") and (ii) a revolving credit facility (the "Revolving Credit
Facility" and, together with the Term Loan Facility, the "Senior Bank
Financing") in the amount of $100.0 million, to be made available to MTL after
the Initial Borrowing Date. A preliminary summary of terms and conditions of
the Senior Bank Financing is attached as Exhibit A to this letter (the "Summary
of Terms").
Each of BTCo and CSFB is pleased to advise you of its commitment, on a
several basis and subject to the terms and conditions contained herein and in
the attached Summary of Terms, to provide (x) 50%, in the case of BTCo and (y)
50%, in the case of CSFB, of the Senior Bank Financing. In connection with the
Senior Bank Financing, BTCo and CSFB shall act as the sole agents (in such
capacity, each, an "Agent" and, collectively, the "Agents") on terms
satisfactory to BTCo, CSFB, MTL and you. The Arrangers shall manage all aspects
of the syndication of the Senior Bank Financing.
The Arrangers reserve the right, prior to or after execution of the
definitive credit documentation for the Senior Bank Financing, to syndicate all
or a part of the Senior Bank Financing to one or more financial institutions
(together with the Arrangers, the "Lenders") approved by MTL (which approval
shall not be unreasonably withheld or delayed) that will become parties to such
definitive credit documentation pursuant to a syndication to be managed by the
Arrangers. You agree actively to assist the Arrangers in achieving a
syndication that is satisfactory to the Arrangers and to you. Such syndication
will be accomplished by a variety of means, including direct contact
during the syndication between senior management and advisors of Acquisition
Corp. and MTL (including, without limitation, Apollo) and the proposed Lenders.
To assist the Arrangers in their syndication efforts, you hereby agree both
before and after the Initial Borrowing Date (i) to provide and cause your
advisors to provide the Arrangers and the other Lenders upon request with all
reasonable information deemed necessary by us to complete syndication, including
but not limited to, information and evaluations prepared by you and MTL and your
and its respective advisors and (ii) to assist the Arrangers upon request in the
preparation of an Information Memorandum to be used in connection with the
syndication of the Senior Bank Financing, including making available officers of
MTL and its subsidiaries from time to time to attend and make presentations
regarding the business and prospects of MTL and its subsidiaries, as
appropriate, at a meeting or meetings of Lenders or prospective Lenders.
Each of BTCo's and CSFB's commitment to provide a portion of the Senior
Bank Financing is expressly subject to (a) there not having occurred since
December 31, 1996 any material adverse change in the business, properties,
assets, operations, liabilities, condition (financial or otherwise) or prospects
of MTL and its subsidiaries taken as a whole, both before and after giving
effect to the Transaction and (b) the absence of any material adverse change
after the date hereof in the market for syndicated facilities similar in nature
to the Senior Bank Financing and the absence of any material disruption of or a
material adverse change in financial, banking or capital markets generally, in
each case as determined by BTCo and CSFB in their reasonable discretion.
To induce the Arrangers to issue this letter, you hereby agree that all
reasonable fees and expenses (including the reasonable fees and expenses of
counsel and consultants) of the Arrangers and their respective affiliates
arising in connection with the preparation, execution and delivery of this
letter and the definitive financing agreements (and our due diligence in
connection therewith) and in connection with the transactions described herein
(the "Transaction Expenses") shall be for your account in the event that the
Recapitalization and/or the Refinancing are consummated; provided, however, that
in the event you or any of your affiliates receives any termination fee or
expense reimbursement payable as a result of the termination of the definitive
agreements relating to the Recapitalization, you shall reimburse from the
aggregate amount of such termination fee and expense reimbursement so received
the Arrangers' and their respective affiliates' Transaction Expenses on a pro
rata basis with all others (including you and your affiliates) claiming expenses
in connection with the transactions described herein. You further agree,
whether or not the Recapitalization or the Refinancing is consummated, the
Senior Bank Financing is made available or definitive credit documents are
executed, to indemnify and hold harmless each Arranger, its affiliates and each
director, officer, employee, agent and representative thereof (each, an
"indemnified person") from and against any and all actions, suits, proceedings
(including any investigations or inquiries), claims, losses, damages,
liabilities or expenses of any kind or nature whatsoever (other than the
Transaction Expenses, which shall be payable as provided in the first sentence
of this paragraph (and the proviso thereto)) which may be incurred by or
asserted against or involve such Arranger, such affiliate or any such
indemnified person as a result of or arising out of or in any way related to or
resulting from the Transaction (or any element thereof), this letter or the
extension of the Senior Bank Financing contemplated by this letter, or in any
way arising from any use or intended use of this letter or the proceeds of any
of the Senior Bank Financing contemplated by this letter and, upon demand, to
pay and reimburse each Arranger, each such affiliate and each indemnified person
for any reasonable legal or other out-of-pocket expenses incurred in connection
with investigating, defending or preparing to defend any such action, suit,
proceeding (including any inquiry or investigation) or claim (whether or not
such Arranger or any such indemnified person is a party to any action, suit or
proceeding out of which any such expenses arise and whether or not any such
action, suit or proceeding is between you and a Arranger or an indemnified
person or between a Arranger or an indemnified person and a third party or
otherwise); provided, however, that you shall not have to indemnify any Arranger
or indemnified person against any loss, claim, damage, expense or liability
which resulted primarily from the gross negligence or willful misconduct of such
Arranger, such affiliate or such indemnified person. This letter is issued for
your benefit only and no other person or entity may rely thereon. Neither any
Arranger nor any other Lender shall be responsible or liable to you or any other
person for any consequential damages which may be alleged as a result of this
letter or any failure to provide the Senior Bank Financing.
Each Arranger reserves the right to employ the services of its affiliates
(including, without limitation, in the case of BTCO, BT Alex. Brown Incorporated
("BTAB")) in providing the services contemplated by this letter and to allocate,
in whole or in part, to such affiliates certain fees payable to the Arrangers in
such manner as the Arrangers and such affiliates may agree in their sole
discretion. You acknowledge that the Arrangers may share with any of their
respective affiliates (including BTAB), and such affiliates may share with the
Arrangers, any information relating to Acquisition Corp., MTL and their
respective affiliates and subsidiaries (including, without limitation, any non-
public customer information regarding the creditworthiness of such entities) or
the Transaction, subject to the Arrangers' customary treatment of customer
confidential information; provided, that BTCo shall not share such information
with BTAB in its capacity as financial advisor to MTL in connection with the
Recapitalization and related transactions. You also acknowledge that the
Arrangers and/or any of their respective affiliates may be providing other
services and/or other financing to you in connection with the Transaction and
that this letter relates only to the Senior Bank Financing, with all such other
services and financing to be agreed upon pursuant to other documentation.
You are not authorized to show or circulate this letter or any portion
thereof to any other person or entity (other than your legal and financial
advisors in connection with your evaluation hereof) until such time as you have
accepted this letter as provided in the penultimate paragraph hereof. In any
event, neither you nor your affiliates is authorized to disclose the terms of
the related fee letter (the "Fee Letter") without our prior written consent,
unless (and then only to the extent) required by law. If this letter is not
accepted by you as provided in the penultimate paragraph hereof, you are to
immediately return this letter (and any copies hereof) to the undersigned.
Except as otherwise expressly set forth herein, the provisions of the three
preceding paragraphs shall survive any termination of this letter.
Each of the Arrangers shall have the right to review and approve all public
announcements and filings relating to the Transaction which refer to BTCo, CSFB
or the other Lenders before they are made (such approval not to be unreasonably
withheld or delayed).
The willingness of each of BTCo and CSFB to provide their respective
commitments as set forth above will terminate on June 30, 1998, unless
definitive documentation evidencing the Senior Bank Financing, satisfactory in
form and substance to BTCo and CSFB, shall have been entered into prior to such
date and the Initial Borrowing Date shall have occurred.
If you are in agreement with the foregoing, please sign and return to BTCo
and CSFB the enclosed copy of this letter, together with an executed copy of the
Fee Letter. This offer shall terminate at 5:00 P.M., New York time, on February
24, 1998 unless a signed copy of this letter, together with a signed copy of the
Fee Letter, has been delivered to BTCo and CSFB (including by way of facsimile
transmission) by such time.
This letter may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
shall be an original, but all of which, when taken together, shall constitute
one agreement. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES
GOVERNING CONFLICTS OF LAWS, AND ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR CONTEMPLATED BY THIS LETTER
IS HEREBY WAIVED. YOU HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE
FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION
WITH ANY DISPUTE RELATED TO THIS LETTER OR ANY MATTERS CONTEMPLATED HEREBY.
This letter and the Fee Letter represent the entire understanding of the parties
with respect to the matters addressed herein and may only be amended in writing.
Very truly yours,
BANKERS TRUST COMPANY
By /s/ Calli S. Hayes
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CREDIT SUISSE FIRST BOSTON
By /s/ Lori Sivaslian
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Title: Director
By /s/ G. David M. Maletta, II
-----------------------------------
Title: Managing Director
Name: G. David M. Maletta, II
Agreed to and Accepted this
10th day of February, 1998
SOMBRERO ACQUISITION CORP.
By /s/ Joshua Harris
--------------------------------
Title: President
EXHIBIT A
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SUMMARY OF CERTAIN TERMS
AND CONDITIONS/1/
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I. Description of Facilities Comprising the Senior Bank Financing
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A. Term Loan Facility
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Term Loan Facility: Term loan facility in an aggregate principal amount of
$60.0 million (or, in the event the Senior Subordinated
Notes are not issued and the Bridge Loans are utilized,
$140.0 million) (the "Term Loan Facility").
Maturity: The Term Loan Facility will mature on the date (the "Term
Loan Facility Maturity Date") that occurs on the sixth
anniversary of the Initial Borrowing Date.
Amortizations: Annual amortization (payable in four equal quarterly
installments) of the loans under the Term Loan Facility
(the "Term Loans") shall be required in an amount for each
such annual period equal to 1% of the initial aggregate
principal amount of the Term Loan Facility. The entire
outstanding principal amount of the Term Loans shall in any
event be required to be repaid in full on the Term Loan
Facility Maturity Date.
Use of Proceeds: Term Loans shall only be utilized by MTL to finance the
Recapitalization and the Refinancing and to pay fees and
expenses incurred in connection therewith.
Availability: Term Loans may only be incurred by MTL on the Initial
Borrowing Date. No amount of Term Loans once repaid may be
reborrowed.
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/1/ All capitalized terms used herein but not defined herein shall have the
meanings provided in the Commitment Letter to which this summary is attached
(the "Commitment Letter").
B. Revolving Credit Facility
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Revolving Credit
Facility: Revolving credit facility of up to $100.0 million, with a
letter of credit sub-limit to be agreed upon (the
"Revolving Credit Facility").
Maturity: The Revolving Credit Facility will terminate, and all
loans made pursuant to the Revolving Credit Facility (the
"Revolving Loans," and together with the Term Loans, the
"Loans") shall be required to be repaid, on the date that
is six years from the Initial Borrowing Date, provided
that to the extent mandatory repayments are required
under the heading "Mandatory Repayments/Commitment
Reductions" below after all outstandings under the Term
Loan Facility have been repaid in full, such mandatory
repayments will apply to reduce the commitments under the
Revolving Credit Facility (and will require prepayments
of Revolving Loans to the extent in excess of such
commitments as so reduced).
Use of Proceeds: All proceeds of Revolving Loans shall be utilized solely
for the Borrower's and its subsidiaries' working capital
requirements, for Permitted Acquisitions (as defined
below) and for other general corporate purposes.
Availability: Revolving Loans may be borrowed, repaid and reborrowed
after the Initial Borrowing Date in accordance with the
terms of the documentation governing the Senior Bank
Financing.
II. Terms Applicable to the Entire Senior Bank Financing
----------------------------------------------------
Borrower: MTL, Inc.
Agents and CSFB and BTCo.
Arrangers:
Administrative Agent
and Collateral Agent: A financial institution acceptable to the Borrower, BTCo
and CSFB.
-2-
Lenders: A syndicate of lenders (the "Lenders") formed by the Arrangers
and approved by the Borrower (which approval shall not be
unreasonably withheld or delayed).
Guaranties: Each direct or indirect wholly-owned domestic subsidiary of the
Borrower shall be required to provide an unconditional guaranty
of all amounts owing under the Senior Bank Financing
(collectively, the "Guaranties", with each entity required to
provide a Guaranty being herein called a "Guarantor").
The Guaranties shall contain terms and conditions reasonably
satisfactory to the Arrangers.
Security: The obligations of the Borrower and the Guarantors shall be
secured by (x) a first priority perfected pledge of all capital
stock and notes owned by the Borrower and its subsidiaries,
provided that no more than 65% of the stock of foreign
subsidiaries of the Borrower shall be required to be pledged
unless such pledge may be effected without giving rise to a
"deemed dividend" tax liability under applicable law or any
other material adverse tax consequence and (y) a first priority
perfected security interest in all other tangible and
intangible assets (including, without limitation, receivables,
contracts, contract rights, securities, intellectual property,
inventory, equipment and real estate) of the Borrower and each
Guarantor, subject to customary exceptions for transactions of
this type.
All documentation evidencing the security required pursuant to
the immediately preceding paragraph shall be in form and
substance satisfactory to the Arrangers, and shall effectively
create first priority security interests in the property
purported to be covered thereby.
-3-
Interest Rates: At the option of the Borrower, Loans under the Senior Bank
Financing may be maintained from time to time as (x) Base Rate
Loans which shall bear interest at the Applicable Margin in
excess of the Base Rate in effect from time to time or (y)
Reserve Adjusted Eurodollar Loans which shall bear interest at
the Applicable Margin in excess of the Eurodollar Rate
(adjusted for maximum reserves) as determined by the
Administrative Agent for the respective interest period,
provided that until the earlier to occur of (x) the 90th day
following the Initial Borrowing Date (or, if later, the last
day of the third interest period described below) and (y) that
date upon which the Arrangers have determined (and notifies the
Borrower) that the primary syndication of the Senior Bank
Financing (and the resultant addition of institutions as
Lenders) has been completed, Reserve Adjusted Eurodollar Loans
may only be incurred with three successive one-month interest
periods (and all Reserve Adjusted Eurodollar Loans at any time
outstanding during a period described above in this proviso
shall at all times have the same interest period), with the
first such interest period beginning within five Business Days
of the Initial Borrowing Date, the second such interest period
beginning on the last day of the first interest period, and the
third interest period beginning on the last day of the second
interest period.
"Base Rate" shall mean the higher of (x) 1/2 of 1% in excess of
the Federal Funds Rate and (y) the rate that the Administrative
Agent announces from time to time as its prime lending rate, as
in effect from time to time.
"Applicable Margin" shall mean initially the percentage per
annum equal to (i) in the case of Term Loans maintained as (x)
Reserve Adjusted Eurodollar Loans, 1.75% and (y) Base Rate
Loans, 0.75%, and (ii) in the case of Revolving Loans
maintained as (x) Reserve Adjusted Eurodollar Loans, 1.50% and
(y) Base Rate Loans, 0.50%, provided that (i) the Applicable
Margin in respect of Loans will be subject to quarterly
adjustments to percentages to be determined (based upon the
achievement of certain financial ratios), with the first test
date for any downward adjustment to be in respect of the
financial statements delivered for the first fiscal quarter
ending after the six month anniversary of the Initial Borrowing
Date (based on the financial performance for the four quarter
period
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most recently ended), (ii) in no event will any downward
adjustment of the Applicable Margins pursuant to clause (i)
above occur at any time a default or event of default exists
under the Senior Bank Financing and (iii) in the event that the
Senior Subordinated Notes are not issued, the Applicable
Margins shall be adjusted upward in amounts to be agreed upon.
Interest periods of 1, 2, 3, 6 or, to the extent available to
each Lender with loans and/or commitments under the respective
facility, 9 or 12 months, shall be available in the case of
Reserve Adjusted Eurodollar Loans.
The Senior Bank Financing shall include customary protective
provisions for such matters as defaulting banks, capital
adequacy, increased costs, actual reserves, funding losses,
illegality and withholding taxes.
Interest in respect of Base Rate Loans shall be payable
quarterly in arrears on the last business day of each fiscal
quarter. Interest in respect of Reserve Adjusted Eurodollar
Loans shall be payable in arrears at the end of the applicable
interest period and every three months in the case of interest
periods in excess of three months. Interest will also be
payable at the time of repayment of any Loans and at maturity.
All calculations of interest on Loans and commitment fees shall
be based on a 360-day year and actual days elapsed.
Default Overdue principal, interest and other amounts shall bear
Interest: interest at a rate per annum equal to the greater of (i) the
rate which is 2% in excess of the rate otherwise applicable to
Base Rate Loans from time to time and (ii) the rate which is 2%
in excess of the rate then borne by such borrowings. Such
interest shall be payable on demand.
-5-
Voluntary
Prepayments/
Commitment
Reductions: Voluntary prepayments and commitment reductions may be made at
any time without premium or penalty, subject to minimum notice
and minimum prepayment or reduction requirements, as the case
may be; provided that voluntary prepayments of Reserve Adjusted
Eurodollar Loans made on a date other than the last day of an
interest period applicable thereto shall be subject to the
payment of customary breakage costs, if any. All voluntary
prepayments of Term Loans shall be applied in direct order of
maturity to reduce the then remaining scheduled installments of
the Term Loan Facility.
-6-
Mandatory
Repayments/
Commitment
Reductions: Mandatory repayments of Term Loans (and after all Term Loans
have been repaid in full, permanent reductions to the Revolving
Credit Facility) to be required from (a) 100% (or 75%, if the
Total Debt-to-EBITDA Ratio (to be defined) is less than a
mutually agreed upon level) of the net cash proceeds from asset
sales by the Borrower and its subsidiaries (other than certain
ordinary course of business sales and dispositions), provided
that the Borrower and its subsidiaries may, in the absence of a
default or an event of default under the Senior Bank Financing,
reinvest proceeds of certain asset sales during a period (to be
agreed upon) following the date of the respective asset sale,
(b) 100% (or 75%, if the Total Debt-to-EBITDA Ratio is less
than a mutually agreed upon level) of the net cash proceeds
from issuances of debt (other than the Senior Subordinated
Notes and certain other permitted debt) and preferred stock
(other than Qualified Preferred Stock) by the Borrower and its
subsidiaries, with customary exceptions to be agreed upon, (c)
50% (or 0%, if the Total Debt-to-EBITDA Ratio is less than a
mutually agreed upon level) of the net proceeds from Qualified
Preferred Stock and common equity issuances by, or capital
contributions to, the Borrower and its subsidiaries (other than
the Common Equity Issuance), with customary exceptions to be
agreed upon and excluding any equity issued as consideration in
connection with, or the proceeds of which are used to effect,
Permitted Acquisitions, (d) 75% (or 50%, if the Total Debt-to-
EBITDA Ratio is less than a mutually agreed upon level) of
annual excess cash flow (the definition of which will be
mutually agreed upon) to be applied on the earlier of 90 days
after the end of each fiscal year and the date of delivery of
the Borrower's audited financial statements for such fiscal
year and (e) 100% of certain insurance proceeds, provided that
the Borrower and its subsidiaries may, in the absence of a
default or an event of default under the Senior Bank Financing,
reinvest proceeds in an amount to be determined during a period
(to be agreed upon) following the date of receipt of such
proceeds.
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All mandatory repayments of Term Loans will be applied pro rata
to reduce future scheduled amortization payments in respect of
the Term Loan Facility.
Commitment
Termination: The commitments hereunder shall terminate on June 30, 1998
unless definitive Credit Documents (as defined below) have been
executed and delivered and the Initial Borrowing Date has
occurred prior to such date.
Commitment Fees: The Applicable Commitment Fee Percentage on the unutilized
total commitments under the Senior Bank Financing, as in effect
from time to time, commencing on the Initial Borrowing Date and
continuing to and including the termination of the Senior Bank
Financing, payable quarterly in arrears and upon the
termination of the Senior Bank Financing. The "Applicable
Commitment Fee Percentage" shall mean initially 1/2 of 1% and
shall be subject to a step-down to a percentage to be
determined (based upon the achievement of specified financial
ratios).
Letter of
Credit Fees: The Applicable Margin for Revolving Loans maintained as Reserve
Adjusted Eurodollar Loans on the aggregate outstanding stated
amounts of letters of credit plus an additional 1/4 of 1% on
the aggregate outstanding stated amounts of letters of credit
to be paid as a fronting fee to the issuing Lender. In
addition, the issuer of a letter of credit will be paid its
customary administrative charges in connection with each letter
of credit issued by it.
Additional Fees: The Arrangers shall receive such fees as have been separately
agreed upon.
Documentation: The Lenders' commitments will be subject to the negotiation,
execution and delivery of definitive financing agreements (and
related security documentation, guaranties, etc.) in connection
with the Senior Bank Financing (the "Credit Documents")
reasonably consistent with the terms of the Commitment Letter
and this Summary of Terms, in each case prepared by White &
Case, counsel to the Arrangers.
Conditions In addition to conditions precedent typical for these types of
Precedent: facilities and any other conditions appropriate in the context
of the proposed transaction, the following conditions shall
apply:
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A. To the Initial Loans
--------------------
a. The structure and all terms of, and the documentation for, each
component of the Transaction shall be reasonably satisfactory
to the Arrangers and the Required Lenders (including, without
limitation, with respect to the Senior Subordinated Notes or
the Bridge Loan, amortizations, maturities, interest rates,
defaults, remedies, guaranties, security and subordination
provisions, as applicable). The Agreement and Plan of Merger
(the "Merger Agreement"), between MTL and Acquisition Corp.,
shall be in the form furnished to the Arrangers prior to the
date of this letter (draft dated February 7, 1998), with such
amendments, modifications and waivers thereto as shall be
consented to by each Arranger. All conditions in the
documentation governing the Transaction (including the accuracy
of all representations and warranties in all material respects)
shall have been satisfied to the reasonable satisfaction of the
Arrangers and not waived, except with the consent of each
Arranger. Each component of the Transaction shall have been
consummated in accordance with the documentation therefor and
all applicable law. After giving effect to the Transaction, the
Borrower and its subsidiaries shall have no outstanding
indebtedness or preferred stock other than pursuant to the
Financing Transactions and certain indebtedness acceptable to
the Arrangers existing on the Initial Borrowing Date in an
aggregate outstanding amount not to exceed an amount to be
mutually agreed upon (the "Existing Indebtedness").
(ii) MTL shall have used the aggregate amount received from the
Common Equity Issuance and the net cash proceeds from the
issuance of Senior Subordinated Notes (or, in the event the
Senior Subordinated Notes are not issued, the Bridge Loan) (x)
to make payments owing in connection with the Recapitalization
and the Refinancing and (y) to pay fees in connection with the
Financing Transactions before utilizing any proceeds of Loans
pursuant to the Senior Bank Financing for any such purpose.
(iii) Since December 31, 1996, there shall have been no material
adverse change in the business, property, assets, operations,
liabilities, condition (financial or otherwise) or prospects of
MTL and its subsidiaries taken as a whole, both before and
after giving effect to the Transaction.
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(iv) All Loans and other financing to the Borrower shall be in full
compliance with all requirements of Regulations G, T, U and X
of the Board of Governors of the Federal Reserve System.
(v) The Lenders shall have received such opinions and other
appropriate factual information and expert advice as follows:
(i) legal opinions from counsel, in form and substance and
covering matters, acceptable to the Arrangers and the Required
Lenders and (ii) a solvency certificate from the chief
financial officer of the Borrower with respect to the Borrower
and its subsidiaries (on a consolidated basis) and the Borrower
(on a stand-alone basis), after giving effect to the
consummation of the Transaction and the financing therefor,
reasonably acceptable to the Arrangers and the Required
Lenders.
(vi) Each of the Guaranties shall have been executed and delivered.
The security agreements required as described under the heading
"Security" above shall have been executed and delivered in
form, scope and substance reasonably satisfactory to the
Arrangers, and the Lenders shall have a first priority
perfected security interest in all assets as are required
above.
(vii) There shall have been no material adverse change after the date
hereof to the syndication market for credit facilities similar
in nature to the Senior Bank Financing contemplated herein and
there shall not have occurred and be continuing a material
disruption of or material adverse change in financial, banking
or capital markets that would have a material adverse effect on
the syndication, in each case as determined by the Arrangers in
their reasonable discretion.
(viii) All costs, fees, expenses (including, without limitation, legal
fees and expenses) and other compensation contemplated hereby
or any letter executed in connection herewith and payable to
the Lenders or the Arrangers (or their respective affiliates)
shall have been paid to the extent due.
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B. Conditions to All Loans
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Absence of material adverse change, absence of material
litigation, absence of default or unmatured default under the
Senior Bank Financing, continued accuracy of representations
and warranties in all material respects and receipt of such
documentation as shall be required by the Agents.
Representations
and Warranties: The Senior Bank Financing and related documentation shall
contain representations and warranties typical for these types
of facilities, as well as any additional ones appropriate in
the context of the proposed transaction.
Covenants: Those typical for these types of facilities and any additional
covenants appropriate in the context of the proposed
transaction (with such covenants having such exceptions or
baskets as may be mutually agreed upon). Although the covenants
have not yet been specifically determined, we anticipate that
the covenants shall in any event include:
(i) Restrictions on indebtedness, with exceptions to include
Existing Indebtedness and certain other indebtedness to be
mutually agreed upon.
(ii) Restrictions on mergers, acquisitions and acquisitions and
dispositions of assets; provided that the Borrower may acquire
assets constituting a business, division or product line of any
Person (to be defined) not already a subsidiary of the Borrower
or the capital stock of any such Person who becomes a wholly-
owned subsidiary (each, a "Permitted Acquisition"), (i) so long
as no default or event of default exists under the credit
agreement governing the Senior Bank Financing (the "Credit
Agreement") at the time of the consummation of the respective
Permitted Acquisition or would exist immediately after giving
effect thereto, (ii) so long as the Borrower establishes pro
forma compliance with the financial covenants contained in the
Credit Agreement, (iii) so long as the aggregate consideration
payable in respect of any individual Permitted Acquisition
shall not exceed a mutually agreed upon amount, (iv) after
giving effect to the respective Permitted Acquisition, the
total unutilized commitments under the Revolving Credit
Facility shall equal or exceed a mutually agreed
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upon amount, (v) so long as the Senior Debt-to-EBITDA Ratio (to
be defined) shall not exceed a mutually agreed upon level and
the Total Debt-to-EBITDA Ratio shall not exceed a mutually
agreed upon level, in each case upon the consummation of, and
after giving effect on a pro forma basis to, any Permitted
Acquisition (after giving effect to cost savings and other
synergies in a manner to be agreed upon) and (vi) subject to
such other reasonable requirements as may be established
pursuant to the Credit Documents.
(iii) Restrictions on sale-leaseback transactions and lease
payments.
(iv) Limitations on dividends.
(v) Restrictions on voluntary prepayments of the Senior
Subordinated Notes and other indebtedness and amendments of
organizational, corporate and other documents.
(vi) Restrictions on transactions with affiliates and formation of
subsidiaries (it being understood that Apollo may receive
closing and management fees and future investment banking fees
from the Borrower on terms, and in amounts, to be agreed upon).
(vii) Restrictions on investments.
(viii) Maintenance of existence and properties.
(ix) No liens, with exceptions to be negotiated.
(x) Financial covenants to consist of a minimum interest coverage
ratio, minimum consolidated EBITDA and a Total Debt-to-EBITDA
Ratio. For purposes of determinations of the Total Debt-to-
EBITDA Ratio, pro forma effect shall be given to Permitted
Acquisitions, it being understood that (i) cost savings in
respect of Permitted Acquisitions shall be determined in a
manner to be mutually agreed upon and (ii) the Total Debt-to-
EBITDA Ratio shall not exceed a mutually agreed upon level upon
the consummation of, and after giving effect on a pro forma
basis to, any Permitted Acquisition.
(xi) Limitation on capital expenditures.
(xii) Adequate insurance coverage.
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(xiii) ERISA covenants.
(xiv) The obtaining of interest rate protection in amounts and for
periods to be determined.
(xv) Limitation on issuances of redeemable common stock and
preferred stock by the Borrower and its subsidiaries, provided
that the Borrower may issue Qualified Preferred Stock.
"Qualified Preferred Stock" shall mean any preferred stock of
the Borrower, the express terms of which shall provide that
dividends thereon shall not be required to be paid at any time
(and to the extent) that such payment would be prohibited by
the terms of the Credit Agreement or any other agreement of the
Borrower relating to outstanding indebtedness and which, by its
terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the
happening of any event (including any change of control event),
cannot mature (excluding any maturity as the result of an
optional redemption by the issuer thereof) and is not
mandatorily redeemable, pursuant to a sinking fund obligation
or otherwise, and is not redeemable, or required to be
repurchased, at the sole option of the holder thereof
(including, without limitation, upon the occurrence of a change
of control event), in whole or in part, on or prior to the
second anniversary of the Term Loan Maturity Date.
(xvi) Financial reporting and visitation and inspection rights.
(xvii) Compliance with laws.
Events of
Default: Those typical for these types of facilities and any additional
ones appropriate in the context of the proposed transaction
including, without limitation, payment, material
misrepresentations, covenant defaults, bankruptcy and a Change
of Control Event (to be defined).
Assignments and
Participations: The Borrower may not assign its rights or obligations under the
Senior Bank Financing without the prior written consent of the
Agents and the Lenders. Any Lender may assign, and may sell
participations in, its rights and obligations under the Senior
Bank Financing, subject (x) in the case of participations, to
customary
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restrictions on the voting rights of the participants
and (y) in the case of assignments, to a minimum assignment
requirement of $5,000,000 (or to the extent the amount held by
such Lender is less than $5,000,000, such lesser amount) and
such other limitations as may be established by the
Administrative Agent. So long as no event of default exists
pursuant to the Senior Bank Financing, the consent of the
Borrower shall be required with respect to assignments of Loans
(other than assignments to (x) affiliates of the respective
Lender or (y) any entity which is already a Lender), such
consent not to be unreasonably withheld or delayed. The Senior
Bank Financing shall provide for a mechanism which will allow
for each assignee to become a direct signatory to the Senior
Bank Financing and will relieve the assigning Lender of its
obligations with respect to the assigned portion of its
commitment.
Governing Law: The rights and obligations of the parties under the Credit
Documents shall be construed in accordance with and governed by
the law of the State of New York.
Required
Lenders: Majority.
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