EXHIBIT 10.1
THE CHASE MANHATTAN BANK
CHASE SECURITIES INC.
May 23, 1997
AV Acquisition Corp.
345 Park Avenue
New York, NY 10154
$760,000,000 SENIOR SECURED CREDIT FACILITIES
COMMITMENT LETTER
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase") and Chase Securities
Inc. ("CSI") that AV Acquisition Corp. (the "Investor"), a Delaware
corporation to be wholly owned by Blackstone Capital Partners II Merchant
Banking Fund L.P. (the "Fund") and certain other investors designated by (and
consisting principally of affiliates of) the Fund, proposes to acquire
approximately 96% of the equity of CommNet Cellular Inc. ("CommNet"), a
Colorado corporation, pursuant to an Agreement and Plan of Merger between
CommNet and the Investor (the "Recapitalization Agreement"), and, in
conjunction therewith, the series of transactions described below and in the
Summary of Principal Terms and Conditions (the "Term Sheet") attached hereto
as Exhibit A will be consummated (collectively, the "Recapitalization").
As part of the Recapitalization, (a) the Investor will receive cash
contributions as common equity in an aggregate cash amount of not less than
the amount previously disclosed to Chase and will merge with and into CommNet
in a transaction (the "Merger") in which (i) CommNet will be the surviving
corporation, (ii) the Fund and the other investors will receive approximately
87% of the post-Merger common stock of CommNet and (iii) the pre-Merger
shareholders of CommNet will receive cash in an aggregate amount of
approximately $498 million and retain approximately 13% of the post-Merger
common stock of CommNet, which together with the acquisition of common stock
by the Fund and other investors referred to in clause (ii) above will indicate
a total equity value for CommNet of approximately $519 million, (b) CommNet
will contribute all its assets to Cellular, Inc. Financial Corporation, a
wholly owned subsidiary of CommNet (the "Borrower"), or a wholly owned
subsidiary of the Borrower (other than assets the transfer of which requires
regulatory or third party approvals which you are unable to obtain after
exercising diligent efforts or would result in material adverse tax
consequences to the Borrower), (c) the Borrower will repay in full the loans
outstanding under and terminate its existing senior secured credit facility
(the "Existing Credit Facility"), (d) CommNet will consummate debt tender
offers and consent solicitations in respect of its 11 3/4% Senior Subordinated
Notes Due 2003 and its 11 1/4% Subordinated Notes Due 2005 (collectively, the
"Notes") pursuant to which it will repurchase or redeem Notes in amounts, at
prices and on terms satisfactory in all respects to Chase (it being understood
that the amounts, prices and terms set forth in Schedule 2.12 of the CCI
Disclosure Schedule to the Recapitalization Agreement are satisfactory to
Chase), and as a result of which all significant negative covenants applicable
to the Notes will be eliminated, and (e) the Borrower will obtain the senior
secured credit facilities (the "Facilities") described in the Term Sheet. You
have requested that Chase commit to provide the entire principal amount of the
Facilities and that CSI agree to structure, arrange and syndicate the
Facilities.
In connection with the foregoing, Chase is pleased to advise you of its
commitment (the "Commitment") to provide the entire principal amount of each
of the Facilities, upon the terms and subject to the conditions set forth or
referred to in this commitment letter (the "Commitment Letter") and in the
Term Sheet. You hereby agree that Chase will act as the sole and exclusive
Administrative Agent, Collateral Agent and Documentation Agent for the
Facilities, that CSI will act as the sole and exclusive Arranger and
Syndication Agent for the Facilities, and that each of Chase and CSI will
perform the duties customarily associated with such roles. No other agents or
co-agents will be appointed, and no other titles will be awarded to any Lender
(as defined below),
unless approved by CSI and you. It is further understood and agreed that no
Lender will receive compensation outside the terms contained herein and in the
Fee Letter referred to below in order to obtain its commitment to participate
in the Facilities.
Chase reserves the right, prior to or after the execution of definitive
documentation for the Facilities, to syndicate all or portions of its
Commitment to one or more financial institutions, reasonably acceptable to the
Administrative Agent and you, that will become parties to such definitive
documentation pursuant to a syndication to be managed by CSI (the financial
institutions becoming parties to such definitive documentation being
collectively called the "Lenders"). You agree actively to assist CSI and Chase
in achieving a timely syndication of the Facilities that is satisfactory to
CSI, Chase and you. This will be accomplished by a variety of means, including
direct contact during the syndication (at times mutually agreed upon) among
the senior officers, representatives and advisors of the Investor, the Fund,
CommNet and the Borrower on the one hand, and the proposed Lenders, on the
other hand. Such assistance shall also include your using your reasonable
efforts to have the syndication and arrangement efforts benefit from the
Investor's, the Fund's, CommNet's and the Borrower's lending relationships.
It is understood and agreed that CSI will, in consultation with you, manage
all aspects of the syndication, including selection of Lenders reasonably
acceptable to you, determination of when CSI will approach potential Lenders,
any naming rights and the final allocations of the commitments among the
Lenders. It is also understood and agreed that the amount and distribution of
the participation fees among the Lenders will be at CSI's sole discretion,
after consultation with you. To assist CSI in its syndication efforts, you
agree, upon CSI's reasonable request, (a) promptly to provide, and to cause
the Fund and your other affiliates and advisors to provide (and to use your
reasonable efforts to cause CommNet and the Borrower to provide), to CSI and
Chase financial and other information in your or their possession with respect
to the Investor, CommNet, the Borrower, the Recapitalization and any other
transactions contemplated hereby, including but not limited to information and
projections prepared by you or the Fund or by your or its advisors on your or
its behalf relating to the Investor, CommNet, the Borrower, the
Recapitalization or the other transactions contemplated hereby, (b) to make
your senior officers, and to use reasonable efforts to cause CommNet's and the
Borrower's senior officers to be made, available to prospective Lenders, (c)
to assist, and to use reasonable efforts to cause CommNet, the Borrower and
your and the Fund's affiliates and advisors to assist, CSI in the preparation
of a Confidential Information Memorandum and other marketing materials to be
used in connection with the syndication and (d) to host, with CSI, a meeting
or meetings of prospective Lenders, provided that, notwithstanding the
foregoing, you shall not be required to provide to CSI or Chase any work
product prepared by Deloitte & Touche L.L.P. in connection with its due
diligence.
As consideration for the Commitment and CSI's agreement to structure,
arrange and syndicate the Facilities and to provide advisory services in
connection therewith, you agree to pay the fees set forth in the Term Sheet
and in the Fee Letter dated the date hereof and delivered herewith (the "Fee
Letter"). Once paid, such fees shall not be refundable under any
circumstances.
You hereby represent and covenant that (a) to the best of your knowledge,
all information (excluding information of a general economic nature and
financial projections) concerning the Investor, CommNet, the Borrower, the
Recapitalization and other transactions contemplated hereby (the
"Information") that has been or will be prepared by or on behalf of the
Investor, the Fund or any of their authorized representatives and that has
been made or will be made available to CSI or Chase by you or any of your or
its authorized representatives in connection with the transactions
contemplated hereby, when taken as a whole, will be complete and correct in
all material respects (after giving effect to all written updates thereto
delivered to Chase or CSI prior to the Closing Date (as defined in the Term
Sheet)) and will not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which
such statements are made and (b) to the best of your knowledge, all financial
projections concerning the Investor, CommNet, the Borrower, the
Recapitalization and the other transactions contemplated hereby (the
"Projections") that have been prepared by or on behalf of the Investor, the
Fund or any of their authorized representatives and that have been or will be
made available to CSI or Chase
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by you, the Fund or any of your or its authorized representatives in
connection with the transactions contemplated hereby have been and will be
prepared in good faith based upon assumptions believed by you to be
reasonable. You agree to supplement the Information and the Projections from
time to time until the closing of the Facilities so that the representations
and covenants in the preceding sentence remain correct. In arranging the
Facilities, including the syndication of the Facilities, CSI and Chase will be
using and relying primarily on the Information and the Projections without
independent verification thereof.
The Commitment is subject to (a) Chase's satisfaction that the Investor,
CommNet, the Borrower and the subsidiaries of CommNet and the Borrower are not
subject to material contractual or other restrictions that would be violated
by the contemplated transactions, including the granting of the security
interests and guarantees contemplated by the Term Sheet and the payment of
dividends by subsidiaries, (b) there not having occurred any material adverse
change in the assets, business, properties, financial condition or results of
operations of CommNet and its subsidiaries, taken as a whole, since March 31,
1997, (c) there not having occurred and being continuing any material
disruption of, or material adverse change in, financial, banking or capital
markets since the date hereof, (d) there being no competing offering,
placement or arrangement of any indebtedness by or for the use of CommNet
prior to the closing of the Facilities, (e) Chase having been afforded the
opportunity to review the Recapitalization Agreement and being reasonably
satisfied with such Agreement (including the schedules and exhibits thereto)
and (f) the other conditions set forth herein and in the Term Sheet.
In addition, the Commitment is subject to the negotiation, execution and
delivery of definitive documentation with respect to the Facilities
satisfactory to Chase. Such documentation shall contain such indemnities,
covenants, representations and warranties, events of default (including but
not limited to Change in Control (to be defined)), conditions precedent,
security arrangements and other terms and conditions as shall be satisfactory
to Chase and the Borrower. These matters that are not covered by or made clear
under the provisions hereof or of the Term Sheet are subject to the approval
and agreement of Chase and you (it being understood that the terms and
conditions of the definitive documentation with respect to the Facilities
shall not be inconsistent with the terms and conditions set forth herein or in
the Term Sheet).
By executing this Commitment Letter you agree (a) to indemnify and hold
harmless CSI, Chase and the other Lenders and their respective officers,
directors, employees, affiliates, agents and controlling persons from and
against any and all losses, claims, damages, liabilities and expenses, joint
or several, to which any such persons may become subject arising out of or in
connection with this Commitment Letter, the Fee Letter, the Term Sheet, the
Recapitalization, the Facilities or any related transaction or any claim,
litigation, investigation or proceeding relating to any of the foregoing,
regardless of whether any of such indemnified parties is a party thereto, and
to reimburse each of such indemnified parties upon demand for any legal or
other expenses reasonably incurred in connection with investigating or
defending any of the foregoing, provided that the foregoing indemnity will
not, as to any indemnified party, apply to losses, claims, damages,
liabilities or related expenses to the extent they result primarily from the
willful misconduct or gross negligence of any indemnified party, and (b) to
reimburse CSI and Chase from time to time, upon presentation of a summary
statement in reasonable detail, for all reasonable out-of-pocket expenses
(including but not limited to expenses of due diligence investigation (which
has been satisfactorily completed), local counsel and other consultants' fees
(if such local counsel and consultants are engaged with your prior written
consent), syndication expenses, travel expenses and reasonable fees,
disbursements and other charges of counsel) incurred in connection with the
Facilities and the preparation of this Commitment Letter, the Term Sheet, the
Fee Letter, the definitive documentation for the Facilities and the security
arrangements in connection therewith. No person indemnified under this
paragraph shall be responsible or liable to any other person for consequential
damages that may be alleged as a result of this Commitment Letter, the Fee
Letter, the Term Sheet, the Recapitalization, the Facilities or any related
transaction. Subject to the provisions of the fourteenth paragraph of this
Commitment Letter, the provisions contained in this paragraph shall remain in
full force and effect notwithstanding the termination of this Commitment
Letter or the Commitment.
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You agree that you will not disclose this Commitment Letter, the Term Sheet,
the Fee Letter, the contents of any of the foregoing or the activities of CSI
or Chase pursuant hereto or thereto to any person without the prior approval
of CSI and Chase, except that (a) you may disclose this Commitment Letter, the
Term Sheet, the Fee Letter and the contents hereof and thereof (i) to the
officers, employees, attorneys and advisors of the Investor and The Blackstone
Group L.P. and their limited partners and members on a confidential and need-
to-know basis and (ii) as required by applicable law or compulsory legal
process or in the prosecution of any proceeding initiated by the Fund,
CommNet, the Borrower or the Investor or any of their affiliates and (b) you
may disclose this Commitment Letter and the Term Sheet and the contents hereof
and thereof on a confidential basis to CommNet, the Borrower and their
respective attorneys and advisors in connection with the transactions
contemplated hereby, it being expressly understood and agreed that neither the
Fee Letter nor the contents thereof may be so disclosed pursuant to this
clause (b) without the consent of CSI and Chase. The provisions contained in
this paragraph shall remain in full force and effect notwithstanding the
termination of this Commitment Letter or the Commitment.
You acknowledge that Chase and CSI and their affiliates may be providing
financing or other services to other companies that have or may in the future
have interests conflicting with your own interests in the transactions
contemplated hereby. Chase and CSI agree that they will not use information
obtained from you in the course of the transactions contemplated hereby in
connection with the performance by Chase or CSI of services for such other
companies, and will not furnish any such information to such other companies.
You acknowledge that Chase and CSI have no obligation to use in connection
with the transactions contemplated hereby or to furnish to you confidential
information obtained by them from other companies.
Neither this Commitment Letter nor the Commitment shall be assignable by you
without the prior written consent of Chase, and any attempted assignment shall
be void. This Commitment Letter may not be amended or any provision hereof
waived or modified except by an instrument in writing signed by each of CSI,
Chase and you. 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 counterpart
of a signature page of this Commitment Letter by facsimile transmission shall
be effective as delivery of a manually executed counterpart of this Commitment
Letter. This Commitment Letter 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 shall be governed by, and construed in accordance with, the laws of the
State of New York. Chase may perform certain of the duties and activities
described hereunder through any of its affiliates, including, without
limitation, CSI. The provisions of the second preceding paragraph shall apply
with equal force and effect to any such affiliates so performing any of such
duties or activities.
Your obligations and representations under this Commitment Letter, other
than those arising under the fourth, fifth, seventh and eleventh paragraphs of
this Commitment Letter, shall automatically terminate and be superseded by the
provisions of the definitive documentation for the Facilities upon the closing
of the Facilities and the consummation of the Recapitalization.
Please indicate your acceptance of the terms hereof and of the Fee Letter by
signing in the appropriate space below and in the Fee Letter and returning to
CSI and Chase the enclosed duplicate originals of this Commitment Letter and
the Fee Letter not later than 5:00 p.m., New York City time, on May 27, 1997,
failing which the Commitment will expire at such time. In the event that the
initial borrowing in respect of the Facilities does not occur on or before
December 31, 1997 (or such later date to which the term of the
Recapitalization Agreement may be extended as a result of the failure to
obtain requisite regulatory consents for the Recapitalization, but in no event
after the one year anniversary of the date of the Recapitalization Agreement),
then this Commitment Letter and the Commitment shall automatically terminate
unless each of CSI and Chase shall agree to an extension.
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CSI and Chase 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/ B. Joseph Lillis
_________________________
Name: B. Joseph Lillis
Title: Managing Director
Chase Securities Inc.
by
/s/ Roderick N. Reed
_________________________
Name: Roderick N. Reed
Title: Managing Director
Accepted and agreed to as of
the date first written above:
AV Acquisition Corp.
by
/s/ Mark T. Gallogly
_________________________
Name: Mark T. Gallogly
Title: President
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EXHIBIT A
CONFIDENTIAL
May 23, 1997
$760,000,000 SENIOR SECURED CREDIT FACILITIES
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
BORROWER:
Cellular, Inc. Financial Corporation (the "Borrower"), a wholly owned
subsidiary of CommNet Cellular Inc., a Colorado corporation ("CommNet").
Following the consummation of the Merger described below, approximately 87% of
the outstanding capital stock of CommNet will be owned by Blackstone Capital
Partners II Merchant Banking Fund L.P. (the "Fund") and certain other
investors designated by (and consisting principally of affiliates of) the Fund
(such investors are referred to collectively as the "Participants"), and the
remainder of the outstanding capital stock of CommNet will continue to be held
by existing shareholders of CommNet.
ARRANGER:
Chase Securities Inc. ("CSI") will act as arranger for the Facilities and
will perform the duties customarily associated with such role.
ADMINISTRATIVE AGENT:
The Chase Manhattan Bank ("Chase") will act as administrative agent,
collateral agent, syndication agent and documentation agent (collectively, the
"Agent") for a syndicate of financial institutions reasonably satisfactory to
Chase and the Borrower (the "Lenders") and will perform the duties customarily
associated with such roles. Chase will also provide the swingline availability
described below.
RECAPITALIZATION:
Pursuant to or in connection with the transactions provided for in an
Agreement and Plan of Merger (the "Recapitalization Agreement") between
CommNet and AV Acquisition Corp. (the "Investor"), which will be owned by the
Fund and the Participants, (a) the Investor will be merged with and into
CommNet in a transaction (the "Merger") in which (i) CommNet will be the
surviving corporation, (ii) the Fund and the Participants will receive
approximately 87% of the common stock of CommNet and (iii) the pre-Merger
shareholders of CommNet will receive cash in an aggregate amount of
approximately $498 million and retain approximately 13% of the common stock of
CommNet, which together with the acquisition of common stock by the Fund and
Participants referred to in clause (ii) above will indicate a total equity
value for CommNet of approximately $519 million, (b) CommNet will contribute
all its assets to the Borrower or a wholly owned subsidiary of the Borrower
(other than assets the transfer of which requires regulatory or third party
approvals which the Borrower is unable to obtain after exercising diligent
efforts or results in material adverse tax consequences), (c) the Borrower
will terminate, and repay in full the estimated approximately $28 million of
indebtedness outstanding under, its existing senior secured credit facility
(the "Existing Credit Facility"), (d) CommNet will consummate debt tender
offers and consent solicitations in respect of its 11 3/4% Senior Subordinated
Notes Due 2003 and its 11 1/4% Subordinated Notes Due 2005 (collectively, the
"Notes") pursuant to which it will repurchase or redeem Notes in amounts, at
prices and on terms satisfactory in all respects to Chase (it being understood
that the amounts, prices and terms set forth in Schedule 2.12 of the CCI
Disclosure Schedule to the Recapitalization Agreement are satisfactory to
Chase), and as a result of which all significant negative covenants applicable
to the Notes shall be eliminated, and (e) the Borrower will obtain the senior
secured credit facilities (the "Facilities") described under the caption
"Facilities" below.
FACILITIES:
(A) A Senior Secured Revolving Credit Facility providing for revolving loans
to and letters of credit for the account of the Borrower in an aggregate
principal amount at any time not to exceed $80,000,000 (the "Revolving
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Facility"), of which up to an amount to be agreed upon may at any time be
represented by letters of credit. A swingline subfacility in an amount to be
agreed will be made available under the Revolving Facility by Chase (with
Lenders sharing credit exposure ratably in accordance with their Revolving
Facility commitments).
(B) A Tranche A Senior Secured Term Loan Facility in a principal amount not
to exceed $200,000,000 (the "Tranche A Term Facility").
(C) A Tranche B Senior Secured Term Loan Facility in a principal amount not
to exceed $100,000,000 (the "Tranche B Term Facility").
(D) A Tranche C Senior Secured Term Loan Facility in a principal amount not
to exceed $100,000,000 (the "Tranche C Term Facility").
(E) A Tranche D Senior Secured Term Loan Facility in a principal amount not
to exceed $280,000,000 (the "Tranche D Term Facility" and collectively with
the Tranche A Term Facility, the Tranche B Term Facility and the Tranche C
Term Facility, the "Term Facilities").
The Revolving Facility and the Term Facilities are collectively referred to
as the "Facilities."
PURPOSE:
The proceeds of the borrowings under the Term Facilities will be used,
first, to repay in full the Existing Credit Facility and to pay all
consideration paid to repurchase or redeem all tendered Notes and then will be
used, together with the proceeds from equity contributions to the Investor, to
provide funds for the Recapitalization and to pay related fees, expenses and
other transaction costs.
The proceeds of borrowings and letters of credit under the Revolving
Facility will be used for working capital and general corporate purposes.
FEES AND INTEREST RATES:
As set forth on Annex I hereto.
AVAILABILITY:
(A) The full amount of the Term Facilities must be drawn in a single drawing
on the date the Recapitalization is consummated (the "Closing Date"). In the
event less than $239,000,000 is required on the Closing Date to repurchase or
redeem Notes, the Term Facilities will be reduced on a dollar-for-dollar basis
in a manner to be agreed upon. Amounts repaid or prepaid under the Term
Facilities may not be reborrowed. The Closing Date shall in no event occur
later than a date to be agreed upon.
(B) Loans and letters of credit under the Revolving Facility will be
available at any time on or after the Closing Date and prior to the eighth
anniversary thereof in an aggregate amount outstanding at any time not greater
than the aggregate amount of the commitments outstanding under the Revolving
Facility at such time.
LETTERS OF CREDIT:
Letters of credit under the Revolving Facility will be issued by Chase (in
such capacity, the "Fronting Bank") for the account of the Borrower. Each
letter of credit shall expire no later than the earlier of (a) 12 months after
its date of issuance and (b) the fifth business day prior to the final
maturity of the Revolving Facility.
Drawings under any letter of credit shall be reimbursed by the Borrower
within one business day. To the extent the Borrower does not reimburse the
Fronting Bank within one business day, the Lenders under the Revolving
Facility shall be irrevocably obligated to reimburse the Fronting Bank pro
rata based upon their
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respective Revolving Facility commitments, with the amount of such
reimbursement payment being deemed to be payment in respect of the
participation of such Lender in the applicable letter of credit.
The issuance of all letters of credit shall be subject to the customary
procedures of the Fronting Bank.
AMORTIZATION:
(A) Loans made under the Tranche A Term Facility will amortize in quarterly
installments (in amounts reflecting the effect of seasonality) over eight
years under a schedule to be agreed upon.
(B) Loans made under the Tranche B Term Facility will amortize over nine
years under a schedule to be agreed upon providing for nominal quarterly
installments (in amounts reflecting the effect of seasonality) commencing in
year 2 of such Facility and quarterly installments in amounts to be determined
(which will reflect the effect of seasonality) during the last year thereof.
(C) Loans made under the Tranche C Term Facility will amortize over nine and
one half years under a schedule to be agreed upon providing for nominal
quarterly installments (in amounts reflecting the effect of seasonality)
commencing in year 2 of such Facility and quarterly installments in amounts to
be determined (which will reflect the effect of seasonality) during the last
year thereof.
(D) Loans made under the Tranche D Term Facility will mature on the tenth
anniversary of the closing date of the Facilities.
(E) Loans under the Revolving Facility will mature, and commitments under
the Revolving Facility will terminate, on the eighth anniversary of the
Closing Date.
GUARANTORS:
The obligations of the Borrower under the Facilities will be unconditionally
and irrevocably guaranteed by CommNet and each of CommNet's and the Borrower's
direct or indirect domestic subsidiaries (collectively, the "Guarantors"), in
a manner reasonably satisfactory to the Borrower and its counsel, Chase and
counsel for the Agent, except that subsidiaries having third party minority
equity ownership will not be required to become Guarantors if CommNet is
unable to obtain the consent of minority owners after using its good faith
efforts.
SECURITY:
The Facilities will be secured by valid, perfected first priority security
interests in all the capital stock and equity interests held by CommNet or any
of its direct or indirect subsidiaries, including the Borrower (except that no
more than 65% of the capital stock and equity interests in any direct or
indirect foreign subsidiary will be included as Collateral), and all the
tangible and intangible assets (including but not limited to accounts and
notes receivable evidencing obligations of subsidiaries, affiliates and others
(which will be assigned to the Agent together with all related collateral,
guarantees and other credit support), inventory, contract rights (including
under partnership agreements, management agreements, operating agreements,
affiliation agreements and similar agreements), real property, trademarks,
trade names, equipment and proceeds of the foregoing) of the Borrower and the
Guarantors (collectively, the "Collateral") in a manner reasonably
satisfactory to the Borrower and its counsel, Chase and counsel for the Agent.
At the request of the Borrower made prior to the Closing Date, assets will be
excluded from the Collateral in specific circumstances where the Agent and the
Borrower determine that the economic detriment to the Borrower of entering
into such security arrangements or taking security interests in such assets
would be excessive in view of the related benefits to be received by the
Lenders. In addition, the Borrower shall have the right to exclude capital
stock, equity interests and licenses (and other categories of assets to be
reasonably agreed by the Borrower and the Agent) from the Collateral if
inclusion of any such assets in the Collateral requires the consent of the
governmental authorities or other third parties and the Borrower has been
unable to obtain such consent after diligent efforts, so long as a substantial
majority of the value of each such category of assets is included in the
Collateral. All such security interests will be created pursuant to
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documentation reasonably satisfactory in all respects to the Agent and on the
Closing Date such security interests shall have become perfected and the Agent
shall have received satisfactory evidence as to the enforceability and
priority thereof.
None of the Collateral will be subject to any other liens, except as agreed
to by Chase and permitted by the definitive credit documentation.
MANDATORY PREPAYMENT OR REDUCTION:
The Borrower will be required to make mandatory prepayments of loans in
amounts and at times to be agreed upon (subject to exceptions to be agreed
upon), (a) for the fiscal year ending September 30, 1999, and each subsequent
fiscal year, in an amount equal to 75% (which percentage will be reduced to
50% upon the satisfaction of financial performance tests to be determined) of
the consolidated excess cash flow (to be defined) of CommNet and its
subsidiaries (after giving effect to debt service on the Facilities and
CommNet's proportionate interest in its subsidiaries, among other things), and
(b) in respect of 100% of the net proceeds of certain dispositions of assets
or equity interests in subsidiaries or other persons or the incurrence of
certain indebtedness by CommNet or any of its subsidiaries.
Except as set forth under the caption "Special Application Provisions"
below, mandatory prepayments of loans will be applied first to loans under the
Term Facilities on a pro rata basis among the Term Facilities, and will be
applied to remaining scheduled principal payments of the Term Loans in the
order of maturity. When there are no longer outstanding loans under the Term
Facilities, mandatory prepayments will be applied to permanently reduce loans,
letters of credit and commitments under the Revolving Facility.
OPTIONAL PREPAYMENT OR REDUCTION:
Loans may be prepaid, and revolving credit commitments may be permanently
reduced, in whole or in part at any time in minimum amounts to be agreed upon
at the Borrower's option. Any optional prepayment of LIBOR-based loans other
than at the end of an interest period will be subject to reimbursement of
redeployment costs.
Except as set forth under the caption "Special Application Provisions"
below, optional prepayments under the Term Facilities will be applied on a pro
rata basis among the Term Facilities, and will be applied to remaining
scheduled principal payments thereunder in the order of maturity.
SPECIAL APPLICATION PROVISIONS:
The first portion in an aggregate amount to be agreed upon of mandatory (to
the extent based on excess cash flow) or, at the election of the Borrower,
optional prepayments of loans under the Facilities will be applied first, to
prepay loans under the Tranche A Facility and then, as provided above in the
last paragraph under the caption "Mandatory Prepayment or Reduction". Holders
of Loans under the Tranche B Term Facility, the Tranche C Term Facility and
the Tranche D Term Facility may, to the extent sufficient loans are
outstanding under the Tranche A Term Facility, decline to accept any mandatory
prepayment described above and, under such circumstances, all amounts that
would otherwise be used to prepay loans under such Term Facilities shall be
used on a pro rata basis to prepay loans under the Tranche A Term Facility and
loans of Lenders under such Term Facilities who accepted the initial
prepayment. In addition, the Borrower shall be entitled, at its election, (i)
to afford the holders of loans under the Tranche B Facility, Tranche C
Facility or Tranche D Facility the right to decline to accept any optional
prepayment of Loans under such Facility in accordance with the special
application provisions described in the immediate preceding sentence with
respect to mandatory prepayments and (ii) to direct any optional prepayments
solely to the prepayment of Tranche D Loans.
FACILITIES DOCUMENTATION:
Usual for facilities and transactions of this type and reasonably acceptable
to the Borrower and its counsel, Chase and counsel for the Agent. The
documentation will include, among other documents, a single credit agreement
(the "Credit Agreement") and appropriate collateral documents.
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REPRESENTATIONS AND WARRANTIES:
Usual for facilities and transactions of this type and reasonably acceptable
to the Borrower and its counsel, Chase and counsel for the Agent, including
but not limited to accuracy of financial statements; no material adverse
change; absence of litigation; no violation of agreements or instruments;
compliance with laws (including but not limited to ERISA, margin regulations,
bank regulatory limitations and environmental laws); payment of taxes;
ownership of properties; insurance; inapplicability of the Investment Company
Act; solvency; effectiveness of regulatory approvals; environmental matters;
accuracy of information; and validity, priority and perfection of security
interests in the Collateral.
CONDITIONS PRECEDENT:
Usual for facilities and transactions of this type and reasonably acceptable
to the Borrower and its counsel, Chase and counsel for the Agent, including
but not limited to delivery of satisfactory legal opinions, audited financial
statements and other financial information; first-priority perfected security
interests in the Collateral (subject to the exceptions to be agreed); accuracy
of representations and warranties; absence of defaults, prepayment events or
creation of Liens under debt instruments or other agreements as a result of
the transactions contemplated hereby (other than in connection with the tender
offers for Notes referred to under "Recapitalization" above); evidence of
authority; material consents of all persons; compliance with applicable
material laws and regulations (including but limited to ERISA, margin
regulations, bank regulatory limitations and environmental laws); absence of
material adverse change in the assets, business, properties, financial
condition or results of operations of CommNet and its subsidiaries since March
31, 1997; payment of fees and expenses; and obtaining of satisfactory
insurance.
The Recapitalization shall be consummated simultaneously with the closing
under the Facilities in accordance with applicable law and the
Recapitalization Agreement and all related documentation, in each case, in the
form previously approved by Chase, and otherwise on terms reasonably
satisfactory to Chase, and Chase shall be satisfied that the aggregate level
of fees and expenses to be paid in connection with the Recapitalization, the
financing therefor and the other transactions contemplated hereby shall not
exceed by a material amount the amount previously disclosed to Chase. The
conditions to the Investor's obligations set forth in the Recapitalization
Agreement shall have been satisfied without giving effect to waivers or
amendments not approved by Chase and which are material and adverse to the
interests of the Lenders.
Notes shall have been repurchased or redeemed in amounts, or amended, at
prices and on terms satisfactory in all respects to Chase and all significant
negative covenants in respect of the Notes shall have been eliminated.
The Existing Credit Facility shall have been repaid in full, all commitments
thereunder shall have been terminated and all liens in respect thereof shall
have been released.
After giving effect to the Recapitalization and the other transactions
contemplated hereby, (a) the Borrower and its subsidiaries shall have
outstanding no preferred stock and no indebtedness other than the loans under
the Facilities, an amount of Notes satisfactory to Chase and amounts of other
indebtedness and preferred stock satisfactory to Chase, (b) the Borrower shall
have no outstanding capital stock other than common stock owned by CommNet and
(c) CommNet shall have outstanding no indebtedness other than an amount of
Notes satisfactory to Chase.
Chase shall have received a satisfactory pro forma consolidated balance
sheet of CommNet, together with a certificate of CommNet to the effect that
such pro forma balance sheet fairly presents the pro forma financial position
of CommNet and its subsidiaries in accordance with generally accepted
accounting principles, and Chase shall be reasonably satisfied that such
balance sheet and the transactions in connection with the Recapitalization and
the financing arrangements contemplated hereby are consistent with the sources
and uses delivered to Chase prior to the date hereof and are not materially
inconsistent with the information or projections and the financial model
delivered to Chase prior to the date hereof. The Borrower will also have
provided such other financial information as Chase may reasonably request in
connection with the Recapitalization.
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Chase shall have received a solvency letter, in form and substance and from
an independent evaluation firm satisfactory to Chase, together with such other
evidence reasonably requested by Chase of the solvency of each of CommNet and
its subsidiaries and the Borrower and its subsidiaries, in each case on a
consolidated basis after giving effect to the Recapitalization and the
consummation of the other transactions contemplated hereby.
All requisite material governmental authorities and all material third
parties shall have approved or consented to the Recapitalization and the other
transactions contemplated hereby to the extent required, all applicable appeal
periods shall have expired and there shall be no governmental or judicial
action, actual or threatened, that has or could have a reasonable likelihood
of restraining, preventing or imposing burdensome conditions on the
Recapitalization or the consummation of the other transactions contemplated
hereby.
AFFIRMATIVE COVENANTS:
Affirmative covenants usual for facilities and transactions of this type
(including materiality concepts and other exceptions to be agreed upon) and
reasonably acceptable to the Borrower and its counsel, Chase and counsel for
the Agent. Affirmative covenants will address, without limitation, maintenance
of corporate existence and rights; maintenance of rights under Collateral
(including partnership agreements, management agreements, operating
agreements, affiliation agreements and similar agreements); performance of
obligations; delivery of financial information prepared in accordance with
United States generally accepted accounting principles, including annual and
quarterly consolidated financial statements, and compliance certificates;
delivery of notices of default, litigation and other adverse matters;
maintenance of properties in good working order; maintenance of satisfactory
insurance; compliance with applicable laws and regulations; inspection of
books and properties; payment of taxes and other liabilities; and further
assurances in respect of guarantees and security interests. The Borrower will
use its reasonable efforts where practicable or possible to effect for its
benefit and the benefit of the Lenders the equivalent of a perfected first
priority security interest in licenses held by subsidiaries and other
affiliates of CommNet to which the Borrower has provided secured financing.
The Borrower will provide the Lenders annually, at the times it is required
to deliver audited financial statements, an operating and capital expenditure
budget for CommNet and its subsidiaries for the next succeeding fiscal year.
NEGATIVE COVENANTS:
Negative covenants usual for facilities and transactions of this type
(including materiality concepts and other exceptions to be agreed upon) and
reasonably acceptable to the Borrower and its counsel, Chase and counsel for
the Agent. Negative covenants will address, without limitation, limitations on
dividends and distributions on capital stock; limitations on redemptions and
repurchases of capital stock and debt; limitations on prepayment of debt (with
exceptions to be agreed upon); limitations on liens and sale/leaseback
transactions; limitations on operating leases; limitations on loans and
investments other than Permitted Investments (to be defined), with exceptions
permitting CommNet, the Borrower and the subsidiaries of CommNet to make loans
and investments in the ordinary course of business in a manner consistent with
recent past practice; limitations on debt; limitation on the creation of any
domestic subsidiary without causing such subsidiary to become a Guarantor in
respect of the Facilities and to create liens on its assets for the benefit of
the Lenders (except as contemplated under the captions "Guarantors" and
"Security" above); limitations on mergers, acquisitions and asset sales;
limitations on transactions with affiliates; limitations on changes in
business conducted; and limitations on amendment of debt and other material
agreements.
SELECTED FINANCIAL COVENANTS:
The Credit Agreement will contain financial covenants appropriate in the
context of the proposed transaction based upon the financial information and
projections heretofore provided to the Agent and calculated on a consolidated
basis, including but not limited to a debt to annualized EBITDA ratio, an
annualized EBITDA to interest ratio, a pro forma debt service ratio and a
fixed charges ratio.
EVENTS OF DEFAULT:
Usual for facilities and transactions of this type (including grace periods
and materiality concepts to be agreed upon) and reasonably acceptable to the
Borrower and its counsel, Chase and counsel for the Agent,
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including but not limited to nonpayment of principal, interest, fees or other
amounts when due; violation of covenants; inaccuracy of representations and
warranties; cross default and cross acceleration to indebtedness of CommNet or
any subsidiary; bankruptcy events; judgments; ERISA; actual or asserted
invalidity of loan documents or security interests or of material agreements;
and Change in Control (to be defined).
HEDGING:
The Borrower shall hedge its interest rate expense on not less than an
amount to be agreed of the aggregate principal amount of the Term Loan
Facilities for a tenor to be agreed of the Term Loan Facilities pursuant to
interest rate protection agreements reasonably satisfactory to Chase.
COST AND YIELD PROTECTION:
Usual for facilities and transactions of this type, including but not
limited to compensation in respect of prepayments (which will include
reimbursement of redeployment costs in the case of prepayments of LIBOR-based
loans other than at the end of an interest period), taxes, changes in capital
requirements, guidelines or policies or their interpretation or application,
illegality, change in circumstances, reserves and other provisions deemed
necessary by the Agent or the other Lenders to provide customary protection
for U.S. and non-U.S. banks.
ASSIGNMENTS AND PARTICIPATIONS:
Lenders will be permitted to assign their loans, notes and commitments to
other financial institutions, in aggregate amounts of not less than $5,000,000
and in increments of $1,000,000 with the consent of the Borrower (other than
in the case of assignments to affiliates or to other Lenders), which shall not
be unreasonably withheld (or, if determined by the Agent after consultation
with prospective Lenders to be necessary for successful syndication, without
the consent of, but upon consultation with, the Borrower) and, in the case of
participations in letters of credit and Revolving Facility commitments, the
Fronting Bank. The Agent will receive a processing and recordation fee of
$3,500, payable by the assignor and/or the assignee, with each assignment.
Assignments will be by novation and will not be required to be pro rata among
the Facilities.
In the event any Lender's long-term credit rating is downgraded to BBB+ or
lower by Standard & Poor's (a division of The McGraw Hill Companies) or Baa1
or lower by Moody's Investors Service, Inc., the Fronting Bank will be
permitted to replace such Lender with an assignee, subject to the restrictions
set forth above.
Lenders will be permitted to participate their loans, notes and commitments
to other financial institutions without restriction. Any participants will
have the same benefits as the selling Lenders would have (and will be limited
to the amount of such benefits) with regard to yield protection and increased
costs. Voting rights of participants will be limited to proposed (a) increases
in commitments, (b) reductions of principal, interest rates or fees, (c)
extensions of scheduled amortization or final maturity and (d) releases of all
or substantially all Collateral securing the Facilities or guarantees thereof.
VOTING:
Amendments and waivers of the Credit Agreement and other definitive credit
documentation will require the approval of Lenders holding 51% or more of the
loans and commitments except that (i) the consent of all the Lenders directly
affected thereby shall be required with respect to (a) increases in
commitments, (b) reductions of principal, interest rates or fees, (c)
extensions of scheduled amortization or final maturity and (d) releases of all
or substantially all Collateral securing the Facilities or guarantees thereof
and (ii) the approval of Lenders holding 51% or more of the Loans and
commitments of each adversely affected Facility shall be required with respect
to any amendment or waiver that (a) changes the allocation under a Term
Facility of any optional or mandatory prepayments of loans under such Term
Facility (or the application of such prepayments to the
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remaining amortization payments under the Term Facility) or (b) materially
adversely affects such Facility in a manner different from the other
Facilities.
EXPENSES AND INDEMNIFICATION:
All reasonable out-of-pocket expenses (including but not limited to expenses
incurred in connection with due diligence) of the Agent and the Arranger (and
the Lenders for enforcement costs and documentary taxes) associated with the
syndication of the Facilities or with the preparation, execution and delivery,
administration, waiver or modification and enforcement of the Credit Agreement
(including in the case of the Agent internally allocated collateral monitoring
fees) and the other documentation contemplated hereby and thereby are to be
paid by the Borrower.
The Borrower will indemnify the Agent, the Arranger and the Lenders and hold
them harmless from and against all reasonable out-of-pocket costs, expenses
(including but not limited to reasonable fees and disbursements of counsel)
and liabilities arising out of or relating to the proposed transactions,
including but not limited to the Recapitalization or any transactions
connected therewith; provided that no such person will be indemnified for
costs, expenses or liabilities arising from such person's gross negligence or
wilful misconduct.
GOVERNING LAW AND FORUM:
New York.
COUNSEL FOR AGENT AND ARRANGER:
Cravath, Swaine & Moore.
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ANNEX I
TO EXHIBIT A
INTEREST RATES:
Interest will be payable on the outstanding loans based upon Adjusted LIBOR
or ABR, as selected by the Borrower.
The interest rates applicable to the Tranche A Term Facility and the
Revolving Facility will be equal to Adjusted LIBOR or ABR, as applicable, plus
a margin determined based upon the ratio of Total Debt to Annualized EBITDA
(adjusted for seasonality) in effect from time to time, as set forth in the
table below. Swingline advances will bear interest at ABR plus the applicable
margin. The definition of Annualized EBITDA will reflect cash received from
the repayment of affiliate advances.
The interest rates applicable to the Tranche B Term Facility will be equal
to Adjusted LIBOR plus 2.750% or ABR plus 1.750%.
The interest rates applicable to the Tranche C Term Facility will be equal
to Adjusted LIBOR plus 3.000% or ABR plus 2.000%.
The interest rates applicable to the Tranche D Term Facility will be equal
to Adjusted LIBOR plus 3.500% or ABR plus 2.500%.
The Borrower may elect interest periods of 1, 2, 3 or 6 months (and 9 or 12
months if at the time of the relevant borrowing all the Lenders make interest
periods of such length available) for Adjusted LIBOR borrowings.
Calculation of interest shall be on the basis of actual days elapsed in a
year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR
loans based on the Prime Rate) and interest shall be payable at the end of
each interest period and, in any event, at least every 3 months or 90 days, as
the case may be.
ABR is the Alternate Base Rate, which is the higher of Chase's Prime Rate
and the Federal Funds Effective Rate plus 1/2 of 1%.
Adjusted LIBOR will at all times include statutory reserves.
LETTER OF CREDIT FEE:
A per annum fee equal at any time to the margin in effect at such time on
Tranche A Term Facility LIBOR loans on the aggregate face amount of
outstanding letters of credit under the Revolving Facility, payable in arrears
at the end of each quarter and upon the termination of the Revolving Facility,
in each case for the actual number of days elapsed over a 360-day year. Such
fee shall be distributed to the Lenders participating in the Revolving
Facility pro rata in accordance with the amount of each such Lender's
Revolving Facility commitment. In addition, the Borrower shall pay to the
Fronting Bank, for its own account, (a) a per annum percentage to be agreed
upon on the aggregate face amount of outstanding letters of credit, payable in
arrears at the end of each quarter and upon the termination of the Revolving
Facility, in each case for the actual number of days elapsed over a 360-day
year, and (b) customary issuance and administration fees.
COMMITMENT FEES:
A commitment fee will accrue on the undrawn portion of the commitments in
respect of the Revolving Facility in an amount determined based upon the ratio
of Total Debt to Annualized EBITDA (adjusted for seasonality) in effect from
time to time, as set forth in the table below, commencing to accrue on the
date on which definitive documentation for the Facilities is executed, payable
quarterly in arrears after such date (and on the Closing Date), provided that
such fee shall not be payable unless the Recapitalization is consummated.
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RATIO OF ABR MARGIN
TOTAL DEBT TO (PER LIBOR MARGIN COMMITMENT FEE
ANNUALIZED EBITDA ANNUM) (PER ANNUM) (PER ANNUM)
----------------- ---------- ------------ --------------
Category 1.............. 1 9.0 1.250% 2.250% 0.500%
Category 2.............. < 9.0 but 1 8.0 1.000% 2.000% 0.500%
Category 3.............. < 8.0 but 1 7.0 0.875% 1.875% 0.375%
Category 4.............. < 7.0 but 1 6.0 0.750% 1.750% 0.375%
Category 5.............. < 6.0 0.500% 1.500% 0.250%
Until the first date after the Closing Date on which CommNet delivers
financial statements and a computation of the ratio of Total Debt to
Annualized EBITDA (adjusted for seasonality) in accordance with the Credit
Agreement, Category 1 shall be deemed to be effective and the initial LIBOR
Margin shall be 2.250% per annum, the initial ABR Margin shall be 1.250% per
annum and the initial Commitment Fee shall be 0.500% per annum.
15