1
Exhibit 10.1
September 10, 1997
Pillowtex Corporation
4111 Mint Way
Dallas, TX 75237
Attn: Mr. Jeffrey D. Cordes
RE: Merger Financing
Gentlemen:
You have advised us that Pillowtex Corporation (the "Borrower") intends to
acquire all of the capital stock of Fieldcrest Cannon Inc. (the "Acquired
Company") for approximately $415 million through the merger of the Acquired
Company with or into the Borrower or a wholly owned subsidiary thereof
(hereinafter the acquisition of Acquired Company may be referred to as the
"Merger"). You have advised us that in connection with the Merger approximately
$13 million of the Acquired Company's existing industrial revenue bond
obligations will remain outstanding and that the Acquired Company's existing
$118 million 6% convertible subordinated debentures will either remain
outstanding, or be converted at the option of the holders into approximately
$72 million in cash and $19 million of Pillowtex common stock. All other
existing debt of the Acquired Company (consisting of approximately $115 million
of senior secured bank debt and approximately $85 million of senior
subordinated debentures) will be repaid or called for redemption simultaneously
with the completion of the Merger. You have also advised us that the Borrower
intends to refinance its existing bank senior debt (approximately $94 million)
simultaneously with the completion of the Merger, and keep outstanding its
existing senior subordinated debentures (approximately $125 million) and
certain other existing senior secured debt (approximately $9 million).
In order to complete the Merger and refinancings described above, and to pay
the costs and expenses related to the Merger and related financings, you have
advised us that the Borrower intends (i) to pay not less than 20.58% of the
total consideration paid to holders of the Acquired Company's capital stock in
the form of newly issued common stock of the Borrower, (ii) to pay not less
than 20.58% of any conversion consideration requested by holders of the
Acquired Company's 6% convertible subordinated debentures in the form of newly
issued common stock of the Borrower, (iii) to privately place not less than $65
million of its newly issued preferred stock, (iv) to raise not less than $135
million from its issuance of new senior subordinated debt (the "Subordinated
Debt") either through the issuance of subordinated bridge notes under the
commitment letter with NationsBridge L.L.C. dated as the date hereof (together
with any extensions thereof being the "Bridge Notes") or through its issuance
of other Subordinated Debt, and (v) to borrow not more than $455 million (with
such amount being increased by 79.42% of any conversion consideration requested
by holders of the Acquired Company's 6% convertible subordinated debentures)
under newly arranged senior credit facilities.
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Pillowtex Corporation
September 10, 1997
Page 2
In connection with the foregoing, NationsBank of Texas, N.A. ("NationsBank" or
the "Agent") is pleased to advise you of its commitment (this letter agreement
being the "Commitment Letter") to provide the full principal amount of the
Senior Credit Facilities described in the Summary of Indicative Terms and
Conditions attached to this Commitment Letter as Exhibit A (the "Term Sheet").
NationsBanc Capital Markets, Inc. ("NCMI") is pleased to advise you of its
commitment, as Arranger and Syndication Agent for the Senior Credit Facilities,
to form a syndicate of financial institutions (the "Lenders") reasonably
acceptable to you for the Senior Credit Facilities. If NationsBank and NCMI
shall determine in their sole discretion that it will not adversely affect
syndication of the Senior Credit Facilities, the Revolving Credit Facility
described in the Term Sheet may be documented as a renewal and extension of the
Borrower's existing revolving credit agreement and the Term Loan Facility
described in the Term Sheet may be documented under a separate new credit
agreement. In such event, the separate credit agreements will contain identical
provisions as outlined in the Term Sheet and will subject to an inter-creditor
agreement providing for cross collateralization, cross approval of amendments
and waivers, and such other matters as are necessary to accomplish the intent
of the Term Sheet. All capitalized terms used and not otherwise defined herein
shall have the meanings set forth in the Term Sheet, and this letter agreement.
The commitments of NationsBank and NCMI hereunder are subject to each of the
terms and conditions set forth herein and in the Term Sheet, and to the
satisfaction of each of the following conditions precedent in a manner
acceptable to NationsBank and NCMI:
(a) execution by the Borrower, the Acquired Company and/or other appropriate
parties of the definitive merger agreement and other related
documentation relating to the Merger (the "Merger Agreement"),
substantially in the form executed on September 10, 1997 provided to
NationsBank and NCMI;
(b) the negotiation, execution and delivery of definitive documentation
with respect to the Senior Credit Facilities consistent with the Term
Sheet and otherwise reasonably satisfactory to NationsBank and NCMI; and
(c) there not having occurred and being continuing since the date hereof
a material adverse change in the market for syndicated bank credit
facilities or a material disruption of, or a material adverse change in,
financial, banking or capital market conditions, in each case as
determined by NationsBank and NCMI in their reasonable discretion.
NationsBank will act as Agent for the Senior Credit Facilities and NCMI will
act as Arranger and Syndication Agent for the Senior Credit Facilities. No
additional agents will be appointed without the prior approval of the Borrower,
NationsBank and NCMI.
Furthermore, the commitments of NationsBank and NCMI hereunder are based upon
the financial and other information regarding the Borrower, the Acquired
Company and their respective subsidiaries previously provided to NationsBank
and NCMI and are subject to the condition, among others, that there shall not
have occurred after the date of such information, in the reasonable opinion of
NationsBank and NCMI, any material adverse change in the business, assets,
liabilities (actual or contingent), operations, condition (financial or
otherwise) or prospects of the Borrower, the Acquired Company and their
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Pillowtex Corporation
September 10, 1997
Page 3
subsidiaries taken as a whole. If the continuing review by NationsBank and NCMI
of the Borrower and the Acquired Company discloses information relating to
conditions or events not previously disclosed to NationsBank and NCMI or
relating to new information or additional developments concerning conditions or
events previously disclosed to NationsBank and NCMI which NationsBank and NCMI
in their reasonable discretion believe may have a material adverse effect on
the condition (financial or otherwise), assets, properties, business,
operations or prospects of the Borrower, the Acquired Company, and their
subsidiaries taken as a whole, NationsBank and NCMI may, in their reasonable
discretion, suggest alternative financing amounts or structures that ensure
adequate protection for the Lenders or decline to participate in the proposed
financing.
You agree to actively assist NationsBank and NCMI in achieving syndication of
the Senior Credit Facilities in a manner reasonably satisfactory to
NationsBank, NCMI and you. In the event that such syndication cannot be
achieved in a manner reasonably satisfactory to NationsBank, NCMI and you under
the structure outlined in the Term Sheet you agree to cooperate with
NationsBank and NCMI in developing an alternative structure that will permit
syndication of the Senior Credit Facilities in a manner reasonably satisfactory
to NationsBank, NCMI and you. Syndication of the Senior Credit Facilities will
be accomplished by a variety of means, including direct contact during the
syndication between senior management and advisors of the Borrower and the
proposed Lenders. To assist NationsBank and NCMI in the syndication efforts,
you hereby agree to (a) provide and cause your advisors to provide NationsBank
and NCMI and the other Lenders upon request with all information reasonably
deemed necessary by NationsBank and NCMI to complete syndication, including but
not limited to information and evaluations prepared by the Borrower and its
advisors, or on their behalf, relating to the Merger, (b) assist NationsBank
and NCMI upon their reasonable request in the preparation of an Information
Memorandum to be used in connection with the syndication of the Senior Credit
Facilities and (c) otherwise assist NationsBank and NCMI in their syndication
efforts, including making available officers and advisors of the Borrower and
its subsidiaries from time to time to attend and make presentations regarding
the business and prospects of the Borrower and the Acquired Company and their
subsidiaries, as appropriate, at a meeting or meetings of prospective Lenders.
You further agree to refrain from engaging in any additional debt financings
for the Acquired Company (except as described in this letter and except for the
Subordinated Debt) during such syndication process unless otherwise agreed to
by NationsBank and NCMI.
It is understood and agreed that NationsBank and NCMI, after consultation with
you, will manage and control all aspects of the syndication, including
decisions as to the selection of proposed Lenders and any titles offered to
proposed Lenders, when commitments will be accepted and the final allocations
of the commitments among the Lenders. NationsBank agrees to use its reasonable
efforts to satisfy the Borrower's preferences with respect to the selection of
proposed Lenders and the final allocation of the commitments among the Lenders.
It is understood that no Lender participating in the Senior Credit Facilities
will receive compensation from you outside the terms contained herein and in
the Term Sheet in order to obtain its commitment. It is also understood and
agreed that the amount and distribution of the fees among the Lenders will be
at the sole discretion of NationsBank and NCMI and that any syndication prior
to execution of definitive documentation will reduce the commitment of
NationsBank.
You hereby represent, warrant and covenant that to the best of your knowledge
(a) all information, other than Projections (as defined below), which has been
or is hereafter made
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Pillowtex Corporation
September 10, 1997
Page 4
available to NationsBank and NCMI or the Lenders by you or any of your
representatives in connection with the transactions contemplated hereby
("Information") is and will be complete and correct in all material respects
and does not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements contained
therein not misleading, and (b) all financial projections concerning the
Borrower and the Acquired Company that have been or are hereafter made
available to NationsBank and NCMI or the Lenders by you or any of your
representatives (the "Projections") have been or will be prepared in good faith
based upon reasonable assumptions. You agree to furnish us with such
Information and Projections as we may reasonably request and to supplement the
Information and the Projections from time to time until the closing date for
the Senior Credit Facilities so that the representation and warranty in the
preceding sentence is correct on the such date. In arranging and syndicating
the Senior Credit Facilities, NationsBank and NCMI will be using and relying on
the Information and the Projections without independent verification thereof.
By executing this Commitment Letter you also agree to reimburse NationsBank and
NCMI from time to time on demand for all reasonable out-of-pocket fees and
expenses (including, but not limited to, the reasonable fees, disbursements and
other charges of legal counsel to NationsBank) incurred in connection with the
Senior Credit Facilities and the preparation of the definitive documentation
for the Senior Credit Facilities and the other transactions contemplated
hereby.
IN THE EVENT THAT NATIONSBANK OR NCMI BECOMES INVOLVED IN ANY CAPACITY IN ANY
ACTION, PROCEEDING OR INVESTIGATION IN CONNECTION WITH ANY MATTER CONTEMPLATED
BY THIS LETTER, THE BORROWER WILL REIMBURSE NATIONSBANK AND NCMI FOR THEIR
REASONABLE LEGAL AND OTHER EXPENSES (INCLUDING THE COST OF ANY INVESTIGATION
AND PREPARATION) AS THEY ARE INCURRED BY NATIONSBANK OR NCMI. THE BORROWER ALSO
AGREES TO INDEMNIFY AND HOLD HARMLESS NATIONSBANK, NCMI AND THEIR AFFILIATES
AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (THE
"INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES AND
LIABILITIES, JOINT OR SEVERAL, RELATED TO OR ARISING OUT OF ANY MATTERS
CONTEMPLATED BY THIS LETTER (INCLUDING ANY ARISING OUT OF THE NEGLIGENCE OF ANY
INDEMNIFIED PARTY), UNLESS AND ONLY TO THE EXTENT THAT IT SHALL BE FINALLY
JUDICIALLY DETERMINED THAT SUCH LOSSES, CLAIMS, DAMAGES OR LIABILITIES RESULTED
PRIMARILY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF NATIONSBANK, NCMI
OR SUCH OTHER INDEMNIFIED PARTY.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether definitive financing documentation shall
be executed and delivered and notwithstanding the termination of this letter
agreement or the commitment of NationsBank and NCMI hereunder, provided,
however, that the provisions of the immediately preceding two paragraphs shall
be superseded by the provisions of the definitive financing documentation.
As described herein and in the Term Sheet, NCMI will act as Arranger and
Syndication Agent for the Senior Credit Facilities. NationsBank reserves the
right to allocate, in whole or in part, to NCMI certain fees payable to
NationsBank in such manner as NationsBank
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Pillowtex Corporation
September 10, 1997
Page 5
and NCMI agree in their sole discretion. You acknowledge and agree that
NationsBank may share with any of its affiliates (including specifically NCMI)
any information relating to the Senior Credit Facilities, the Borrower, the
Acquired Company and their subsidiaries and affiliates, subject to a
confidentiality agreement reasonably acceptable to you.
This Commitment Letter may not be assigned without the prior written consent of
NationsBank and NCMI.
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this letter agreement no later than 5:00 p.m. Dallas, Texas
time on September 11, 1997. This letter agreement will become effective upon
your delivery to us of executed counterparts of this letter agreement and the
fee letter of even date herewith (the "Fee Letter") and, without limiting the
more specific terms hereof and of the Term Sheet, you agree upon acceptance of
this commitment to pay the fees set forth in the Term Sheet and in the Fee
Letter. This commitment shall terminate if not so accepted by you prior to that
time. Following acceptance by you, this commitment will terminate on December
31, 1997 , unless the Senior Credit Facilities are closed by such time.
Except as required by applicable law, this Commitment Letter, the Term Sheet,
and the Fee Letter and the contents hereof and thereof shall not be disclosed
by you to any third party without the prior consent of NationsBank and NCMI,
other than to your attorneys, financial advisors and accountants, in each case
to the extent necessary in your reasonable judgment; provided, however, it is
understood and agreed that after your acceptance of this Commitment Letter, the
Term Sheet and the Fee Letter you may disclose the terms of this letter and the
Term Sheet (but not the Fee Letter) to the Acquired Company and its attorneys
and financial advisors and accountants in connection with the Merger, in
filings with the SEC and other applicable regulatory authorities and stock
exchanges, and in proxy and other materials disseminated to stockholders and
other purchasers of securities of the Borrower. Without limiting the foregoing,
in the event that you disclose the contents of this letter or the Fee Letter in
contravention of the preceding sentence, you shall be deemed to have accepted
the terms of this Commitment Letter and Term Sheet, and the Fee Letter.
THIS COMMITMENT LETTER (INCLUDING THE TERM SHEET), THE FEE LETTER AND ANY OTHER
AGREEMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS COVERED HEREIN AND THEREIN AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF.
THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
{Remainder of page intentionally left blank}
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Pillowtex Corporation
September 10, 1997
Page 6
This letter may be executed in counterparts which, taken together, shall
constitute an original.
Very truly yours,
NATIONSBANK OF TEXAS, N.A.
By: /s/ DOUGLAS E. HUTT
------------------------------
Title: Senior Vice President
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ HAROLD R. BEATTIE
------------------------------
Title: Managing Director
ACCEPTED AND AGREED TO:
PILLOWTEX CORPORATION
By: /s/ JEFFREY D. CORDES
------------------------------
Title: President and COO
Date: 9/10/97
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EXHIBIT A
PILLOWTEX CORPORATION
SUMMARY OF INDICATIVE TERMS AND CONDITIONS
SEPTEMBER 10, 1997
===============================================================================
BORROWER: Pillowtex Corporation.
GUARANTORS: The Senior Credit Facilities
shall be guaranteed by all existing
and hereafter acquired domestic
subsidiaries of the Borrower (the
"Guarantors") upon consummation of
the Merger. All guarantees shall be
guarantees of payment and not of
collection.
AGENT: NationsBank of Texas, N.A. (the
"Agent" or "NationsBank") will act as
sole and exclusive administrative and
collateral agent. As such,
NationsBank will negotiate with the
Borrower, act as the primary contact
for the Borrower and perform all
other duties associated with the role
of exclusive administrative agent. No
other agents or co-agents may be
appointed without the prior written
consent of the Borrower, NationsBank
and NCMI.
ARRANGER &
SYNDICATION AGENT: NationsBanc Capital Markets, Inc.
("NCMI").
LENDERS: A syndicate of financial institutions
(including NationsBank) arranged by
NCMI, which institutions shall be
reasonably acceptable to the Borrower
and the Agent (collectively, the
"Lenders").
SENIOR CREDIT FACILITIES: An aggregate principal amount of
up to $600 million will be available
under the conditions hereinafter set
forth:
Revolving Credit Facility: $350
million revolving credit facility,
which will include a $40 million
sublimit for the issuance of standby
and commercial letters of credit
(each a "Letter of Credit"). Letters
of Credit will be issued by
NationsBank (in such capacity, the
"Fronting Bank"), and each Lender
will purchase an irrevocable and
unconditional participation in each
Letter of Credit. Up to $15 million
of the Revolving Credit Facility will
be available for swing line advances
to be funded solely by the Agent
("Swing Line Loans"). Swing Line
Loans will constitute usage under the
Revolving Credit Facility (except for
purposes of computing the Commitment
Fee), and will reduce availability
for Revolving Credit Loans and
Letters of Credit. At any time
(including during the continuance of
an event of default) the Agent may
require that its Swing Line Loans be
refinanced with new Revolving Credit
Loans which will be made pro-rata by
all Lenders.
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Term Loan Facility: $250 million term
loan facility comprised of two
separate term loan tranches:
(i) $125 million Tranche A Term
Loan.
(ii) $125 million Tranche B Term
Loan.
PURPOSE: The proceeds of the Senior Credit
Facilities shall be used: (i) to
refinance and/or redeem certain
existing indebtedness of the Borrower
and the Acquired Company (ii) to
purchase the capital stock of the
Acquired Company pursuant to the
Merger Agreement (as defined below)
and to pay any conversion
consideration requested by holders of
the Acquired Company's 6% convertible
subordinated debentures; (iii) to pay
fees and expenses incurred in
connection with the Merger, and (iv)
to provide for working capital and
general corporate purposes of the
Borrower.
INTEREST RATES: The Senior Credit Facilities (except
for Swing Line Loans) shall bear
interest, at the option of the
Borrower, at a rates per annum equal
to either (i) the LIBOR interbank
rate, adjusted for reserves, or (ii)
the Base Rate (defined as the higher
of (a) the NationsBank prime rate and
(b) the Federal Funds rate plus
1/2%), in each case plus the
"Applicable Margins" set forth
below.
x = Ratio of Debt/EBITDA LIBOR + * Base Rate + *
------------------------ --------- -------------
x < or = to 5.50 225 bps 75 bps
5.00 < or = to x < 5.50 200 bps 50 bps
4.50 < or = to x < 5.00 175 bps 25 bps
4.00 < or = to x < 4.50 150 bps 0 bps
3.50 < or = to x < 4.00 125 bps 0 bps
3.00 < or = to x < 3.50 100 bps 0 bps
x < 3.00 75 bps 0 bps
* The Applicable Margins shown above
are applicable only to the Revolving
Credit Loans and Tranche A Term Loan.
The Applicable Margins with respect
to the Tranche B Term Loan shall be
equal to the Applicable Margins shown
above, plus 50 bps. Nothwithstanding
the foregoing, the Applicable Margins
with respect to the Tranche B Term
Loan shall never be reduced below
Libor + 200bps and Base Rate + 50
bps.
Swing Line Loans shall bear interest
at the Base Rate plus the Applicable
Margins shown above, less the
Commitment Fee.
The Borrower's initial Applicable
Margins shall be based upon the
Borrower's ratio of Debt/EBITDA at
Closing using the most recent
combined LTM EBITDA of the Borrower
and the Acquired Company adjusted to
include those pro-forma cost savings
permitted by the Borrower's
independent accountants in accordance
with Regulation S-X. Notwithstanding
the foregoing, the Borrower's initial
Applicable Margins shall not assume a
ratio of Debt/EBITDA of less than
5.00 to 1.00. Changes in the
Borrower's Applicable Margin will be
effective two business days following
the Agent's receipt of financial
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statements indicating a change,
commencing with the receipt of the
Borrower's 3-31-98 financial
statements.
If during the 180 day period
following the Closing, any breakage
costs, charges or fees are incurred
with respect to LIBOR loans on
account of the syndication of the
Senior Credit Facilities, the
Borrower shall immediately reimburse
the Agent for any such costs, charges
or fees. Such right of reimbursement
to be in addition to and not in
limitation of customary cost and
yield protection.
The Borrower may select interest
periods of 1, 2, 3 or 6 months for
LIBOR loans, subject to availability.
A penalty rate shall apply on all
loans in the event of default at a
rate per annum of 2% above the
applicable interest rate.
The loan documentation shall include
cost and yield protection customary
for transaction and facilities of
this type, including without
limitation changes in capital
adequacy and capital requirements or
their interpretation, illegality,
unavailability, and reserves, all
without proration or offset.
LETTER OF CREDIT FEES: Letter of Credit fees are due
quarterly in arrears to be shared
proportionately by the Lenders. Fees
will be equal to (i) for standby
Letters of Credit 100%, and (ii) for
commercial Letters of Credit 50%, of
the Libor Applicable Margin for
Revolving Credit Loans in effect from
time to time on a per annum basis,
plus a fronting fee of 12.5 bps per
annum to be paid to Fronting Bank for
its own account. Fees will be
calculated on the aggregate stated
amount for each letter of credit for
the stated duration thereof.
COMMITMENT FEE A 50 basis points per annum
(calculated on the basis of actual
number of days elapsed in a year of
360 days) Commitment Fee calculated
on the unused portion of the Senior
Credit Facilities shall commence to
accrue upon the closing of a
definitive credit agreement, and
shall thereafter be payable quarterly
in arrears. The Commitment Fee shall
be reduced (i) to 37.5 basis points
per annum for any period where the
Borrower's ratio of Debt/EBITDA <
4.00, and (ii) to 25 basis points
during any period where the
Borrower's ratio of Debt/EBITDA <
3.50. For purposes of determining the
Commitment Fee, Revolving Credit
Loans and Letters of Credit, but not
Swing Line Loans, constitute usage.
MATURITY: The Revolving Credit Facility
shall terminate and all amounts
outstanding thereunder shall be due
and payable in full six years from
12/31/97.
The Term Loan Facility shall be
subject to repayment according to the
Scheduled Amortization, with the
final payment of all amounts
outstanding, plus accrued interest,
being due six years from 12/31/97 for
the Tranche A Term Loan and seven
years from 12/31/97 for the Tranche B
Term Loan.
AVAILABILITY/SCHEDULED
A-3
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AMORTIZATION: Revolving Credit Facility: Loans
under the Revolving Credit Facility
("Revolving Credit Loans" and "Swing
Line Loans", and together with the
Term Loans, the "Loans") may be made,
and Letters of Credit may be issued
subject to availability.
Term Loan Facility: Loans under the
Term Loan Facility ("Term Loans")
will be available in a single
borrowing at Closing and be subject
to quarterly amortization of
principal, based upon the annual
amounts shown below (the "Scheduled
Amortization").
Tranche A Tranche B
Year Ending Term Loan Term Loan
----------- --------- ---------
12/31/98 $0 $1,250,000
12/31/99 $5,000,000 $1,250,000
12/31/00 $15,000,000 $1,250,000
12/31/01 $25,000,000 $1,250,000
12/31/02 $35,000,000 $1,250,000
12/31/03 $45,000,000 $1,250,000
12/31/04 $0 $117,500,000
SECURITY: Concurrently with the Merger, the
Agent (on behalf of the Lenders)
shall receive a first priority
perfected security interest in all of
the capital stock of each of the
domestic subsidiaries (direct or
indirect) of the Borrower and 65% of
the capital stock of each foreign
subsidiary (direct or indirect) of
the Borrower, which capital stock
shall not be subject to any other
lien or encumbrance. The Agent (on
behalf of the Lenders) shall also
receive a first priority perfected
security interest in all other
presently unencumbered and future
domestic assets and properties of the
Borrower and its subsidiaries
(including, without limitation,
accounts receivable, inventory,
material real property, machinery,
equipment, contracts, trademarks,
copyrights, patents, license
agreements, and general intangibles).
The foregoing security shall ratably
secure the Senior Credit Facilities
and any interest rate swap/foreign
currency swap or similar agreements
with a Lender under the Senior Credit
Facilities.
MANDATORY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: Until the Borrower's ratio of
Debt/EBITDA less than 4.00, in
addition to the amortization set
forth above, the Term Loan Facility
will be prepaid by an amount equal to
(a) 100% of the net cash proceeds of
all asset sales by the Borrower or
any subsidiary of the Borrower
(including stock of subsidiaries),
subject to de minimus baskets and
reinvestment provisions to be agreed
upon and net of selling expenses and
taxes to the extent such taxes are
paid; (b) 75% of Excess Cash Flow (to
be defined) pursuant to an annual
cash sweep arrangement; (c) 100% of
the net cash proceeds from the
issuance of any debt after the
Closing by the Borrower or any
subsidiary (excluding certain
permitted debt and Subordinated Debt
issued to refinance the Bridge
Notes); and (d) 50% of the net cash
proceeds from the issuance of equity
by the Borrower or any subsidiary
after the
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Closing (excluding equity proceeds
that are applied to repay the Bridge
Notes). Prepayments shall be applied
pro rata to reduce the Tranche A Term
Loan and the Tranche B Term Loan, and
within each tranche, pro rata with
respect to each remaining installment
of principal.
OPTIONAL PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Borrower may prepay the
Senior Credit Facilities in whole or
in part at any time without premium
or penalty, subject to reimbursement
of the Lenders' breakage and
re-deployment costs in the case of
prepayment of LIBOR borrowings.
Optional Prepayments of the Term
Loans shall be applied pro rata to
reduce the Tranche A Term Loan and
the Tranche B Term Loan, and within
each tranche, pro rata with respect
to each remaining installment of
principal.
CONDITIONS PRECEDENT
TO CLOSING: The initial funding of the
Senior Credit Facilities will be
subject to the satisfaction of
conditions precedent usual and
customary for leveraged financings
generally and for this transaction in
particular, including but not limited
to the following:
(i) The negotiation, execution
and delivery of definitive
documentation with respect
to the Senior Credit
Facilities reasonably
satisfactory to NCMI, the
Agent and the Lenders.
(ii) The Merger shall have been
consummated in accordance
with the terms of the Merger
Agreement and in compliance
with applicable law and
regulatory approvals. The
Merger Agreement shall not
have been altered, amended
or otherwise changed or
supplemented in any material
respect or any material
condition therein waived,
without the prior written
consent of the Agent, which
shall not be unreasonably
withheld.
(iii) The Agent shall be satisfied
that after giving affect to
transactions contemplated
hereby, at the Closing (a)
the Borrower will have not
less than $40 million of
availability under the
Revolving Credit Facility
immediately after the
initial funding of the
Senior Credit Facilities
(with such amount being
increased by 79.42% of any
conversion consideration
which may be requested by
holders of the Acquired
Company's 6% convertible
subordinated debentures
after the initial funding of
the Senior Credit
Facilities), (b) the
Borrower shall have issued
the Bridge Notes in
accordance with the
commitment letter of
NationsBridge, L.L.C. of
even date herewith, or other
Subordinated Debt on terms
satisfactory to the Agent,
in an amount of not less
than $135 million, (c) the
Borrower shall have issued
$65 million in new preferred
stock of the Borrower on
substantially the terms set
forth in the Preferred Stock
Purchase Agreement of even
date herewith, a copy of
which has been provided to
Agent, and (d) the Borrower
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shall have issued its
common stock as partial
consideration for not less
than 20.58% of the aggregate
value of all capital stock
of the Acquired Company
acquired by the Borrower and
any conversion consideration
requested by holders of the
Acquired Company's 6%
convertible subordinated
debentures at the Closing.
(iv) There shall not have
occurred, in the Agent's
reasonable estimation, a
material adverse change
since December 31, 1996 in
the business, assets,
operations, condition
(financial or otherwise) or
prospects of the Borrower
and its subsidiaries and the
Acquired Company and its
subsidiaries taken as a
whole, or in the facts and
information regarding such
entities as represented to
date.
(v) The Agent shall have
received (a) satisfactory
opinions of counsel to the
Borrower (which shall cover,
among other things,
authority, legality,
validity, binding effect and
enforceability of the
documents for the Senior
Credit Facilities) and such
corporate resolutions,
certificates and other
documents as the Agent shall
reasonably require and (b)
satisfactory evidence that
the Agent (on behalf of the
Lenders) holds a perfected,
first priority lien in all
collateral for the Senior
Credit Facilities, subject
to no other liens except for
permitted liens to be
determined.
(vi) Receipt of all governmental,
shareholder and third party
consents (including
Hart-Scott Rodino clearance)
and approvals necessary, in
the reasonable opinion of
the Agent, in connection
with the purchase of the
Acquired Company and the
related financings and other
transactions contemplated
hereby and expiration of all
applicable waiting periods
without any action being
taken by any authority that
could restrain, prevent or
impose any material adverse
conditions on the Borrower
and its subsidiaries
(including the Acquired
Company and its
subsidiaries), or such other
transactions, or that could
seek or threaten any of the
foregoing, and no law or
regulation shall be
applicable which in the
judgment of the Agent
could have such effect.
(vii) The Borrower and its
subsidiaries (including the
Acquired Company and its
subsidiaries) shall be in
compliance with all existing
financial obligations (after
giving effect to the
Merger).
REPRESENTATIONS &
WARRANTIES: Usual and customary for transactions
of this type, to include without
limitation: (i) corporate status;
(ii) corporate power and
authority/enforceability; (iii) no
violation of law or contracts or
organizational documents; (iv) no
material litigation; (v) correctness
of specified financial statements and
no material adverse change; (vi) no
required governmental or third party
approvals; (vii) use of
proceeds/compliance with margin
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regulations; (viii) status under
Investment Company Act; (ix) ERISA;
(x) environmental matters; (xi)
perfected liens and security
interests; (xii) payment of taxes,
and (xiii) consummation of the
Merger.
COVENANTS: Usual and customary for transactions
of this type, to include without
limitation: (i) delivery of financial
statements and other reports; (ii)
delivery of compliance certificates:
(iii) notices of default, material
litigation and material governmental
and environmental proceedings; (iv)
compliance with laws; (v) payment of
taxes; (vi) maintenance of insurance;
(vii) limitation on liens; (viii)
limitations on mergers,
consolidations and sales of assets;
(ix) limitations on incurrence of
debt; (x) limitations on dividends
and stock redemptions and the
redemption and/or prepayment of other
debt; (xi) limitations on
investments; (xii) ERISA; (xiii)
limitation on transactions with
affiliates; and (xiv) limitation on
capital expenditures.
Financial covenants to include (but
not limited to):
o Maintenance at all times of a
Minimum Net Worth, with step-up
provisions to be agreed upon,
o Maintenance on a rolling four
quarter basis of a Maximum
Leverage Ratio (total funded
debt/EBITDA), and
o Maintenance on a rolling four
quarter basis of a Minimum
Fixed Charge Coverage Ratio
(EBITDA less capital
expenditures)/(interest expense
+ scheduled principal
repayments).
EVENTS OF DEFAULT: Usual and customary in transactions
of this nature, and to include,
without limitation, (i) nonpayment of
principal, interest, fees or other
amounts, (ii) violation of covenants,
(iii) inaccuracy of representations
and warranties, (iv) cross-default to
other material agreements and
indebtedness, (v) bankruptcy, (vi)
material judgments, (vii) ERISA,
(viii) actual or asserted invalidity
of any loan documents or security
interests, or (ix) Change in Control
of the Borrower.
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to
make assignments to other financial
institutions approved by the Borrower
and the Agent, which approval shall
not be unreasonably withheld. Lenders
will be permitted to sell
participations with voting rights
limited to significant matters such
as changes in amount, rate, and
maturity date. An assignment fee of
$3,500 is payable by the Lender to
the Agent upon any such assignment
occurring (including, but not limited
to an assignment by a Lender to
another Lender).
WAIVERS & AMENDMENTS: Amendments and waivers of the
provisions of the loan agreement and
other definitive credit documentation
will require the approval of Lenders
holding loans and commitments
representing more than 50% of the
aggregate amount of loans and
commitments under the Senior Credit
Facilities, except that (a) the
consent of all the Lenders affected
thereby shall be
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required with respect to (i)
increases in commitment amounts, (ii)
reductions of principal, interest, or
fees, (iii) extensions of scheduled
maturities or times for payment, (iv)
releases of all or substantially all
collateral and (v) releases of all or
substantially all guarantors and (b)
the consent of the Lenders holding at
least 50% of the Tranche A Term Loan
Facility and at least 50% of the
Tranche B Term Loan Facility shall be
required with respect to any
amendment that changes the allocation
of any payment between the Tranche A
and Tranche B Term Loan Facilities.
INDEMNIFICATION: The Borrower shall indemnify the
Lenders from and against all losses,
liabilities, claims, damages or
expenses relating to their loans, the
Borrower's use of loan proceeds or
the commitments, including but not
limited to reasonable attorneys' fees
and settlements costs. This
indemnification shall survive and
continue for the benefit of the
Lenders at all times after the
Borrower's acceptance of the Lenders'
commitment for the Senior Credit
Facilities, notwithstanding any
failure of the Senior Credit
Facilities to close.
CLOSING: On or before December 31, 1997.
GOVERNING LAW: Texas
EXPENSES: Borrower will pay all reasonable
out-of-pocket costs and expenses
associated with the preparation, due
diligence, administration,
syndication and enforcement of all
documents executed in connection with
the Senior Credit Facilities,
including without limitation, the
reasonable legal fees of the Agent's
counsel regardless of whether or not
the Senior Credit Facilities are
closed.
OTHER: This term sheet is intended as an
outline only and does not purport to
summarize all the conditions,
covenants, representations,
warranties and other provisions which
would be contained in definitive
legal documentation for the Senior
Credit Facilities contemplated
hereby. The Borrower shall waive its
right to a trial by jury.
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