1
CONFIDENTIAL EXHIBIT 99(a)(7)
SUMMARY OF TERMS AND CONDITIONS(a)
Borrower: Norwood Promotional Products, Inc. ("Borrower").
Syndication Agent: Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") will act as joint
lead arranger, syndication agent and documentation
agent (the "Syndication Agent").
Administrative Agent: NationsBank, N.A ("NationsBank" or the
"Administrative Agent").
Joint Lead Arrangers: Merrill Lynch and NationsBanc Montgomery Securities
LLC ("NMS") (together the "Joint Lead Arrangers").
Lenders: Merrill Lynch Capital Corporation, NationsBank and a
syndicate of lenders acceptable to Borrower and
Merrill Lynch (the "Lenders").
Credit Facilities: Senior secured credit facilities in an aggregate
principal amount of $100 million, such credit
facilities comprising:
(A) Term Loan Facilities. Term loan facilities in
an aggregate principal amount of $75 million (the
"Term Loan Facilities"), such aggregate principal
amount to be allocated among (i) a Term Loan A
Facility in an aggregate principal amount of $35
million (the "Term Loan A Facility"), and (ii) a Term
Loan B Facility in an aggregate principal amount of
$40 million (the "Term Loan B Facility). Loans under
the Term Loan Facilities are herein referred to as
"Term Loans."
(B) Revolving Facility. Revolving credit facility
in an aggregate principal amount of $25 million (the
"Revolving Facility" and, together with the Term Loan
Facilities, the "Credit Facilities"; any such facility
is herein referred to as a "Facility").
- ------------------------
a Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the attached Commitment Letter (the
"Commitment Letter"). References herein to "$" or "US$" are to United
States Dollars. For all purposes of this Term Sheet, the
"subsidiaries" of Borrower shall be deemed to include those entities
that will become subsidiaries of Borrower.
2
-2-
Loans under the Revolving Facility are herein referred
to as "Revolving Loans"; the Term Loans and the
Revolving Loans are herein referred to as "Loans". A
portion of the Revolving Facility to be mutually
determined will be available as a letter of credit
subfacility.
Documentation: Usual for facilities and transactions of this type and
reasonably acceptable to Borrower and the Joint Lead
Arrangers. The documentation for the Credit
Facilities will include, among others, a credit
agreement (the "Credit Agreement"), guarantees and
appropriate collateral documents (collectively, the
"Credit Documents"). Borrower and each of Borrower's
subsidiaries party to the Credit Documents are herein
referred to as the "Credit Parties".
Transaction/Purpose: FPK, LLC, a Delaware limited liability Company
("LLC") formed by Frank P. Krasovec intends to form a
new corporation ("Newco"). LLC has entered into a
merger agreement (the "Merger Agreement") with
Borrower to effect the recapitalization of Borrower
(the "Recapitalization"). Pursuant to the Merger
Agreement, (i) Newco will merge with and into Borrower
with Borrower as the survivor (the "Merger") and (ii)
after giving effect to the Merger and the transactions
contemplated thereby, the Buyout Group (as defined in
the Merger Agreement), Liberty Capital Partners, LP or
its affiliates (collectively, "Liberty") and certain
other third parties will own all of the capital stock
of Borrower.
Borrower will (i) raise gross cash proceeds of up to
$37 million from the issuance by Borrower of its
unsecured subordinated notes due six months after all
the Term Loans have been paid in full (the
"Subordinated Notes") arranged by Liberty on terms and
conditions and pursuant to documentation reasonably
satisfactory to Merrill Lynch, NationsBank and NMS in
their respective sole discretion (the "Subordinated
Financing"); (ii) raise gross cash proceeds of up to
$20 million from the issuance by Borrower of its pay-
in-kind preferred stock (the "PIK Preferred") to
Liberty on terms and conditions and pursuant to
documentation reasonably satisfactory to Merrill
Lynch, NationsBank and NMS in their respective sole
discretion (the "Preferred Stock Financing"); (iii)
raise gross cash proceeds of up to $3 million from the
issuance by Borrower of its common stock (the "Common
Stock") to Liberty on terms and conditions and
pursuant to documentation reasonably satisfactory to
Merrill Lynch, NationsBank and NMS in their respective
sole discretion (the "Common Stock Financing"); and
(iv)
3
-3-
raise gross proceeds of at least $22 million provided
by the Buyout Group (including the amount provided by
the Buyout Group by converting their common stock,
valued at the Consideration (as defined in the Merger
Agreement) of $20.70 per share, into Common Stock of
Borrower) and certain other third parties previously
disclosed to Merrill Lynch, NationsBank and NMS.
Borrower will repay (the "Existing Debt Repayment")
all indebtedness, and terminate all commitments to
make extensions of credit, under its existing $125.0
million credit facility arranged by Merrill Lynch (the
"Existing Debt").
The Recapitalization, the Merger, the Subordinated
Financing, the Preferred Stock Financing, the Common
Stock Financing, the Existing Debt Repayment, and the
entering into and borrowings under the Credit
Facilities by the parties herein described are herein
referred to as the "Transactions".
Guarantors: Borrower's direct and indirect domestic subsidiaries
existing on the date of the first extension of credit
under the Credit Agreement (the "Closing Date") or
thereafter created or acquired shall unconditionally
guarantee, on a joint and several basis, all
obligations of Borrower under the Credit Facilities
and under each approved interest rate protection
agreement entered into with a Lender or an affiliate
thereof. Each such guarantor is herein referred to as
a "Guarantor" and its guarantee is referred to herein
as a "Guarantee".
Security: The Credit Facilities, the Guarantees, and the
obligations of Borrower under each interest rate
protection agreement or currency exchange agreement
entered into with a Lender or an affiliate thereof
will be secured by (i) a perfected first priority lien
on, and pledge of, all the capital stock and
intercompany debt of each of the direct and indirect
subsidiaries of Borrower existing on the Closing Date
or thereafter created or acquired (except that to the
extent that the pledge thereof would cause material
adverse tax consequences, such pledge with respect to
foreign subsidiaries shall be limited to 65% of the
capital stock of "first tier" foreign subsidiaries),
and (ii) a perfected first priority lien on, and
security interest in, all of the tangible and
intangible properties and assets (including all real
property) of Borrower and its direct and indirect
domestic subsidiaries existing on the Closing Date or
thereafter created or acquired, except for those
properties and assets which the Syndication Agent
shall determine in its sole discretion that the costs
of obtaining such security interest are excessive in
relation to the value of the security to be afforded
4
-4-
thereby (it being understood that none of the
foregoing shall be subject to any other liens or
security interests, except for certain customary
exceptions to be agreed upon) (all of such collateral,
the "Collateral").
Final Maturity and
Amortization: (A) Term Loan Facilities. The Term Loan A Facility
will mature on the fifth anniversary of the Closing
Date. The Term Loan B Facility will mature on the
sixth anniversary of the Closing Date. Amounts
outstanding under the Term Loan Facilities will
amortize, beginning with the last business day of the
second full fiscal quarter after the Closing Date, on
a quarterly basis during each year as set forth below:
Fiscal Term Loan Fiscal Term Loan
Year A Amount Year B Amount
------ ------------ ------ ------------
1999 $ 3,000,000 1999 $ 400,000
2000 6,000,000 2000 400,000
2001 8,000,000 2001 400,000
2002 8,500,000 2002 400,000
2003 9,500,000 2003 400,000
------------
$ 35,000,000 2004 38,000,000
============ ------------
$ 40,000,000
============
(B) Revolving Facility. The Revolving Facility will
mature on the fifth anniversary of the Closing Date
(the "Revolving Loan Maturity Date").
Availability: (A) Term Loan Facilities. The Term Loan Facilities
will be available solely on the Closing Date in a
single draw. Amounts borrowed under the Term Loan
Facilities that are repaid or prepaid may not be
reborrowed.
(B) Revolving Facility. The Revolving Facility will
be available for working capital and general corporate
purposes in the form of revolving loans and letters of
credit on and after the Closing Date until 30 business
days prior to the Revolving Loan Maturity Date.
Amounts repaid under the Revolving Facility may be
reborrowed to the extent of the commitments then in
effect. At the Closing Date, not more than $10
million shall be drawn under the Revolving Facility to
consummate the Transactions.
Annual Cleandown: For a consecutive 30-day period during a quarter
acceptable to the Joint Lead Arrangers in their sole
discretion of each calendar year beginning in the
fiscal year beginning September 1, 1999, the sum of
the aggregate principal amount of
5
-5-
Loans outstanding under the Revolving Facility plus
the face amount of all outstanding Letters of Credit
shall not exceed an amount acceptable to the Joint
Lead Arrangers in their sole discretion.
Letters of Credit: Letters of credit under the Revolving Facility
("Letters of Credit") will be issued by a Lender
jointly agreed upon by the Joint Lead Arrangers and
Borrower (in such capacity, the "L/C Lender"). Each
standby letter of credit shall expire no later than
the earlier of (a) twelve months after its date of
issuance or (b) the fifth business day prior to the
Revolving Loan Maturity Date. Each trade or commercial
letter of credit shall expire no later than the
earlier of (a) 180 days after its date of issuance, or
(b) the fifth business day prior to the Revolving Loan
Maturity Date. The issuance of all Letters of Credit
shall be subject to the customary procedure of the L/C
Lender.
Drawings under any Letter of Credit shall be
reimbursed by Borrower on the same business day. To
the extent that Borrower does not reimburse the L/C
Lender on the same business day, the Lenders under the
Revolving Facility shall be irrevocably obligated to
reimburse the L/C Lender pro rata based upon their
respective Revolving Facility commitments, with the
amount of such reimbursement payment being deemed to
be a drawing under the Revolving Facility.
Letter of Credit Fees: Substantially consistent with the existing $125
million credit facility arranged by Merrill Lynch.
Interest Rates and
Commitment Fees: Interest rates in connection with the Credit
Facilities will be as specified on Annex I attached
hereto. Commitment fees will be payable on the unused
portion of the Revolving Facility as specified in
Annex I attached hereto.
Borrower will be entitled to make borrowings based on
the ABR or LIBOR (each as defined in Annex I hereto).
Borrower may select interest periods of one, two,
three or six months for LIBOR borrowings. Interest
will be payable at the end of each interest period
and, in the case of any interest period longer than
three months, no less frequently than three months.
Interest on all LIBOR borrowings shall be calculated
on the basis of the actual number of days elapsed over
a 360-day year. Interest on all ABR borrowings shall
be calculated on the basis of the actual number of
days elapsed over a 365-day year.
6
-6-
Default Rate: The applicable interest rate (including applicable
margin) plus 2.00% per annum.
Mandatory Prepayments/
Reductions in
Commitments: In addition to scheduled amortization, Borrower will
be required to reduce the Credit Facilities as
follows: (1) 75% of annual Excess Cash Flow (to be
defined) ; (2) 100% of the net cash proceeds of the
disposition of any assets in excess of $250,000
annually (in one transaction or a related series of
transactions to the extent the proceeds are not
reinvested in equipment of comparable value), other
than inventory in the ordinary course of business; (3)
100% of any net cash proceeds of any issuance of debt
subsequent to the Closing Date; and (4) 50% of the net
cash proceeds of any issuance of equity securities
subsequent to the Closing Date. Notwithstanding
clauses (3) and (4) of the foregoing do not apply with
respect to any new capital provided on terms and
conditions satisfactory to the Majority Lenders and
the Joint Lead Arrangers after the Closing Date to the
extent such new capital is simultaneously used to
effect the consummation of any acquisition made in
accordance with the Credit Agreement.
Mandatory prepayments under clauses (1) through (4)
above will be applied pro rata among the Term Loan
Facilities based on the aggregate principal amount of
Term Loans then outstanding under each such Term Loan
Facility. Any application to the Term Loan Facilities
shall be applied (x) with respect to the Term Loan A
Facility, pro rata to the remaining scheduled
amortization payments thereunder, and (y) with respect
to the Term Loan B Facility, in inverse order of
maturity to the remaining amortization payments
thereunder. Notwithstanding the foregoing, any holder
of Term Loans under the Term Loan B Facility may, to
the extent that Term Loans are then outstanding under
the Term Loan A Facility, elect not to have mandatory
prepayments applied to such holder's Term Loans under
the Term Loan B Facility, in which case the aggregate
amount so declined shall be applied to the Term Loans
under the Term Loan A Facility pro rata. To the
extent that the amount to be applied to the prepayment
of Term Loans exceeds the aggregate amount of Term
Loans then outstanding, such excess shall be applied
to the Revolving Facility to permanently reduce the
commitments thereunder.
Revolving Loans will be immediately prepaid to the
extent that the aggregate extensions of credit under
the Revolving Facility exceeds the commitments then in
effect under the Revolving Facility. To the extent
that the amount to be
7
-7-
applied to the repayment of the Revolving Loans
exceeds the amount thereof then outstanding, Borrower
shall cash collateralize outstanding Letters of
Credit.
Voluntary Prepayments/
Reductions in
Commitments: (A) Term Loan Facilities: Borrowings under the Term
Loan Facilities may be prepaid at any time in whole or
in part at the option of Borrower, in a minimum
principal amount and in multiples to be agreed upon,
without premium or penalty (except, in the case of
LIBOR borrowings, prepayments not made on the last day
of the relevant interest period). Voluntary
prepayments under the Term Loan Facilities will be
applied pro rata against the remaining scheduled
amortization payments under the Term Loan Facilities.
(B) Revolving Facility: The unutilized portion of
the commitments under the Revolving Facility may be
reduced and Revolving Loans may be repaid at any time,
in each case, at the option of Borrower, in a minimum
principal amount and in multiples to be agreed upon,
without premium or penalty (except, in the case of
LIBOR borrowings, prepayments not made on the last day
of the relevant interest period).
Conditions to
Effectiveness and
Closing: The effectiveness of the Credit Documents and to the
making of the initial extensions of credit thereunder
(the "Closing") shall be subject to conditions
precedent that are usual for facilities and
transactions of this type, to those specified below
and in the Commitment Letter and to such additional
conditions precedent as may be required by the Joint
Lead Arrangers (all such conditions to be satisfied in
a manner reasonably satisfactory in all respects to
the Joint Lead Arrangers and (to the extent specified
below) the Required Lenders), including, but not
limited to, execution and delivery of the Credit
Documents reasonably acceptable in form and substance
to the Lenders; delivery of borrowing certificates;
receipt of valid security interests as contemplated
hereby; accuracy of representations and warranties;
absence of defaults and material litigation; evidence
of authority; compliance with laws; and adequate
insurance and payment of fees.
The Closing will be subject to (but not limited to)
the following additional conditions:
(A) The delivery, on or prior to the Closing Date, of
(i) legal opinions addressed to the Lenders and the
Agents and in form and substance reasonably
satisfactory to the Joint Lead Arrangers, (ii)
officers' certificates, together with the accompanying
8
-8-
charter documents and corporate resolutions, in form
and substance reasonably satisfactory to the Joint
Lead Arrangers, (iii) a certificate from the chief
financial officer of Borrower and, at Borrower's
expense, an opinion of a nationally recognized
appraisal firm or valuation consultant satisfactory to
the Joint Lead Arrangers in their sole discretion with
respect to the solvency of each Credit Party
immediately after the consummation of the Transactions
to occur on the Closing Date, and (iv) other closing
documents customary for such agreements or reasonably
requested by the Joint Lead Arrangers or the Required
Lenders.
(B) The Board of Directors of LLC and Borrower shall
have authorized and approved the Transactions and the
Joint Lead Arrangers shall have received satisfactory
evidence of the same. LLC and Borrower shall have
entered into the Merger Agreement, which shall be in
full force and effect. The terms, conditions and
structure of the Recapitalization and the Merger
Agreement, including any amendments thereto (and the
documentation therefor (including all proxy
solicitation materials)) shall be in form and
substance reasonably satisfactory to the Joint Lead
Arrangers and the Required Lenders. The
Recapitalization and the Existing Debt Repayment and
the financing therefor shall be in compliance in all
material respects with all laws and regulations
including any state antitakeover laws applicable to
such transactions. Borrower shall not have any
"poison pill" rights or shall have redeemed such
rights at a nominal price, or the Joint Lead Arrangers
shall otherwise be reasonably satisfied that such
rights are null and void as applied to the
Recapitalization. The Joint Lead Arrangers and the
Lenders shall have received copies, certified by
Borrower, of all filings made with any governmental
authority in connection with the Recapitalization and
the other Transactions. The Recapitalization shall
have been consummated.
(C) LLC and Borrower shall have entered into the
Merger Agreement, which shall be in full force and
effect. The terms, conditions and structure of the
Recapitalization and the Merger Agreement, including
any amendments thereto (and the documentation
therefor), shall be in form and substance satisfactory
to the Joint Lead Arrangers and the Required Lenders
in their respective sole discretion. The
Recapitalization and the Existing Debt Repayment and
the financing therefor shall be in compliance with all
laws and regulations, or the Joint Lead Arrangers and
the Required Lenders shall have determined such to be
inapplicable to such transactions.
9
-9-
(D) All conditions to the Recapitalization shall have
been satisfied, and not waived, amended, supplemented
or otherwise modified except with the consent of the
Joint Lead Arrangers and the Required Lenders in their
respective sole discretion, to the satisfaction of the
Joint Lead Arrangers and the Required Lenders. The
consideration per share of common stock in the
Recapitalization shall not exceed $20.70 per share and
an aggregate of $91 million for all shares (except as
the result of the valid exercise of appraisal rights
in accordance with Texas law), and the aggregate
number of shares of common stock of Borrower issued
and outstanding immediately prior to the consummation
of the Merger (the "Common Shares") owned by
Borrower's shareholders, if any, other than members of
the Buyout Group, who shall have exercised or given
notice of their intent to exercise the rights of
dissenting shareholders under the Texas Business
Corporation Act shall be less than ten percent (10%)
of the total number of outstanding Common Shares. The
Joint Lead Arrangers shall be satisfied with the
amount and the terms and conditions of all management
rollover of their equity in Borrower in connection
with the Recapitalization. The Joint Lead Arrangers
shall have received satisfactory evidence that fees
and expenses in connection with the Transactions will
not exceed $9.0 million. Immediately after the
consummation of the transactions, The Joint Lead
Arrangers will be satisfied with the direct and
indirect capital ownership of the surviving
corporation.
(E) Borrower shall have received aggregate gross
proceeds arranged by Liberty of at least $37 million
from the Subordinated Financing pursuant to
agreements, and terms and conditions thereunder, in
form and substance reasonably satisfactory to the
Joint Lead Arrangers and the Required Lenders.
Borrower shall have received aggregate gross proceeds
of at least $20 million from the Preferred Stock
Financing pursuant to agreements, and terms and
conditions thereunder, in form and substance
reasonably satisfactory to the Joint Lead Arrangers
and Required Lenders. Borrower shall have received
aggregate gross proceeds of at least $3 million from
the Common Stock Financing pursuant to agreements, and
terms and conditions thereunder, in form and substance
reasonably satisfactory to the Joint Lead Arrangers
and the Required Lenders. Borrower shall have
received aggregate gross proceeds of at least $22
million from the Buyout Group and certain other third
parties previously disclosed to Merrill Lynch,
NationsBank and NMS.
10
-10-
(F) Each of the Transactions (other than extensions
of credit under the Credit Facilities) shall have been
consummated in all material respects in accordance
with the terms hereof and the terms of documentation
therefor (without the waiver of any material condition
unless consented to by the Joint Lead Arrangers and
the Required Lenders in their respective reasonable
discretion) that are in form and substance
satisfactory to the Joint Lead Arrangers and the
Required Lenders in their respective reasonable
discretion.
(G) All obligations of Borrower and its subsidiaries
with respect to the Existing Debt shall be repaid in
full (or provisions made therefor satisfactory to the
Joint Lead Arrangers and the Required Lenders in their
respective reasonable discretion) and all lending
commitments thereunder terminated to the satisfaction
of the Joint Lead Arrangers and the Required Lenders
in their respective sole discretion with all security
interests in favor of existing lenders being
unconditionally released, and reasonably satisfactory
evidence thereof shall have been provided in writing.
The Joint Lead Arrangers shall have received a
"pay-off" letter with respect to all such debt repaid.
(H) All requisite third parties and governmental
authorities (domestic and foreign) shall have approved
or consented to the Transactions and the other
transactions contemplated hereby (without the
imposition of any materially burdensome or adverse
conditions) and all such approvals and consents shall
be in full force and effect (or there shall be a plan
satisfactory to the Joint Lead Arrangers and the
Required Lenders in their respective sole discretion
for the obtaining thereof). All applicable waiting
periods shall have expired without any action being
taken by any competent authority which restrains,
prevents, or imposes materially adverse conditions
upon the Transactions.
(I) Since the date of the last audited financial
statements of Borrower delivered to the Lenders prior
to the date of the Commitment Letter, there shall not
have occurred or become known (i) in the reasonable
judgment of the Required Lenders any material adverse
change or any condition or event that in the sole
judgment of the Lenders could be expected to result in
a material adverse change in the business, assets,
liabilities (contingent or otherwise), operations,
condition (financial or otherwise), solvency,
properties, prospects or material agreements (each, a
"Material Adverse Change") of Borrower and its
subsidiaries taken as a whole (both before and after
giving effect to the Transactions), (ii) any
transaction
11
-11-
(other than the Transactions) entered into by Borrower
or any of its subsidiaries, whether or not in the
ordinary course of business, that, in the sole
judgment of the Joint Lead Arrangers or the Required
Lenders, is material to Borrower and its subsidiaries
taken as a whole (after giving effect to the
Transactions), or (iii) any dividend or distribution
of any kind declared or paid by Borrower on its
capital stock.
(J) There shall not exist any threatened or pending
action, proceeding or counterclaim by or before any
court or governmental, administrative or regulatory
agency or authority, domestic or foreign, (i)
challenging the consummation of any of the
Transactions or that could in the sole judgment of the
Joint Lead Arrangers and the Required Lenders
restrain, prevent or impose burdensome conditions on
the Transactions, individually or in the aggregate, or
any other transaction contemplated hereunder or (ii)
seeking to obtain, or having resulted in the entry of,
any judgment, order or injunction that (a) would
restrain, prohibit or impose adverse conditions on the
ability of the Lenders to make the Loans under the
Credit Facilities, (b) in the sole judgment of the
Joint Lead Arrangers and Required Lenders could be
expected to result in a Material Adverse Change with
respect to Borrower and its subsidiaries taken as a
whole (both before and after giving effect to the
Transactions), (c) could purport to affect the
legality, validity or enforceability of any Credit
Document or any documents relating thereto or could
have a material adverse effect on the ability of any
Credit Party to fully and timely perform its
obligations under the Credit Documents or the rights
and remedies of the Lenders, (d) would be materially
inconsistent with the stated assumptions underlying
the projections provided to the Joint Lead Arrangers
and the Lenders, or (e) seeks any material damages as
a result thereof.
(K) Any defaults in any material agreements of
Borrower or any of its subsidiaries that may result
from the Transactions shall have been resolved or
otherwise addressed in a manner satisfactory to the
Joint Lead Arrangers and the Required Lenders in their
respective reasonable discretion; and no law or
regulation shall be applicable that restrains,
prevents or imposes materially adverse conditions upon
any component of the Transactions or the financing
thereof, including the extensions of credit under the
Credit Facilities.
(L) The Joint Lead Arrangers and the Required Lenders
shall be satisfied (in their reasonable judgment) with
the actual capitalization (including with respect to
indebtedness and
12
-12-
capital stock) and corporate and organizational
structure of Borrower and its subsidiaries (after
giving effect to the Transactions), including as to
direct and indirect ownership and as to the terms of
the indebtedness and capital stock of Borrower and its
subsidiaries and as to all other matters relating to
their financial and operating condition. Immediately
after giving effect to the Transactions, Borrower and
its subsidiaries shall have no debt or preferred stock
(or direct or indirect guarantee in respect thereof)
outstanding other than the Credit Facilities, the
Subordinated Notes, the Preferred Stock Financing and
certain other debt, including capitalized leases,
seller notes and non-competes to remain outstanding,
in an amount and on terms and conditions and pursuant
to documentation acceptable to the Joint Lead
Arrangers and NationsBank, and the Joint Lead
Arrangers and the Required Lenders shall be satisfied
with all other liabilities (contingent or otherwise)
of Borrower and its subsidiaries.
(M) The Joint Lead Arrangers and the Required Lenders
shall be satisfied (in their respective reasonable
judgment) with the terms and provisions of all
material agreements of Borrower and its subsidiaries.
(N) All other documentation and agreements related to
the Transactions or which, in the sole judgment of the
Joint Lead Arrangers and the Required Lenders, affects
the extension of credit under the Credit Facilities in
any respect shall be in form and substance
satisfactory to the Joint Lead Arrangers and the
Required Lenders in their respective sole judgment.
(O) All loans and other financing to Borrower shall
be in full compliance with all applicable requirements
of Regulations T, U and X of the Board of Governors of
the Federal Reserve System.
(P) All accrued fees and expenses of the Lenders, the
Joint Lead Arrangers and the Administrative Agent
(including the reasonable fees and expenses of counsel
to the Lenders, the Joint Lead Arrangers and the
Administrative Agent) in connection with the Credit
Documents shall have been paid in cash in full.
(Q) The Joint Lead Arrangers and the Lenders shall
have received third-party environmental reports
(including Phase 1 reports) of Borrower and its
subsidiaries from an environmental engineering firm
acceptable to the Joint Lead Arrangers in their sole
discretion and the results thereof shall be
satisfactory to the Joint Lead Arrangers and the
Required
13
-13-
Lenders in their respective sole discretion.
Insurance relating to Borrower and its subsidiaries
will be in place on and after the Closing Date from
insurance companies satisfactory to the Joint Lead
Arrangers and the Required Lenders in their respective
sole discretion and the terms thereof shall be
reasonably satisfactory to the Joint Lead Arrangers
and the Required Lenders in their respective sole
judgment.
(R) The Lenders shall have received a pro forma
balance sheet of Borrower and its subsidiaries as at
the Closing Date and after giving effect to the
Transactions and the financing contemplated hereby,
which pro forma balance sheet shall be substantially
in conformity with that delivered to the Lenders
during syndication and satisfactory to the Joint Lead
Arrangers and the Required Lenders in their respective
sole judgment. The Lenders shall have received
projected cash flows and income statements for the
period of six years following the Closing Date, which
projections shall be (i) based upon reasonable
assumptions made in good faith, (ii) satisfactory to
the Lenders in their sole discretion and (iii)
substantially in conformity with those projections
delivered to the Lenders during syndication. The
Lenders shall have received (i) audited financial
statements of Borrower for fiscal years 1992 through
1997 and (ii) unaudited interim combined financial
statements of Borrower for each fiscal month and
quarterly period ended subsequent to August 31, 1997
as to which such financial statements are available,
and such financial statements shall not, in the sole
judgment of the Lenders, reflect any Material Adverse
Change with respect to Borrower as compared with the
financial statements or projections previously
furnished to the Lenders.
(S) The Lenders shall have received a business plan
or budget for Borrower and its subsidiaries after
giving effect to the Transactions for fiscal years
1998 and 1999 satisfactory to the Joint Lead Arrangers
in their sole discretion.
(T) The Lenders shall have received the results of a
recent lien, tax and judgment search in each of the
jurisdictions and offices where assets of each of
Borrower and its subsidiaries are located or recorded,
and such search shall reveal no liens on any of their
assets except for liens permitted by the Credit
Documents or liens to be discharged in connection with
the transactions contemplated hereby.
(U) On and as of the Closing Date, after giving
effect to the Transactions, the ratio of Borrower's
pro forma consolidated total debt to pro forma
trailing four quarter EBITDA shall not
14
-14-
be greater than 5.0:1.0, and the Joint Lead Arrangers
shall have received an officers' certificate as to the
same satisfactory to the Joint Lead Arrangers in their
sole discretion (including satisfactory schedules and
other supporting data).
(V) The Joint Lead Arrangers and the Required Lenders
shall be satisfied with the employment (as well as
employment agreements, if any) of senior management of
Borrower after the Recapitalization.
(W) The Lenders shall have received such other legal
opinions, corporate documents and other instruments
and/or certificates as the Joint Lead Arrangers or the
Required Lenders may request in their reasonable
discretion.
Conditions to All
Extensions of Credit:
Each extension of credit under the Credit Facilities
will be subject to the (i) absence of any Default or
Event of Default, (ii) continued accuracy of
representations and warranties (except representations
and warranties which are made only as of a prior
date), and (iii) absence of any Material Adverse
Change and no material adverse effect upon the
respective abilities of the Credit Parties to perform
their obligations under the Credit Documents.
Representations and
Warranties:
Customary for facilities similar to the Credit
Facilities and such additional representations and
warranties as may be required by the Joint Lead
Arrangers in their sole discretion, including, but not
limited to, no Default or Event of Default; absence of
Material Adverse Change; receipt of financial
statements (including pro forma financial statements);
absence of undisclosed liabilities or material
contingent liabilities not disclosed in writing to
Joint Lead Arrangers prior to the date hereof;
compliance with laws; solvency; no conflicts with
laws, charter documents or agreements; good standing;
payment of taxes; ownership of properties; corporate
power and authority; no burdensome restrictions; ERISA
matters; environmental matters; labor matters; absence
of material litigation; use of proceeds and margin
regulations; no material misstatement or omission;
validity and perfection of security interests; absence
of liens and security interests; and accuracy of
Borrower's representations and warranties in the
Merger Agreement.
Affirmative Covenants: Customary for facilities similar to the Credit
Facilities and such others as may be reasonably
required by the Joint Lead Arrangers, including, but
not limited to, maintenance of corporate
15
-15-
existence and rights; compliance with laws;
performance of obligations; maintenance of material
rights and privileges; maintenance of properties in
good repair; maintenance of appropriate and adequate
insurance; inspection of books and properties; payment
of taxes and other liabilities; notice of defaults,
litigation and other adverse action; delivery of
financial statements (including consolidating
financial statements), financial projections and
compliance certificates; ERISA compliance;
environmental compliance; and further assurances.
Negative Covenants: Customary for facilities similar to the Credit
Facilities and such others as may be reasonably
required by the Joint Lead Arrangers, including, but
not limited to, limitation on indebtedness; limitation
on liens; limitation on further negative pledges;
limitation on loans, investments and joint ventures;
limitation on guarantee or other contingent
obligations; limitation on restricted payments
(including dividends, redemptions and repurchases of
equity interests); limitation on fundamental changes
(including limitation on mergers, acquisitions and
asset sales); limitation on restrictions on amending
Credit Documents; limitation on issuance, sale or
other disposition of subsidiary stock; limitation on
capital expenditures; limitation on operating leases;
limitation on sale-leaseback transactions; limitation
on sale or discount of receivables; limitation on
transactions with affiliates; limitation on dividend
and other payment restrictions affecting subsidiaries;
limitation on changes in business conducted;
limitation on amendment of documents relating to other
indebtedness and other material documents; limitation
on creation of subsidiaries; limitation on designated
senior debt under the Subordinated Financing; and
limitation on prepayment or repurchase of other
indebtedness.
Financial Covenants: The Credit Facilities will contain financial
covenants appropriate in the context of the proposed
transaction based upon the financial information
provided to the Joint Lead Arranger, including, but
not limited to (definitions and numerical calculations
to be set forth in the Credit Agreement), minimum
interest coverage ratio, minimum fixed charge coverage
ratio, maximum total debt to trailing four quarter
EBITDA, and maximum senior debt to trailing four
quarter EBITDA. The financial covenants contemplated
above will be tested on a quarterly basis and will
apply to Borrower and its subsidiaries on a
consolidated basis.
16
-16-
Events of Default: Customary for facilities similar to the Credit
Facilities and others to be specified by the Joint
Lead Arrangers, including, but not limited to,
nonpayment of principal, interest, fees or other
amounts when due; violation of covenants; failure of
any representation or warranty to be true in all
material respects; cross-default and
cross-acceleration; Change in Control (to be defined);
bankruptcy and insolvency events; material judgments;
ERISA events; change of control under any other
indebtedness; and actual or asserted (by Borrower or
any affiliate) invalidity of loan documents or
security interests.
Yield Protection and
Increased Costs: Usual for facilities and transactions of this type,
including, but not limited to, in respect of
prepayments (which will include reimbursement of
redeployment costs in the case of prepayments (or
conversion into ABR loans) of LIBOR loans other than
at the end of an interest period), taxes (including
but not limited to gross-up provisions for withholding
taxes imposed by any governmental authority), changes
in capital requirements, guidelines or policies or
their interpretation or application, illegality,
change in circumstances, reserves and other provisions
deemed necessary by the Joint Lead Arrangers or the
other Lenders to provide customary protection for U.S.
and non-U.S. Lenders.
Assignments and
Participations: No Credit Party may assign its rights or obligations
in connection with the Credit Facilities without the
prior written consent of all the Lenders.
Lenders shall be permitted to assign and participate
loans, notes and commitments. Non-pro rata
assignments of loans, notes, and commitments of the
Credit Facilities shall be permitted. Each assignment
(unless to another Lender or its affiliates) shall be
in a minimum amount of $5 million (unless Borrower and
the Administrative Agent otherwise consents or unless
the assigning Lender's exposure is reduced to $0).
Assignments shall be permitted with Borrower's consent
(not to be unreasonably withheld or delayed), except
that no such consent need be obtained to effect an
assignment to any Lender (or its affiliates) or if any
event of default has occurred and is continuing.
Participations shall be permitted without restriction
and participants will have the same benefits as the
original syndicate Lenders with regard to yield
protection and increased costs, collateral benefits
and provision of information on the Credit Parties (it
being understood that with respect to yield protection
and increased cost provisions, such shall be
applicable to the participant only if the Lender
effecting such participation would have been entitled
thereto). Voting rights of participants will be
subject to customary limitations. In the case of the
Revolving Facility,
17
-17-
assignments will require the consent of the L/C
Lender. Assignees will assume all of the rights and
obligations of the assigning Lender. Assignments to
any Credit Party and or any of its affiliates are
prohibited without consent of all of the Lenders.
Voting: Lenders holding at least a majority of the extensions
of credit and commitments under the Credit Agreement
(the "Required Lenders").
Expenses and
Indemnification: In addition to those out-of-pocket expenses
reimbursable under the Commitment Letter, all
out-of-pocket expenses of the Joint Lead Arrangers and
the Administrative Agent (and the Lenders for
enforcement costs and documentary taxes) associated
with the preparation, execution and delivery of any
waiver or modification (whether or not effective) of,
and the enforcement of, any Credit Document (including
the reasonable fees, disbursements and other charges
of counsel for the Joint Lead Arrangers and the
Administrative Agent) are to be paid by Borrower.
Borrower will indemnify each of the Joint Lead
Arrangers, the Administrative Agent and the other
Lenders and hold them harmless from and against all
costs, expenses (including fees, disbursements and
other charges of counsel) and liabilities arising out
of or relating to any litigation or other proceeding
(regardless of whether the Joint Lead Arrangers, the
Administrative Agent or any such other Lender is a
party thereto) that relate to the Transactions or any
transactions related thereto; provided, however, that
none of the Joint Lead Arrangers, the Administrative
Agent or any such other Lender will be indemnified for
any cost, expense or liability to the extent
determined by a court of competent jurisdiction in a
final and nonappealable judgment to have resulted from
such person's gross negligence or bad faith.
Governing Law and Forum: New York.
Waiver of Jury Trial: All parties to the Credit Agreement waive right to
trial by jury.
Counsel for Joint Lead
Arrangers: Cahill Gordon & Reindel.
18
ANNEX I
Interest Rates and Fees: Borrower will be entitled to make borrowings at
either LIBOR or ABR, plus (A) with respect to LIBOR
Loans, (i) in the case of Loans under the Revolving
Facility, 2.75% per annum; (ii) in the case of Loans
under the Term Loan A Facility, 2.75% per annum and
(iii) in the case of Loans under the Term Loan B
Facility, 3.25% per annum; and (B) with respect to ABR
Loans, (i) in the case of Loans under the Revolving
Facility, 1.75% per annum; (ii) in the case of Loans
under the Term Loan A Facility, 1.75% per annum; and
(iii) in the case of Loans under the Term Loan B
Facility, 2.25% per annum. A pricing grid governing
such rates showing stepups/ stepdowns in such rates
beginning after 12 months after the Closing Date shall
be negotiated based upon improved credit measures.
"ABR" means the higher of (i) the corporate base rate
of interest announced by the Administrative Agent from
time to time, changing when and as said corporate base
rate changes, and (ii) the Federal Funds Rate plus
0.50% per annum. The corporate base rate is not
necessarily the lowest rate charged by the
Administrative Agent to its customers.
"LIBOR" means the rate determined by the
Administrative Agent to be available to the Lenders in
the London interbank market for deposits in the amount
of, and for a maturity corresponding to, the amount of
the applicable LIBOR Loan, as adjusted for maximum
statutory reserves.
Commitment fees accrue on the undrawn amount of the
Credit Facilities, commencing on the Closing Date. The
commitment fee in respect of the Credit Facilities
will be 0.50% per annum.
All commitment fees will be payable in arrears at the
end of each quarter and upon any termination of any
commitment, in each case for the actual number of days
elapsed over a 360-day year.