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EXHIBIT 4.09
NASHUA CORPORATION $66,000,000 CREDIT FACILITIES
Agreement in Principle
March 27, 1996
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The following is a summary of the changes to the existing Credit Agreement,
dated as of January 5, 1995 (the "EXISTING CREDIT AGREEMENT") among Nashua
Corporation (the "BORROWER"), the lenders parties thereto (the "LENDERS") and
Chemical Bank as agent (the "AGENT") to be incorporated in the Amended and
Restated Credit Agreement. This summary sets forth the agreement in principle of
the Borrower, the Lenders and the Agent in respect of the Amended and Restated
Credit Agreement subject to the conditions precedent set forth herein.
I. Types and Amounts of Credit Facilities
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Credit Facilities: The loans outstanding and commitments under the
Existing Credit Agreement will be restructured as a
term loan facility (the "TERM LOAN FACILITY") and a
revolving credit and letter of credit facility (the
"REVOLVING CREDIT FACILITY"; together with the Term
Loan Facility, the "CREDIT FACILITIES"). The aggregate
amount of the Credit Facilities will be $66,000,000.
Term Loan Facility
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Amount of Facility: The portion of outstanding loans under the Existing
Credit Agreement to be designated as outstanding Term
Loans will be $48,000,000.
Amortization: Fifty percent of the Term Loans outstanding on October
1, 1996 shall be amortized in four equal quarterly
installments commencing on January 2, 1997.
All remaining Term Loans shall be due and payable
December 31, 1997.
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Revolving Credit Facility
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Borrowing Base: The amount from time to time available under the
Revolving Credit Facility (which when added to a
portion to be determined of outstanding Term Loans)
shall not exceed a percentage, to be determined by the
Agent and the Lenders, of the eligible accounts
receivable and eligible inventory (each of which terms
shall be defined in the Credit Documentation (as
defined below)) of the Borrower and its subsidiaries.
Amount of Facility: The Revolving Credit Facility shall be in an amount
equal to $18,000,000 of which $5,000,000 (the "LETTER
OF CREDIT SUB-FACILITY") will be available
exclusively for letters of credit issued for insurance
coverage purposes only; PROVIDED that there shall be
a $250,000 sublimit for letters of credit issued
for purposes other than insurance coverage. The portion
of the outstanding loans under the Existing Credit
Agreement to be designated as outstanding Revolving
Credit Loans shall equal $5,000,000.
Letter of Credit
Sub-Facility: The letters of credit heretofore issued by the Bank of
Montreal in the face amount of $3,018,000 shall be
replaced by letters of credit issued under the
Letter of Credit Sub-facility. All letters of credit
shall expire on or before the Termination Date.
Maturity: December 31, 1997 (the "TERMINATION DATE").
Mandatory Prepayments
and Commitment
Reductions: The following amounts shall be applied to prepay the
Term Loans and reduce the Revolving Credit Facility:
(a) 100% of the net proceeds of any incurrence of
indebtedness after the Closing Date not permitted under
the Credit Documentation by the Borrower or any of its
subsidiaries;
(b) 100% (or, provided no Event of Default shall have
occurred and is continuing, 75% after mandatory
prepayments of principal (including amounts paid
to the Collateral Agent as cash collateral in respect
of outstanding Letters of Credit) of the Credit
Facilities and the Senior Notes have been paid to the
Lenders and the
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Senior Noteholders in an aggregate amount equal to
$50,000,000 less the Holdback Amount (as defined in
clause (h) below)) of the net proceeds of the sale or
issuance of equity (other than the issuance of equity
to senior employees in amounts to be agreed on in
connection with management incentive programs)
after the Closing Date by the Borrower or
any of its subsidiaries shall be paid to the
Collateral Agent for application as provided in
paragraphs (e) and (f) below; PROVIDED that in the
case of the issuance or sale of equity of Cerion
Technologies, Inc. ("Cerion") on terms and conditions
satisfactory to the Lenders, only the net proceeds
from the sale of such equity by Nashua Precision
Technologies, Inc. ("NPT") (and not the net proceeds
from the issuance of equity by Cerion) shall be paid
to the Agent as a mandatory prepayment as provided
above;
(c) 100% (or, provided no Event of Default shall have
occurred and is continuing, 75% after mandatory
prepayments of principal (including amounts paid
to the Collateral Agent as cash collateral in respect
of outstanding Letters of Credit) of the Credit
Facilities and the Senior Notes have been paid to the
Lenders and the Senior Noteholders in an aggregate
amount equal to $50,000,000 less the Holdback Amount)
of the net proceeds in excess of $500,000 on an
individual basis and $1,000,000 on a cumulative basis
of any sale or other disposition by the Borrower or
any of its subsidiaries of any assets (except for
the sale of inventory and obsolete assets in the
ordinary course of business and for the sale of assets
in amounts to be agreed when the net proceeds are used
for reinvestment in similar assets) shall be paid to
the Collateral Agent for application as provided in
paragraphs (e) and (f) below;
(d) On February 15, 1997, the Borrower shall pay to
the Collateral Agent 100% (or, provided no Event of
Default shall have occurred and is continuing, 75%
after mandatory prepayments of principal (including
amounts paid to the Collateral Agent as cash collateral
in respect of outstanding Letters of Credit)
of the Credit Facilities and the Senior Notes have
been paid to the Lenders and the Senior Noteholders
in an aggregate amount equal to $50,000,000 less the
Holdback Amount) of Excess Cash Flow (to be defined in
the Credit Documentation referred
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to below) for application as provided in the paragraphs
(e) and (f) below;
(e) Except in the case of a Triggering Event (as
defined below), all proceeds of mandatory prepayments
described in paragraphs (a), (b), (c) and (d) above
shall be paid by the Collateral Agent (as hereafter
defined)
FIRST to the Agent for the PRO RATA account of the
Lenders until all Revolving Credit Loans
outstanding in excess of $5,000,000 (including,
unreimbursed draws under any Letters of Credit
issued under the Letter of Credit Sub-facility in
excess of $3,018,000) are paid in full (including,
in each case, interest thereon) (and with any
such mandatory prepayment there shall be a
simultaneous permanent reduction of the Revolving
Credit Facility to an amount equal to $5,000,000
(not including the Letter of Credit Sub-facility)
irrespective of the amount outstanding under the
Revolving Credit Facility),
SECOND, to the Agent for the PRO RATA account of
the Lenders until all remaining outstanding
Revolving Credit Loans are paid in full WITHOUT a
permanent reduction of the Revolving Credit
Facility for such remaining loans,
THIRD 78.88% of such remaining proceeds to the
Agent for the pro rata account of the Lenders and
21.12% to Prudential Insurance Company of
America ("PRU") for the PRO RATA account of the
holders (the "NOTEHOLDERS") of the Borrower's
9.17% Senior Notes (the "SENIOR NOTES") until all
amounts outstanding under the Credit Facilities
and the Senior Notes (other than Yield Maintenance
Premium) are paid in full (and the Revolving
Credit Commitment is terminated) and all letters
of credit issued under the Letter of Credit
Sub-facility are fully cash collateralized, and
FOURTH, to the Agent for the PRO RATA account of
the Lenders until all Hedge Obligations (as
hereafter defined) are paid in full, and
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FIFTH, to Pru for the PRO RATA account of the
Noteholders until the Deferred Yield Maintenance
Obligations (as defined below) (including
interest thereon) are paid in full.
(f) All amounts paid to the Agent as per clause
"THIRD" in paragraph (e) above shall be applied,
FIRST, to the prepayment of the Term Loans,
SECOND, to the cash collateralization of
outstanding Letters of Credit and
THIRD, to the payment of Revolving Credit Loans
and the permanent reduction of the Revolving
Credit Facility in the amount of such payment.
Each such prepayment of the Term Loans shall be
applied to the scheduled installments
thereof in inverse order of maturity, and any
such prepayment of the Term Loans may not be
reborrowed.
(g) In addition, the Borrower shall from time to time
immediately prepay outstanding Revolving Credit Loans
to the extent they exceed the Borrowing Base then in
effect.
(h) At any time before the Revolving Credit Facility
has been permanently reduced to an amount less than or
equal to $10,000,000, with respect to any mandatory
prepayment relating to either any asset sale or equity
issuance described in clauses (b) or (c) above with
net cash proceeds in excess of $15,000,000, the
Borrower shall be entitled to retain an amount (the
"HOLDBACK AMOUNT") equal to the excess, if any, of (i)
$3,000,000 OVER (ii) the amount of Revolving Credit
Loans outstanding on the date of such mandatory
prepayment in excess of $5,000,000.
Optional Prepayments: Optional prepayments and commitment reductions
permitted on one Business Day's notice.
Collateral: The obligations of the Borrower in respect of the
Credit Facilities shall be secured initially by a
perfected first priority security interest in all
receivables and inventory
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of the Borrower and all of the assets of the Borrower's
domestic subsidiaries (all stock of the foreign
subsidiaries shall be pledged to the Agent, except in
the case where the Lenders determine that only 65% be
pledged due to adverse tax consequences). At its next
shareholders' meeting the Borrower will use its best
efforts to obtain all necessary consents to pledge all
of its assets to the Collateral Agent and if it obtains
such consents will pledge such remaining assets to the
Collateral Agent within 10 Business Days after being
so requested by the Majority Lenders. All collateral
will be shared with the Senior Noteholders and the
Lenders (subject to the priorities set forth herein)
(and in addition to securing the Credit Facilities
and the Senior Notes, will secure certain obligations
("HEDGE OBLIGATIONS") under existing and future foreign
exchange transactions entered into with certain of the
Lenders described in the section below entitled
"Foreign Exchange Agreements" and subject to the
limits therein described). Chemical Bank shall
act as collateral agent for the Lenders and the Senior
Noteholders (in such capacity, the "COLLATERAL AGENT").
The Security Agreements shall create two
separate and distinct liens. A prior lien will secure
principal of loans (including unreimbursed draws of
Letters of Credit in excess of $3,018,000)
outstanding under the Credit Facilities in excess of
$56,018,000 (including interest thereon) and a second
lien shall secure all remaining secured obligations.
II. Certain Conditions
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Initial Conditions: The availability of the Credit Facilities shall be
conditioned upon satisfaction of, among other things,
the following conditions precedent (the date upon which
all such conditions precedent shall be satisfied, the
"CLOSING DATE"):
(a) The Borrower and its subsidiaries shall have
executed and delivered satisfactory definitive
financing and security documentation with respect to
the Credit Facilities (the "CREDIT DOCUMENTATION").
(b) The Lenders shall have received evidence that the
Borrower has obtained the results of a recent lien
search in each of the jurisdictions and offices where
the collateral is located or recorded, and such search
shall
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reveal no liens on any of the collateral except
for liens permitted by the Credit Documentation.
(c) The Lenders shall have received any necessary
consents from the Senior Noteholders.
(d) The Lenders and the Senior Noteholders shall have
executed an intercreditor agreement satisfactory to
the Lenders.
(e) The Lenders shall have received such legal opinions
(including opinions (i) from counsel to the Borrower
and its subsidiaries and (ii) from such special and
local counsel as may be required by the Agent),
documents and other instruments as are customary for
transactions of this type or as they may reasonably
request.
(f) Any amendment to the Note Purchase Agreement shall
be in form and substance satisfactory to the Agent and
the Lenders.
(g) No material adverse change to the business,
operations or prospects of the Borrower or any of its
subsidiaries shall have occurred.
(h) The Borrower shall have received all necessary
approvals from its Board of Directors.
Affirmative Covenants: The Borrower will provide the Lenders with (i) copies
of the unaudited monthly management report within a
number of days to be determined after the end of each
calendar month, (ii) such borrowing base certification
as may be required by the Lenders, and (iii) such other
financial information as the Lenders may reasonably
request, including a revised business plan for fiscal
year 1996.
The Borrower and its subsidiaries shall maintain their
lock-boxes and accounts with their current banks but
shall enter into such agreements on the Closing
Date with the Collateral Agent and such banks (in form
and substance satisfactory to the Collateral Agent) to
ensure that the Collateral Agent has a perfected
security interest in the receipts and cash in such
lock-boxes and accounts.
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The Lenders shall have the right to continue the
engagement of an independent financial consultant
acceptable to the Lenders, at the Borrower's expense,
to assist in the analysis regarding the performance
and operations of the Borrower.
Financial Covenants: (a) EBITDA (to be defined in the Credit
Documentation), measured on a cumulative basis, for
any test period set forth below, will not, as at
the last day of such test period, be less than the
number set forth below opposite such test period:
Quarter Amount
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January 1, 1996 - March 31, 1996 $ 1,640,000
January 1, 1996 - June 30, 1996 $ 7,800,000
January 1, 1996 - September 30, 1996 $19,150,000
January 1, 1996 - December 31, 1996 $27,300,000
(b) The ratio of EBITDA to Fixed Charges (each to be
defined in the Credit Documentation), measured on a
cumulative basis for any test period set forth
below, will not, as at the last day of such test
period, be less than the ratio
set forth below opposite such test period:
Quarter Ratio
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January 1, 1996 - March 31, 1996 .67:1
January 1, 1996 - June 30, 1996 1.59:1
January 1, 1996 - September 30, 1996 2.60:1
January 1, 1996 - December 31, 1996 2.78:1
(c) Consolidated Tangible Net Worth (to be
defined in the Credit Documentation)
will not at any time during any quarter set forth
below be less than the number opposite such
quarter:
Quarter Amount
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Fourth Quarter 1995 $39,100,000
First Quarter 1996 $36,500,000
Second Quarter 1996 $37,100,000
Third Quarter 1996 $40,800,000
Fourth Quarter 1996 and thereafter $42,700,000
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(d) Capital Expenditures of the Borrower and its
subsidiaries will not for each fiscal year set
forth below exceed the amount set forth opposite
such fiscal year:
Fiscal Year
1995 $17,200,000
1996 $17,000,000
1997 $17,000,000
Negative Covenants: Limitations customary to this kind of financing,
including, without limitation, on: indebtedness
(including preferred stock); liens; guarantee
obligations; mergers, consolidations; sales of assets;
leases; dividends and other payments in respect of
capital stock; investments, loans and advances;
modifications of debt instruments; transactions with
affiliates; sale and leasebacks; negative pledge
clauses; changes in lines of business.
Interest Rate: The Applicable Margin will be .50%. All Loans shall be
Reference Rate Loans (as defined in the Existing Credit
Agreement).
Amendment Fee: $247,500 payable to the Agent, for the ratable benefit
of the Lenders, on the Closing Date.
Commitment Fee: .50% per annum on the unused portion.
Letter of Credit Fees: 2% per annum on amount available to be drawn payable
quarterly in advance (.25% for the account of the
Issuing Bank and the remaining 1.75% for the PRO RATA
account of the Lenders).
Contingent Fees and
Covenants: If the Borrower has not paid to the Lenders and the
Senior Noteholders mandatory prepayments of principal
(including amounts paid to the Collateral Agent as cash
collateral in respect of outstanding Letters of Credit)
of the Credit Facilities and the Senior Notes in an
aggregate amount equal to $20,000,000 less the
Holdback Amount on or prior to June 30, 1996, (i) the
Borrower shall pay to the Agent on July 1, 1996, for
the pro rata account of the Lenders, a facility fee
equal to 1% of the average daily principal amount
outstanding under the Credit Facilities (including the
average daily amount available to
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be drawn under all outstanding Letters of Credit)
during the period commencing on the Closing Date
and ending on June 30, 1996.
If the Borrower has not paid to the Lenders and the
Senior Noteholders mandatory prepayments of principal
(including amounts paid to the Collateral Agent as cash
collateral in respect of outstanding Letters of Credit)
of the Credit Facilities and the Senior Notes in an
aggregate amount equal to $50,000,000 less the
Holdback Amount on or before September 30, 1996,
then on October 1, 1996 the Borrower shall pay to the
Agent, for the pro rata account of the Lenders, a
facility fee equal to 1% of the average daily principal
amount outstanding under the Credit Facilities
(including the average daily amount available to be
drawn under all outstanding Letters of Credit) during
the period commencing on the Closing Date and ending
on September 30, 1996.
Expenses and
Indemnification: The Borrower shall pay (a) all reasonable out-of-pocket
expenses of the Agent associated with the preparation,
execution, delivery and administration of the Credit
Documentation and any amendment or waiver with respect
thereto (including, without limitation, expenses
relating to collateral examination and monitoring,
environmental audits, real estate or other asset
appraisals, consulting fees, filing fees and the
reasonable fees and disbursements and other
charges of counsel) and (b) all out-of-pocket expenses
of the Agent and the Lenders in connection with the
enforcement of the Credit Documentation (including the
fees and disbursements and other charges of counsel).
The Borrower shall indemnify, pay and hold harmless the
Agent and the Lenders (and their respective directors,
officers, employees and agents) against any loss,
liability, cost or expense incurred in respect of the
financing contemplated hereby or the use or the
proposed use of proceeds thereof (except to the extent
resulting from the gross negligence or willful
misconduct of the indemnified party).
Intercreditor Agreement: The Intercreditor Agreement will provide that upon a
bankruptcy event relating to the Borrower (a
"BANKRUPTCY EVENT"), an acceleration of all amounts
outstanding under
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the Credit Facilities or the Senior Notes (an
"ACCELERATION EVENT") or a termination of the
Revolving Credit Commitment (or a refusal by the
Lenders to lend thereunder for a six-month period) (a
"COMMITMENT TERMINATION EVENT"); a Bankruptcy Event,
an Acceleration Event and a Commitment Termination
Event, each "TRIGGERING EVENT"), proceeds from
mandatory prepayments or from collateral realization
will be paid
FIRST to the Agent for the PRO RATA account of the
Lenders until all Revolving Credit Loans in excess
of $5,000,000 (including, unreimbursed draws under
any Letters of Credit issued under the Letter of
Credit Sub-facility in excess of $3,018,000
(including, in each case, interest thereon)) are
paid in full and all outstanding Letters of Credit
under the Letter of Credit Sub-facility in excess
of $3,018,000 are fully cash collateralized,
SECOND if the amount outstanding under the
Revolving Credit Facility is less than $5,000,000
on the date of such Triggering Event, to Pru for
the PRO RATA account of the Noteholders in an
amount equal to the product of (x) $1,056,000
times (y) an amount equal to the difference
between (i) one MINUS (ii) the percentage derived
by dividing the amount outstanding under such
Revolving Credit Facility on such date by
$5,000,000,
THIRD PRO RATA to the Lenders and the Senior
Noteholders based on the remaining secured
obligations outstanding on such date (including
Hedge Obligations, contingent obligations in
respect of outstanding Letters of Credit that are
not cash collateralized and Yield Maintenance
Obligations accruing on the date of such
Triggering Event but excluding the Deferred Yield
Maintenance Obligations (as defined below)) until
all such obligations are paid in full and
FOURTH to the Noteholders PRO RATA until all
Deferred Yield Maintenance Obligations are paid
in full.
The Intercreditor Agreement shall further provide that
all Yield Maintenance Obligations accruing under the
Note Purchase Agreement prior to a Bankruptcy Event
relating
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to the Borrower or an Acceleration Event relating to
the Senior Notes (the "DEFERRED YIELD MAINTENANCE
OBLIGATIONS") shall be deferred (including any interest
accruing on such Deferred Yield Maintenance
Obligations) and shall not be payable until all amounts
outstanding under the Credit Facilities are paid in
full. In addition, "Required Secured Parties" under the
Intercreditor Agreement shall be defined as defined in
the 2/29/96 draft of the Intercreditor Agreement. The
consent of a majority in principal amount of Senior
Notes shall be required in order for the Lenders to
make advances under the Credit Facilities in excess of
$66,000,000; and once permanent reductions to the
Credit Facilities are made, such amounts cannot be
readvanced without the consent of a majority in
principal amount of the Senior Notes. To the extent not
already provided for in the 2/29/96 draft of the
Intercreditor Agreement, the Intercreditor Agreement
shall contain provisions that ensure that the Required
Secured Parties may not (i) impair the rights of the
Senior Noteholders under the Note Purchase Agreement,
and (ii) materially impair the rights of the Senior
Noteholders in the collateral subject to the lien of
the Collateral Agent, in each case without the prior
consent of a majority in principal amount of the
Senior Notes; PROVIDED however that nothing contained
in this sentence shall be construed as requiring any
provisions in the Intercreditor Agreement that could
limit the rights of the Required Secured Parties to
direct the exercise or non-exercise of rights under
the Intercreditor Agreement (including foreclosure
on collateral and the filing of a petition in
bankruptcy against the Borrower or any of its
subsidiaries) or limit any rights of the Required
Secured Parties to direct actions with respect to
preserving or protecting the collateral.
Assignment: The consent of the Borrower shall not be required for
any assignments after the occurrence of an Event of
Default.
Foreign Exchange Other than the Hedge Agreements existing on the date
Agreements: hereof, the Borrower shall not enter into any other
Hedge Agreements other than spot and forward foreign
exchange contracts (not to exceed 6 months in duration)
with any Lender in the aggregate notional amount not to
exceed $4,000,000 in the following currencies: Belgian
Francs, Canadian Dollars, British Pounds and Dutch
Gilders.
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Miscellaneous: If the Note Purchase Agreement (as defined in the
Existing Credit Agreement) is hereafter amended such
that any material terms thereof (including, without
limitation, pricing, covenants, amortization, events of
default and mandatory prepayments) are more favorable
to the Noteholders than the terms hereof are to the
Lenders (as determined by the Agent and the Lenders in
their sole discretion), the Borrower shall enter into
an amendment of the Amended and Restated Credit
Agreement in order to include such favorable terms
therein if the Agent and the Majority Lenders so
desire.
By January 1, 1997 (the "AMENDMENT DATE"), the Borrower
shall negotiate in good faith with the Agent and the
Lenders in order to enter into an amendment to the
Amended and Restated Credit Agreement for the purpose
of continuing the financial covenants described above
through the Termination Date. If after 30 days after
the Amendment Date, the Borrower, the Lenders and the
Agent have not agreed on appropriate levels for such
financial covenants through the Termination Date, the
Agent in its reasonable judgment shall set such levels
and the Borrower, the Agent and the Lenders shall
execute an amendment to the Amended and Restated Credit
Agreement on the thirty-first day after the Amendment
Date for the purposes of including the levels with
respect to such financial covenants set by the Agent
as part of the Amended and Restated Credit Agreement
for the period through the Termination Date. During the
10 Business Day period after any material asset sale,
the Borrower shall negotiate in good faith with the
Agent and the Lenders in order to enter into an
amendment to the Amended and Restated Credit Agreement
for the purpose of resetting the financial covenant
levels described above. If the Borrower, the Agent and
the Lenders have not agreed on appropriate levels for
such financial covenants by the end of such 10 Business
Day period, the Agent in its reasonable judgment shall
set such levels and the Borrower, the Agent and the
Lenders shall execute an amendment to the Amended and
Restated Credit Agreement on the first Business Day
after such 10 Business Day period for the purposes of
including the new levels set by the Agent as part of
the Amended and Restated Credit Agreement.
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[COPY NOT SUBMITTED BY CLIENT]
The closing shall occur on April 3, 1996 at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York 10017.
This Term Sheet may be executed in any number of separate counterparts and shall
be effective upon receipt by the Agent of such counterparts executed by the
parties hereto (including facsimile signatures).
IN WITNESS WHEREOF, 9the parties hereto have caused this Term Sheet to
be duly executed by their proper and duly authorized officers as of the day and
year first above written.
NASHUA CORPORATION
/s/ Daniel M. Junius
By: ____________________________
Daniel M. Junius
Vice President -- Finance,
Chief Financial Officer
and Treasurer
CHEMICAL BANK, as Agent and as a Lender
/s/ John J. Huber III
By: ____________________________
John J. Huber III
Managing Director
THE FIRST NATIONAL BANK OF BOSTON
/s/ Linda A. Sternfelt
By: ____________________________
Linda A. Sternfelt
Vice President
BANK OF MONTREAL
/s/ Thomas E. McGraw
By: ____________________________
Thomas E. McGraw
Manager