TENNECO INC.
$830 MILLION SENIOR SECURED CREDIT FACILITIES
Summary of Terms and Conditions
February __, 2007
Tenneco Inc., a Delaware corporation (the "Borrower"), intends to
refinance (the "Refinancing") all amounts outstanding under its Credit Agreement
dated as of December 12, 2003, as amended (the "Existing Credit Agreement"), for
which JPMorgan Chase Bank, N.A. acts as Administrative Agent. The Borrower will
require $830 million of senior secured credit facilities (the "Credit
Facilities") in order to finance the Refinancing and for general corporate
purposes (the Refinancing, the entering into the Credit Facilities and the use
of proceeds of the Credit Facilities are collectively referred to as the
"Transaction"). Following is a description of certain of the terms and
conditions of the Credit Facilities:
I. Parties
Borrower: Tenneco Inc. (the "Borrower").
Guarantors: Each (other than mutually agreed exceptions,
including for immaterial subsidiaries) of the
Borrower's direct and indirect domestic
subsidiaries (subsidiaries defined as greater
than 80% direct or indirect ownership by the
Borrower) (the "Guarantors"; the Borrower and the
Guarantors, collectively, the "Loan Parties").
Joint Lead Arrangers
and Joint Book-Runners: J.P. Morgan Securities Inc. and Deutsche Bank
Securities Inc. (in such capacities, the
"Arrangers").
Administrative Agent: JPMorgan Chase Bank, N.A. ("JPMCB" and, in such
capacity, the "Administrative Agent").
Lenders: A syndicate of banks, financial institutions and
other entities, including JPMCB, arranged by the
Arrangers and reasonably acceptable to the
Borrower (collectively, the "Lenders").
II. Types and Amounts of Credit Facilities
1. Tranche A Term Facility
Type and Amount of Facility: Five-year term loan facility (the "Tranche A Term
Facility") in the amount of $100 million (the
loans thereunder, the "Tranche A Term Loans").
Availability: The Tranche A Term Loans shall be made in a
single drawing on the Closing Date (as defined
below).
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Amortization: The Tranche A Term Loans shall be repayable in
equal quarterly installments in each year below
an aggregate amount for such year equal to the
percentage set forth opposite such year of the
aggregate principal amount of the Tranche A Term
Loans funded on the Closing Date:
Year Percentage
---- ----------
1 0%
2 0
3 15
4 40
5 45
The final installment of the Tranche A Term
Facility shall be due on the fifth anniversary of
the Closing Date.
Purpose: The proceeds of the Tranche A Term Loans shall be
used to finance the Refinancing, to pay fees and
expenses relating to the Transaction and for
general corporate purposes.
2. Tranche B Term Facility
Type and Amount of Facility: Seven-year term loan facility (the "Tranche B
Term Facility"; together with the Tranche A Term
Facility, the "Term Facilities") in the amount of
$177.5 million (the loans thereunder, the
"Tranche B Term Loans"; together with the Tranche
A Term Loans, the "Term Loans").
Availability: The Tranche B Term Loans shall be made in a
single drawing on the Closing Date.
Amortization: The Tranche B Term Loans shall be repayable in
consecutive equal quarterly installments in an
amount equal to 0.25% of the aggregate principal
amount of the Tranche B Term Loans funded on the
Closing Date during the first six years and nine
months after the Funding Date, with the balance
being payable in a final installment on the
seventh anniversary of the Closing Date.
Purpose: The proceeds of the Tranche B Term Loans shall be
used to finance the Refinancing, to pay fees and
expenses relating to the Transaction and for
general corporate purposes.
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3. Letter of Credit Facility
Type and Amount of Facility: A seven-year letter of credit facility (the
"Tranche B L/C Facility") in an amount equal to
$177.5 million (the letters of credit thereunder,
the "Tranche B L/Cs"). Letters of credit issued
under the Existing Credit Agreement and
outstanding on the Closing Date may be deemed to
be Tranche B L/Cs.
Availability: The Tranche B L/Cs will be issued by JPMCB or one
or more other Lenders requested by the Borrower
and to be reasonably acceptable to the
Administrative Agent (in such capacity, the
"Tranche B L/C Issuing Lender"). No Tranche B L/C
shall have an expiration date after the earlier
of (a) one year after the date of issuance and
(b) five business days prior to the seventh
anniversary of the Closing Date, provided that
any Tranche B L/C with a one-year tenor may
provide for the renewal thereof for additional
one-year periods (which shall in no event extend
beyond the date referred to in clause (b) above).
Participations: On and after the Closing Date, the participants
in the Tranche B L/C Facility (the "Tranche B L/C
Participants") shall acquire an undivided
interest in all rights and obligations of the
Tranche B L/C Issuing Lender in the Tranche B
L/Cs (the amount thereof being referred to as
such Participant's "Tranche B L/C
Participation").
On the Closing Date, each Tranche B L/C
Participant shall deposit with the Administrative
Agent an amount equal to such Participant's
Tranche B L/C Participation (its "Tranche B L/C
Funded Amount"). The Administrative Agent shall
invest the Tranche B L/C Funded Amounts in time
deposits (the "Tranche B L/C Credit-Linked
Deposit") earning a rate equal to a benchmark
eurodollar rate minus a customary percentage to
be determined based on market conditions on the
Closing Date. The sole funding obligation of each
Tranche B L/C Participant shall be satisfied upon
funding of its Tranche B L/C Funded Amount. The
Tranche B L/C Participants shall have no right to
withdraw their Tranche B L/C Funded Amounts. The
Borrower shall not have any right, title or
interest in the Tranche B L/C Credit-Linked
Deposit.
If a draft is paid under a Tranche B L/C for
which the Tranche B L/C Issuing Lender is not
reimbursed in full by the Borrower, each Tranche
B L/C Participant's ratable share of the Tranche
B L/C Funded Amounts shall automatically be
applied in satisfaction of such reimbursement
obligation.
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Tranche B L/Cs will be available at any time on
and after the Closing Date and prior to the
earlier to occur of (x) the Early Maturity Date
(as defined below), if any, and (y) the seventh
anniversary of the Closing Date, in an aggregate
amount outstanding at any time not greater than
the Tranche B L/C Credit-Linked Deposit.
Revolving Loans: The Tranche B L/C Facility will be available for
the making of revolving loans on substantially
the terms set forth in the Existing Credit
Agreement.
Purpose: The Tranche B L/C Facility shall be used to
finance the Refinancing, to pay fees and expenses
relating to the transaction for general corporate
purposes of the Borrower and its subsidiaries.
4. Revolving Facility
Type and Amount of Facility: Five-year revolving credit facility (the
"Revolving Facility"; together with the Term
Facility and the Tranche B L/C Facility, the
"Credit Facilities") in the amount of up to $375
million (the loans thereunder, the "Revolving
Loans").
Increase in Revolving
Facility: After the Closing Date, the Borrower may, from
time to time when no default or event of default
is in existence, request Lenders under the
Revolving Facility and/or, with the approval of
the Administrative Agent (which shall not be
unreasonably withheld), other entities, to
provide additional commitments to the Revolving
Facility so long as the aggregate amount of
commitments under the Revolving Facility after
the Closing Date does not exceed $450 million. If
such additional commitments are provided, the
Revolving Facility shall be increased by the
amount of such commitments. Such additional
commitments shall not result in a mandatory
prepayment of the Term Loans or reduction of the
Tranche B L/C Facility.
Availability: The Revolving Facility shall be available on a
revolving basis during the period commencing on
the Closing Date and ending on the fifth
anniversary thereof (the "Revolving Termination
Date").
Letters of Credit: Up to $100 million of the Revolving Facility
shall be available for the issuance of letters of
credit (the "Revolving L/Cs"; together with the
Tranche B L/Cs, the "Letters of Credit") by JPMCB
and other Lenders requested by the Borrower and
reasonably acceptable to the Administrative Agent
which agree to act as issuer (in such capacity,
collectively, the
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"Revolving L/C Issuing Lender"). No Revolving L/C
shall have an expiration date after the earlier
of (a) one year after the date of issuance and
(b) five business days prior to the Revolving
Termination Date, provided that any Revolving L/C
with a one-year tenor may provide for the renewal
thereof for additional one-year periods (which
shall in no event extend beyond the date referred
to in clause (b) above).
Drawings under any Revolving L/C shall be
reimbursed by the Borrower (whether with its own
funds or with the proceeds of Revolving Loans) no
later than the business day following
notification by the Revolving L/C Issuing Lender
of the applicable drawing dates. The Borrower
shall be deemed to have requested a borrowing of
Revolving Loans in the amount of each such
drawing, and the proceeds of such Revolving Loans
shall be used to reimburse the Revolving L/C
Issuing Lenders. To the extent that the Borrower
does not so reimburse the Revolving L/C Issuing
Lender, the Lenders under the Revolving Facility
shall be irrevocably and unconditionally
obligated to reimburse the Issuing Lender on a
pro rata basis.
Letters of Credit shall be deemed to be first
Tranche B L/Cs to the extent of availability
under the Tranche B L/C Facility and second
Revolving L/Cs.
Swingline Loans: A portion of the Revolving Facility not in excess
of $50 million shall be available for swingline
loans (the "Swingline Loans") from JPMCB (in such
capacity, the "Swingline Lender") on same-day
notice. Any such Swingline Loans will reduce
availability under the Revolving Facility on a
dollar-for-dollar basis. Each Lender under the
Revolving Facility shall acquire, under certain
circumstances, an irrevocable and unconditional
pro rata participation in each Swingline Loan.
Maturity: The Revolving Termination Date.
Purpose: The proceeds of the Revolving Loans shall be used
for general corporate purposes of the Borrower
and its subsidiaries.
5. Other Increases in Credit Facilities
Pre-Closing Increase: Prior to the Closing Date, the Borrower may
request the Arrangers to seek additional
commitments (i.e., in excess of $475 million in
the aggregate) for the Revolving Facility and the
Tranche A Term Facility (ratably as between such
Credit Facilities). The Tranche B Term Facility
and the Tranche B
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L/C Facility will be reduced ratably by the
accepted amount of such additional commitments.
Incremental Facilities: The Credit Documentation (as defined below) will
permit the Borrower to increase the Tranche B
Term Facility or the Tranche B L/C Facility or
add one or more incremental loan facilities to
the Credit Facilities (each, an "Incremental
Facility") in an aggregate amount of up to
$275,000,000; provided that (i) no Lender will be
required to participate in any such Incremental
Facility, (ii) no event of default or default
exists or would exist after giving effect
thereto, (iii) on a pro forma basis on the date
of incurrence and for the most recent
determination period, after giving effect to such
Incremental Facility and other customary and
appropriate pro forma adjustments events, the
Senior Secured Leverage Ratio (the ratio of (x)
the sum of total outstanding debt under the
Credit Facilities and the Second Lien Notes to
(y) EBITDA) is less than 2.5x, (iv) the maturity
date of any such Incremental Facility shall be no
earlier than the maturity date of the Tranche B
Term Facility of the Tranche B L/C Facility, as
applicable, and the weighted average life of any
such Incremental Facility shall not be less than
the remaining average life of the Tranche B Term
Facility or the Tranche B L/C Facility, as
applicable, (v) the interest rates applicable to
any Incremental Facility shall be subject to a
"most favored nation" clause to be agreed upon by
the Borrower and the Administrative Agent, (vi)
any Incremental Facility shall be on terms and
pursuant to documentation mutually acceptable to
the Borrower, the lenders under such Incremental
Facility and the Administrative Agent, provided
that, to the extent such terms and documentation
are not consistent in any material respect with
the Tranche B Term Facility or the Tranche B L/C
Facility, as applicable (except to the extent
permitted by clause (iv) or (v) above), they
shall be reasonably satisfactory to the
Administrative Agent and (vii) the net cash
proceeds of any such Incremental Facility shall
be used to redeem/purchase the Second Lien Notes
or to finance permitted acquisitions.
III. Certain Payment Provisions
Fees and Interest Rates: As set forth on Annex I.
Optional Prepayments and
Commitment Reductions: Loans may be prepaid and commitments may be
reduced by the Borrower at any time without
premium or penalty (other than breakage costs) in
minimum amounts set forth in the Existing Credit
Agreement. Optional prepayments of the
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Term Loans shall be applied to the installments
thereof in direct order of maturity and may not
be reborrowed. The Tranche B L/C Facility may be
reduced at the option of the Borrower from time
to time in minimum amounts to be agreed upon (and
a corresponding amount of the Tranche B L/C
Credit-Linked Deposit shall be returned to the
Tranche B L/C Participants).
Mandatory Prepayments: The following amounts shall be applied first to
prepay the Term Loans and second to reduce the
Tranche B L/C Facility:
(a) 100% (subject to reduction to (i) 75% if the
Consolidated Leverage Ratio (the ratio of (x) the
total outstanding debt to (y) EBITDA) is less
than 3.0x and (ii) 50% if the Consolidated
Leverage Ratio is less than 2.5x) of the net cash
proceeds of the incurrence of certain
indebtedness (excluding (i) proceeds of a
Permitted Receivables Financing described below,
(ii) permitted indebtedness issued to refinance
the Subordinated Notes or the Second-Lien Notes
and (iii) other permitted Indebtedness) after the
Closing Date by the Borrower or any of its
subsidiaries;
(b) 100% (subject to reduction to 50% if the
Borrower's corporate family rating is at least
Baa3 ("Moody's") or BBB- S&P)) of the net cash
proceeds of any sale or other disposition
(including as a result of casualty or
condemnation or sale/leaseback) by the Borrower
or any of its subsidiaries of any assets after
the Closing Date (except for (i) the sale of
inventory in the ordinary course of business and
(ii) other exceptions (including reinvestment and
including in respect of casualty/condemnation)
consistent with the existing Credit Agreement);
and
(c) 50% (subject to reduction to 0% if the Senior
Secured Leverage Ratio is less than or equal to
2.5x) of excess cash flow (to be defined in a
manner consistent with the Existing Credit
Agreement) for each fiscal year of the Borrower
(commencing with the 2008 fiscal year).
All such amounts shall be applied first to the
prepayment of the Term Loans and second to reduce
the Tranche B L/C Facility. Each such prepayment
of the Term Loans shall be applied ratably to the
Tranche A Term Loans and the Tranche B Term Loans
to the respective installments thereof in direct
order of maturity and may not be reborrowed.
Notwithstanding the foregoing, so long as any
Tranche A Term Loans are outstanding, each holder
of Tranche B Term Loans shall have the right to
refuse all or any portion of any
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such prepayment allocable to it, and the amounts
so refused will be applied to prepay the Tranche
A Term Loans. If the Tranche B L/Cs are cash
collateralized by the Borrower, a portion of the
Tranche B L/C Funded Amounts equal to the amount
of such cash collateral shall be withdrawn from
the Tranche B L/C Credit-Linked Deposit and
returned to the Tranche B L/C Participants.
In the event that (i) the Borrower's 10-1/4%
Senior Secured Notes due June 2013 (the "Second
Lien Notes") have not been refinanced or extended
prior to December 15, 2012 to a date not earlier
than September 30, 2014, all outstanding Tranche
B Term Loans shall mature and the Tranche B L/C
Facility shall terminate, in each case on
December 15, 2012 and (ii) the Second Lien Notes
have been refinanced or extended to a date prior
to September 30, 2014, all outstanding Tranche B
Term Loans shall mature and the Tranche B L/C
Facility shall terminate, in each case on the
date which is six months prior to the date to
which the Second Lien Notes have been refinanced
or extended (the earlier of the dates described
in clauses (i) and (ii), the "Early Maturity
Date").
IV. Collateral The obligations of each Loan Party in respect of
the Credit Facilities and any interest rate and
other hedging arrangements entered into with a
Lender or an affiliate thereof (collectively, the
"Secured Obligations") shall be secured by a
perfected first priority security interest (to
the extent required by the Existing Credit
Agreement) in substantially all of the assets
(including, without limitation, intellectual
property, owned real property, and capital stock)
of the Loan Parties (subject to exclusions
consistent with the Existing Credit Agreement and
a 65% limitation on the capital stock of each of
the Borrower's direct and indirect first-tier
foreign subsidiaries(with no pledge of the
capital stock of other foreign subsidiaries)).
V. Certain Conditions
Conditions to the
Closing Date: The initial funding of the Credit Facilities
shall be conditioned upon fulfillment of, among
other things, the following conditions precedent
(the date upon which all such conditions
precedent shall be satisfied, the "Closing Date")
on or before March 31, 2007:
(a) The Borrower shall have executed and
delivered definitive financing documentation with
respect to the Credit Facilities
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(the "Credit Documentation") that is reasonably
satisfactory to the Lenders. It is expected that
the Credit Documentation will consist of an
amendment and restatement of the Existing Credit
Agreement and related documentation and be
substantially similar to the Existing Credit
Agreement and related documentation with such
changes as the Borrower and the Lenders may agree
upon, including the changes set forth in this
Term Sheet and the changes set forth in Annex II.
(b) The Lenders, the Administrative Agent and the
Arrangers shall have received all fees required
to be paid by the Closing Date, and all
reasonable expenses of the Administrative Agent
and the Arrangers for which invoices have been
presented, on or before the Closing Date.
(c) The Administrative Agent shall have received
the results of a recent lien search in the state
of organization of each of the Loan Parties
(including bring-downs of recent searches), and
such search shall reveal no outstanding or
effective liens on any of the assets of the Loan
Parties except for liens permitted by the Credit
Documentation or liens to be discharged on or
prior to the Closing Date pursuant to
documentation reasonably satisfactory to the
Administrative Agent.
(d) The Lenders shall have received (i) audited
consolidated financial statements of the Borrower
for the two most recent fiscal years ended prior
to the Closing Date as to which such financial
statements are available and (ii) unaudited
interim consolidated financial statements of the
Borrower for each quarterly period ended
subsequent to the date of the latest financial
statements delivered pursuant to clause (i) of
this paragraph as to which such financial
statements are available. Delivery of financial
statements included in the Borrower's filings
described below with the SEC shall satisfy the
requirement for such financial statements.
(e) The Lenders shall have received projections
of the Borrower and its subsidiaries for each
year through 2009.
(f) All material governmental and third party
approvals necessary in connection with the
Transaction, the financing contemplated hereby
and the continuing operations of the Borrower and
its subsidiaries shall have been obtained and be
in full force and effect.
(g) The Lenders shall have received the legal
opinions in form and substance reasonably
satisfactory to the Administrative
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Agent, such documents and other instruments
relating to the collateral as they may reasonably
request in connection with the perfection of the
security interest in the collateral.
Conditions to all Borrowings: The making of each extension of credit shall be
conditioned upon (a) the accuracy in all material
respects of all representations and warranties in
the Credit Documentation and (b) there being no
default or event of default in existence at the
time of, or after giving effect to the making of,
such extension of credit. As used herein and in
the Credit Documentation a "material adverse
change" shall mean any event or change in
circumstance that would reasonably be expected to
have a material adverse effect on (a) the
Transaction, or (b) the business, property,
operations, or condition (financial or otherwise)
of the Borrower and its subsidiaries, taken as a
whole.
VI. Certain Documentation Matters
The Credit Documentation shall contain
representations, warranties, covenants and events
of default substantially similar to the Existing
Credit Agreement and other terms deemed
appropriate by the Borrower and the Lenders,
including, without limitation:
Representations and
Warranties: Substantially similar to the Existing Credit
Agreement, including financial statements; no
material undisclosed liabilities; no material
adverse change; corporate existence; compliance
with law; corporate power and authority;
enforceability of Credit Documentation; no
conflict with law or contractual obligations; no
material litigation; no default; ownership of
property; liens; intellectual property; taxes;
Federal Reserve regulations; ERISA; Investment
Company Act; subsidiaries; use of proceeds;
environmental matters; solvency; labor matters;
accuracy of disclosure; creation and perfection
of security interests; and seniority of debt and
lien priority.
Affirmative Covenants: Substantially similar to the Existing Credit
Agreement, including delivery of annual and
quarterly financial statements, reports,
accountants' certificates, officers'
certificates, amendments to Subordinated Notes
and Second Lien Notes and other information
reasonably requested by the Lenders; annual
projections (if Consolidated Leverage Ratio
exceeds 3.5x); payment of taxes; continuation of
business and maintenance of existence and
material rights and privileges; compliance with
laws and material contractual obligations;
maintenance of property and insurance;
maintenance of books
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and records; right of the Lenders to inspect
property and books and records; notices of
defaults, litigation and other material events;
compliance with environmental laws; and further
assurances (including, without limitation, with
respect to security interests in after-acquired
property).
Financial Covenants: Minimum interest coverage (i.e., EBITDA/interest
expense) of 2.10x at closing, subject to step ups
to be determined.
Maximum Consolidated Net Leverage Ratio (i.e.,
(x) total debt less the lesser of (i) aggregate
unrestricted cash in excess of $50 million and
(ii) $150 million to (y) EBITDA) of 4.25x at
closing subject to step downs to be determined.
The definitions of terms used in the financial
covenants will be substantially similar to the
Existing Credit Agreement.
The Credit Documentation will permit addbacks to
EBITDA of cash restructuring charges and related
expenses associated with restructurings by the
Borrower and its subsidiaries, provided that the
aggregate amount of such cash restructuring
charges after the Closing Date shall not exceed
$60 million. In addition, up to $10 million of
customer acquisition costs may be added back to
EBITDA in each fiscal year (beginning 2007).
Negative Covenants: Substantially similar to the Existing Credit
Agreement, including limitations (with mutually
agreed exceptions and baskets) on: indebtedness,
including guarantee obligation; liens; mergers,
consolidations, liquidations and dissolutions;
sales of assets; dividends and other payments in
respect of capital stock; investments, loans and
advances; optional payments and modifications of
Subordinated Notes and Second Lien Notes;
transactions with non-consolidated affiliates;
sale and leasebacks; changes in fiscal year;
negative pledge clauses; and changes in lines of
business.
The principal revisions to the Existing Credit
Agreement and related documents not set forth in
this Term Sheet are set forth on Annex II.
Events of Default: Substantially similar to the Existing Credit
Agreement, including nonpayment of principal when
due; nonpayment of interest, fees or other
amounts after a grace period of five days;
material inaccuracy of representations and
warranties when given; violation of covenants
(subject, in the case of certain affirmative
covenants, to a grace period of 30 days after
notice); cross-default to indebtedness
aggregating more
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than $50 million; bankruptcy events; certain
ERISA events; material judgments aggregating more
than $75 million; actual or asserted invalidity
of any guarantee or security document,
subordination provisions or security interest
(unless, in the case of security interests,
involving a de minimis amount not exceeding $5
million); and a change of control.
Voting: Amendments and waivers with respect to the Credit
Documentation shall require the approval of
Lenders holding not less than a majority of the
aggregate amount of the Term Loans, Revolving
Loans, Tranche B L/C Facility, participations in
Revolving Letters of Credit and unused
commitments under the Revolving Facility (the
"Required Lenders"), except that (a) the consent
of each Lender directly affected thereby shall be
required with respect to (i) reductions in the
amount or extensions of the scheduled date of
amortization or final maturity of any Loan, (ii)
reductions in the rate of interest or any fee or
extensions of any scheduled due date thereof and
(iii) increases in the amount or extensions of
the expiry date of any Lender's commitment and
(b) the consent of 100% of the Lenders shall be
required with respect to (i) modifications to any
of the voting percentages and (ii) releases of
all or substantially all of the Guarantors or all
or substantially all of the collateral other than
in connection with any sales or financing
otherwise permitted under the Credit
Documentation. Additional tranches may be added
under the Credit Documentation with the consent
of the Required Lenders; provided that the
consent of the Required Lenders shall not be
required in connection with any Incremental
Facility. Lenders which are in default of their
funding obligations shall not be entitled to vote
and shall be disregarded in voting calculations.
The Borrower shall be entitled to replace any
Lender (with a Lender or another lender
reasonably satisfactory to the Administrative
Agent) which has not approved any amendment or
waiver requiring the consent of all of the
Lenders as long as Lenders holding not less than
66-2/3% of the aggregate amount of the Term
Loans, Revolving Loans, Tranche B L/C Facility,
participations in Revolving Letters of Credit and
unused commitments under the Revolving Facility
shall have approved such amendment or waiver.
Assignments and
Participations: The Lenders shall be permitted to assign and sell
participations in their Loans, participations in
Tranche B L/Cs and commitments, subject, in the
case of assignments (other than to another Lender
or to an affiliate of a Lender), to the consent
of the Administrative Agent and the Borrower
(which consent in each case shall not be
unreasonably withheld and
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shall not be required from the Borrower during a
payment or bankruptcy Event of Default), provided
that no Lender may assign its commitments under
the Revolving Facility (other than to an
affiliate of such Lender or, with the consent of
the Administrative Agent not to be unreasonably
withheld, to another Lender then holding
commitments under the Revolving Facility) without
the consent of the Administrative Agent, the
Issuing Lender, the Swingline Lender and the
Borrower (which consent in each case shall not be
unreasonably withheld and shall not be required
from the Borrower during a payment or bankruptcy
Event of Default). Non-pro rata assignments shall
be permitted. In the case of partial assignments
(other than to another Lender or to an affiliate
of a Lender), the minimum assignment amount shall
be $5,000,000 ($1,000,000 in the case of Term
Loans and Tranche B L/C Participations), and,
after giving effect thereto, the assigning Lender
shall have commitments and Loans aggregating at
least $5,000,000 ($1,000,000 in the case of Term
Loans and Tranche B L/C Participations), in each
case unless otherwise agreed by the Borrower and
the Administrative Agent. Participants shall have
the same (but no greater) benefits as the Lenders
with respect to yield protection and increased
cost provisions. Participants may only vote on
matters on which the consent of all Lenders is
required. Pledges of Loans in accordance with
applicable law shall be permitted without
restriction. Promissory notes shall be issued
under the Credit Facilities only upon request.
Yield Protection: The Credit Documentation shall contain customary
provisions substantially similar to the Existing
Credit Agreement (a) protecting the Lenders
against increased costs or loss of yield
resulting from changes in reserve, capital
adequacy and other requirements of law, statutory
reserve requirements for eurocurrency liabilities
and from the imposition of or changes in
withholding or other taxes (other than in the
rate of income taxes applicable to each Lender in
its applicable lending office) and (b)
indemnifying the Lenders for "breakage costs"
incurred in connection with, among other things,
any prepayment of a Eurodollar Loan (as defined
in Annex I) on a day other than the last day of
an interest period with respect thereto.
Expenses and Indemnification: The Borrower shall pay (a) all reasonable
out-of-pocket expenses of the Administrative
Agent and the Arrangers associated with the
syndication of the Credit Facilities and the
preparation, execution, and delivery of the
Credit Documentation and any amendment or waiver
with respect thereto (including the reasonable
fees, disbursements and
14
other charges of counsel) and (b) all
out-of-pocket expenses of the Administrative
Agent and the Lenders (including the reasonable
fees, disbursements and other charges of counsel)
in connection with the enforcement of the Credit
Documentation.
The Administrative Agent, the Arrangers and the
Lenders (and their affiliates and their
respective officers, directors, employees,
advisors and agents) will have no liability for,
and will be indemnified and held harmless
against, any losses, claims, damages, liabilities
or expenses incurred in respect of the financing
contemplated hereby or the use or the proposed
use of proceeds thereof, except to the extent
they are found by a final, non-appealable
judgment of a court to arise from the gross
negligence or willful misconduct of the
indemnified party.
Governing Law and Forum: State of New York.
Counsel to the
Administrative Agent
and the Arrangers: Simpson Thacher & Bartlett LLP.
ANNEX I
Interest and Certain Fees
Interest Rate Options: The Borrower may elect that the Loans comprising
each borrowing bear interest at a rate per annum
equal to:
- the ABR plus the Applicable Margin; or
- the Eurodollar Rate plus the Applicable
Margin;
provided, that all Swingline Loans shall bear
interest based upon the ABR.
As used herein:
"ABR" means the higher of (i) the rate of
interest publicly announced by JPMCB as its prime
rate in effect at its principal office in New
York City (the "Prime Rate"), and (ii) the
federal funds effective rate from time to time
plus 0.5%.
"Applicable Margin" has the following meaning:
<Table>
<Caption>
Eurodollar ABR
Loans Loans
----- -----
Revolving Loans 1.50% 0.50%
Tranche A Term Loans 1.50 0.50
Tranche B Term Loans 1.75 0.75
Tranche B L/C Facility 1.75 0.75
</Table>
The foregoing margins for Revolving Loans and
Tranche A Term Loans shall be subject to
adjustment after the fiscal quarter in which the
Closing Date occurs as determined in accordance
with the pricing grid ("Pricing Grid") attached
hereto as Annex I-A and provided that no event of
default has occurred and is continuing.
"Eurodollar Rate" means the rate for eurodollar
deposits for a period equal to one or two weeks
or one, two, three or six months (as selected by
the Borrower) appearing on Page 3750 of the Dow
Jones Markets screen.
Interest Payment Dates: In the case of Loans bearing interest based upon
the ABR ("ABR Loans"), quarterly in arrears.
In the case of Loans bearing interest based upon
the Eurodollar Rate ("Eurodollar Loans"), on the
last day of each
I-2
relevant interest period and, in the case of any
interest period longer than three months, on each
successive date three months after the first day
of such interest period.
Commitment Fees: The Borrower shall pay a commitment fee
calculated at the rate per annum determined in
accordance with the Pricing Grid on the average
daily unused portion of the Credit Facilities,
payable quarterly in arrears and accruing from
the Closing Date. Swingline Loans shall, for
purposes of the commitment fee calculations only,
not be deemed to be a utilization of the
Revolving Facility. Outstanding Revolving L/Cs
will be treated as utilization of the Revolving
Facility for purposes of commitment fee
calculations.
Letter of Credit Fees: Earnings on the Tranche B L/C Credit-Linked
Deposit shall be distributed monthly in arrears
to the Tranche B L/C Participants. The Borrower
shall pay to the Tranche B L/C Participants (a)
the amount by which such earnings are less than
the amount that would have been earned had the
Tranche B L/C Funded Amounts earned the
applicable eurodollar rate for the relevant
period and (b) any breakage costs arising out of
the release of the Tranche B L/C Funded Amounts
other than on the last day of the relevant
interest period for the related deposit.
The Borrower shall pay a fee on all outstanding
Tranche B L/Cs at a per annum rate equal to the
Applicable Margin with respect to Tranche B Term
Loans which are Eurodollar Loans on the undrawn
face amount of each such Tranche B L/C. The
Borrower shall pay a fee on all outstanding
Revolving L/Cs at a per annum rate equal to the
Applicable Margin then in effect with respect to
Revolving Loans which are Eurodollar Loans on the
undrawn face amount of each such Revolving L/C.
Such fee shall be shared ratably among the
Lenders participating in such Letter of Credit
and shall be payable quarterly in arrears.
Fronting Fees: A fronting fee equal to an amount to be agreed
upon by the Issuing Lender and the Borrower per
annum on the face amount of each Letter of Credit
shall be payable quarterly in arrears to the
relevant Issuing Lender for its own account. In
addition, customary administrative, issuance,
amendment, payment and negotiation charges shall
be payable to each Issuing Lender for its own
account.
Default Rate: Overdue principal and reimbursement obligations
shall bear interest at 2% above the rate
otherwise applicable thereto.
I-3
Overdue interest, fees and other amounts shall
bear interest at 2% above the rate applicable to
ABR Loans.
Rate and Fee Basis: All per annum rates shall be calculated on the
basis of a year of 360 days (or 365/366 days, in
the case of ABR Loans the interest rate payable
on which is then based on the Prime Rate) for
actual days elapsed.
Pricing Grid
REVOLVING FACILITY AND TRANCHE
A TERM FACILITY
<Table>
<Caption>
EURODOLLAR COMMITMENT
CONSOLIDATED NET LEVERAGE RATIO ABR LOANS LOANS FEE
- ----------------------------------------- --------- ---------- ----------
greater than or equal to 4.00 to 1.0..... 1.00% 2.00% .500%
greater than or equal to 3.50 to 1.0..... 0.75 1.75 .375
greater than or equal to 2.50 to 1.0..... 0.50 1.50 .350
less than or equal to 2.5 to 1.0......... 0.25 1.25 .300
</Table>
ANNEX II
FINANCIAL COVENANTS
- Delete Fixed Charge Coverage Ratio Covenant (Section 7.1(c)).
- Delete Capital Expenditure Covenant (Section 7.7).
INDEBTEDNESS
- Increase general guarantee basket from $90 million to $100 million at any
time (Section 7.2(c)).
- Increase basket for purchase money/capital lease/acquired Indebtedness
from $75 million to $125 million at any time (Section 7.2(e)).
- Increase basket for Foreign Subsidiary Indebtedness from $100 million to
$150 million at any time (Section 7.2(h)).
- Increase general Indebtedness basket from $50 million to $150 million at
any time (Section 7.2(j)).
- Create new exception to Indebtedness covenant permitting new unsecured
indebtedness of up to $200 million of Foreign Subsidiaries if the
proceeds are used to redeem/prepay Second Lien Notes.
- Amend the Indebtedness covenant (Section 7.2) to clarify that notional
cash pooling arrangements by Foreign Subsidiaries are permitted.
- Amend the Indebtedness covenant (Section 7.2) to permit the Borrower to
guarantee on an unsecured basis all obligations of its subsidiaries.
LIENS
- Increase basket for Liens securing judgments and contingent obligations
relating to judgment appeal or other bonds from $15 million to $50
million at any time (Section 7.3(k)).
- Increase general Lien basket from $50 million to $100 million (Section
7.3(n)).
- Add an exception permitting cash collateral up to an amount to be agreed
upon to secure obligations to issuing banks in respect of banker's
acceptances issued through Joint Ventures in China.
INVESTMENTS
- Increase Joint Venture investment basket from $75 million per year to
$125 million per year (Section 7.8(g)).
- Add a general acquisition basket permitting acquisitions in an aggregate
amount of the sum of (i) $250 million, (ii) the net cash proceeds of
qualified equity of the Borrower issued after the Closing Date and
(iii) the portion of annual Excess Cash Flow (beginning with Excess
Cash Flow for fiscal year 2007) not required to be applied to payment
of the Credit Facilities and not used for other purposes. In addition,
the Borrower and its Subsidiaries may make other acquisitions as long
as, after giving effect thereto, the pro forma Consolidated Net Leverage
Ratio would be less than 3.0x (and in connection therewith the Borrower
may utilize any remaining portion of the basket described in the
preceding
sentence to the extent the pro forma Consolidated Net Leverage Ratio
would equal or exceed 3.0x).
- Increase the general investment basket from $50 million to $100 million
(Section 7.8(j)).
RESTRICTED PAYMENTS
- Replace restricted payment baskets/permitting purchase of employee stock
of up to $10 million at any time and a general dividend basket of $15
million per year (Section 7.6(b) and (c)) with the following:
General basket of $20 million per year; provided that (i) such basket
shall increase to $30 million per year if, after giving effect to a
restricted payment, the pro forma Consolidated Leverage Ratio would be
less than 3.25x and (iii) such basket may be further increased to a
cumulative basket of the sum of $100 million plus 50% of Consolidated
Net Income accruing from the Closing Date if, after giving effect to a
restricted payment, the pro forma Consolidated Leverage Ratio would be
less than 2.50x. No such restricted payment may be made during a
default or event of default other than restricted payments required
pursuant to contractual obligations to purchase capital stock or
options of the Borrower from officers or employees or former officers
or employees.
- Amend the restricted payments covenant (Section 7.6) to add an exception
which permits the Borrower to pay personal payroll taxes of employees
in respect of vested restricted shares of the Borrower's stock.
ASSET SALES
- Increase general asset sale basket from 10% of Consolidated Total Assets
to 25% of Consolidated Total Assets. Decrease minimum cash portion of
purchase price under general asset sale basket from 80% to 75% (Section
7.5(g)).
SALE/LEASEBACKS
- Amend the sale/leaseback covenant (Section 7.11) to exclude from the
restrictions of the covenant transactions with leases of one year or
less following the sale.
REDEMPTION OF SUBORDINATED NOTES AND SECOND LIEN NOTES
- Permit redemption/payment of the Second Lien Notes and the Subordinated
Notes in an amount equal to the sum of (i) the net cash proceeds of
equity issued by the Borrower after the Closing Date plus (ii) the
portion of annual Excess Cash Flow (beginning with Excess Cash Flow
for fiscal year 2007) not required to be applied to payment of the
Credit Facilities and which is not used for other purposes, provided
that the amount of the Subordinated Notes and the aggregate amount of
the Second Lien Notes and the Subordinated Notes that may be
redeemed/purchased pursuant to this exception is capped as follows
based on the pro forma Consolidated Leverage Ratio after giving effect
to such redemption/purchase:
<Table>
<Caption>
PF Consolidated Subordinated Notes Aggregate
Leverage Ratio Maximum Amount Maximum Amount
--------------- ------------------ --------------
greater than or equal to 3.0x $50 million $150 million
greater than or equal to 2.5x 100 million 300 million
less than 2.5x 125 million 375 million
</Table>
In addition, the Second Lien Notes may be redeemed/purchased with (i) the
net cash proceeds of Incremental Facilities, (ii) the net cash proceeds
of new senior or subordinated unsecured Indebtedness of the Borrower
(which Indebtedness may be guaranteed by the other Loan Parties on a
senior or subordinated basis, as applicable, (iii) proceeds of Revolving
Credit Loans and (iv) cash generated by the operations of the Borrower.
For the avoidance of doubt, the Subordinated Notes may only be
redeemed/paid (i) as set forth above based on the pro forma Consolidated
Leverage Ratio or (ii) from the net cash proceeds of Permitted
Refinancing Indebtedness or new common equity issued by the Borrower, as
provided in the Existing Credit Agreement.
- Amend Sections 7.9 and 7.15 to clarify that permitted
redemptions/payments of the Subordinated Notes and the Second Lien Notes
may be made within 30 days following receipt of permitted refinancing
proceeds rather than substantially concurrently with the receipt of such
proceeds.
EVENTS OF DEFAULT
- Amend Section 8(f) and other relevant provisions to provide that a
bankruptcy or similar proceeding with respect to a subsidiary of the
Borrower that has de minimus assets and liabilities is not a default or
event of default.
DEFINITIONS
- Amend the definition of "Indebtedness" to exclude from the definition
banker's acceptances issued through Joint Ventures in China up to an
amount to be agreed upon. (Section 1.1)
- Amend the definition of "Asset Sale" to clarify that the sale of
post-dated checks in accordance with past practices of the Borrower in
China is excluded from such definition. (Section 1.1)
- Amend the definition of "Consolidated Interest Expense" to refer to
interest expense to the extent paid in cash (Section 1.1)
MISCELLANEOUS
- Extend the commitment fee payment date from the first Business Day to the
second Business Day following the end of a calendar quarter (Section
2.10(a))
- Amend the definition of "Interest Payment Date" to extend payment date
for payment of ABR loans from the first Business Day to the second
Business Day following the end of a calendar quarter. (Section 1.1)
- Amend the definition of "Interest Payment Date" to extend the payment
date for payment of the Tranche B L/C Facility from the second Business
Day to the third Business Day following the end of a calendar quarter.
(Section 1.1)
- Revise certain notice deadlines for funding.
- Add a waiver of covenant violations/potential covenant violations
occurring under the Existing Credit Agreement prior to the Closing Date.
COLLATERAL
- Amend the definition of "Cash Management Obligations" set forth in the
guaranty and security documents to provide up to $15 million of
collateral and guaranty coverage for all working capital and long term
credit agreements, credit facilities supporting letters of credit and/or
bank issued guarantees and foreign exchange lines of credit provided by
any Lender (or any Affiliate of a Lender) to the Borrower or any of its
Subsidiaries (with the result that such loans will be secured on a pari
passu basis with the Credit Facilities).