EXHIBIT (b)(2)
One North Franklin Street
Thirty-Fifth Floor
Chicago, IL 60606
January 26, 2004
Mr. Lewis J. Schoenwetter
H.I.G. Capital, LLC
1001 Brickell Bay Drive, 27th Floor
Miami, FL 33131
Re: Commitment for Bridge Financing
Dear Lewis:
On behalf of Dymas Funding Company, LLC and its affiliates (collectively
"Dymas"), we hereby commit to provide a $34,000,000 Senior Secured Bridge
Facility ("Bridge Facility") upon the general terms and conditions outlined in
the summary of terms attached to this commitment letter. The Bridge Facility
would be used (i) to provide financing for the acquisition by H.I.G. Capital LLC
("HIG") of T-NETIX, Inc. ("T-NETIX"), (ii) to refinance existing indebtedness,
(iii) to provide financing for ongoing working capital needs and (iv) to finance
expenses relating to the acquisition and the Bridge Facility.
The summary of terms attached hereto is intended to be indicative of the
principal terms of the Bridge Facility and does not purport to specify all of
the terms, conditions, representations and warranties, covenants and other
provisions that will be contained in the final loan documents for the Bridge
Facility.
Dymas is delivering this commitment letter to you in reliance upon the accuracy
of all information furnished to Dymas by you or on your behalf. You agree that
you will not disclose the contents of the summary of terms attached hereto to
any third party (including, without limitation, any financial institution or
intermediary) without Dymas' prior written consent other than to the board of
directors of and advisors to (including Mooreland Partners) T-NETIX,
shareholders of T-NETIX, providers of subordinated debt, prospective equity
investors, governmental and regulatory authorities and your advisors and
officers ("Approved Third Parties") on a need-to-know basis. You agree to inform
all such persons who receive information concerning Dymas, this commitment
letter, or the summary of terms that such information is confidential and may
not be disclosed to any other person. Not withstanding the preceding paragraph
however, HIG and T-NETIX shall be allowed to provide any and all information to
the extent required by the SEC in connection with the tender offer.
By executing this commitment letter, you agree to pay the fees, costs and
expenses provided for in the summary of terms attached hereto and to indemnify
Dymas, its directors, officers, employees, agents, auditors, accountants,
consultants, counsel and affiliates from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages or expenses including
amounts paid in settlement, incurred by any of them arising out of or by reason
of any
investigation, litigation or other proceeding brought or threatened relating to
any loan made or proposed to be made hereunder except to the extent resulting
from Dymas' gross negligence and willful misconduct. You agree that in any
action arising from an alleged breach by Dymas of this commitment letter the
only damages that may be sought are only those which are direct and reasonably
foreseeable as the probable result of any breach thereof and any right to
indirect, special or punitive damages or lost anticipated profits is hereby
waived.
This commitment letter and the summary of terms attached hereto supersede all
prior discussions, indications of interest and proposals previously delivered to
you. Unless extended in writing by Dymas, in its discretion, this commitment
shall expire upon 7:00 p.m., January 26, 2004, unless you shall have executed
and delivered a copy of this commitment letter to the attention of the
undersigned prior to that date and time, and you shall have delivered to the
undersigned a check in the amount of $42,500 in payment of the initial Bridge
Facility Fee no later than January 29, 2004. This commitment letter and the
summary of terms attached hereto will terminate if the transaction contemplated
herein in the summary of terms attached hereto does not close prior to March 31,
2004. Expiration of this commitment shall not affect your obligations to pay any
fees, costs or expenses provided for herein or in any other agreements entered
into between H.I.G. Capital or the borrower and Dymas. Subject to the terms and
conditions specified in the summary of terms attached hereto, it is contemplated
that the proceeds of the facility provided for herein and therein shall be used
to refinance existing indebtedness of T-NETIX and to finance the acquisition by
a newly formed corporation of certain shares of stock of T-NETIX provided,
however, in the event the conditions specified in that certain commitment letter
of even date herewith between the parties hereto (the "Permanent Commitment")
are satisfied and the facilities provided for therein are funded, the facilities
provided for herein shall not be utilized. If the facilities provided for herein
are funded, it is contemplated that subject to the conditions set forth in the
Permanent Commitment, the proceeds of the facilities provided for therein shall
be used to refinance in full the facilities provided for herein.
We appreciate the opportunity you have given us to deliver a financing
commitment and look forward to working with you.
Sincerely,
Dymas Funding Company, LLC
By: Dymas Capital Management Company, LLC
Its: Manager
By: /s/ Kenneth Leonard
--------------------------------------
Title: Managing Director
Summary of Terms - Bridge, Dated January 26, 2004
-2-
Accepted and Agreed to
this 26th day of January, 2004:
HIG Capital, LLC
By: /s/ Brian Schwartz
---------------------------------
Title: Managing Director
Summary of Terms - Bridge, Dated January 26, 2004
-3-
OUTLINE OF CERTAIN TERMS AND CONDITIONS
OF PROPOSED CREDIT FACILITY
The following is intended to summarize certain basic terms of the Bridge
Facility. It is not intended as a definitive list of all requirements of Agent
in connection with the financing commitment.
BORROWER: T-NETIX, Inc. ("T-NETIX") with respect to the Revolver
and a newly formed Delaware corporation formed to
acquire the stock of T-NETIX ("NewCo") with respect to
the Term Loan.
SOLE LEAD ARRANGER: Dymas Capital Management Company, LLC ("Arranger").
ADMINISTRATIVE AGENT: Dymas Funding Company, LLC ("Agent") (together with
Arranger, "Dymas").
USE OF PROCEEDS: The proceeds of the (i) Term Loan shall be used to
finance the acquisition of T-NETIX (the "Acquisition"),
(ii) Revolver shall be used to refinance existing
indebtedness and fund general working capital needs, and
(iii) Term Loan shall be used to pay associated
transaction fees, costs and expenses.
CREDIT FACILITY: A $34,000,000 Senior Secured Bridge Facility
(collectively, the "Bridge Facility"), consisting of the
loans described below:
- A six-month senior secured revolving loan facility
(a "Revolver") with a commitment amount of
$14,000,000 with estimated fundings at close of
$5,500,000 (specific funding amount subject to
working capital fluctuations to be discussed and
mutually agreed upon) and $2,200,000 in
outstanding face amount of letters of credit.
- A six-month senior secured term loan ("Term Loan")
with a principal amount of up to $20,000,000
funded at closing. The amount of the Term Loan
shall be calculated following the determination of
the number of shares of T-NETIX tendered to NewCo.
REVOLVER AVAILABILITY: Availability under the Revolver is subject to a
borrowing base that is equal to the sum of up to 80% of
eligible accounts receivable with the definition to be
determined in the loan documentation for the Bridge
Facility ("Definitive Documentation"). At Borrower's
option, letters of credit may be issued or guaranteed
under the Revolver. Outstanding letters of credit will
be reserved from availability under the Revolver.
AMORTIZATION: The Term Loan would be payable in one installment of
principal at the earlier of six months after the Closing
Date or the merger of Newco with and into T-NETIX (the
"Merger"). In addition, payment of the Term Loan shall
be made as required by Regulation U.
INTEREST: The Borrower is required to pay interest at the Base
Rate plus the applicable margin according to the
following pricing grid:
REVOLVER: Base Rate plus 2.00%.
Unused Facility Fee: 0.50% per annum on the average
daily balance of the unused portion of the Revolver,
payable quarterly in arrears.
Letter of Credit Fee: A per annum fee in an amount equal
to the LIBOR margin on the Revolver, payable quarterly
in arrears.
Summary of Terms - Bridge, Dated January 26, 2004
-4-
TERM LOAN: Base Rate plus the applicable margin as
indicated below.
BASE RATE MARGIN
----------------
Month 1: 4.00%
Month 2: 4.25%
Month 3: 4.50%
Month 4: 6.00%
Month 5: 6.50%
Month 6: 7.00%
Interest on Revolver Base Rate loans will be payable
monthly in arrears on the last day of each calendar
month.
Interest with respect to the Term Loan shall accrue,
compound and be added to the principal balance of the
Term Loan at the end of each calendar month after
closing. Such capitalized interest shall be deemed part
of the principal balance of the Term Loan. All accrued
and unpaid interest (including capitalized interest)
shall be payable on the maturity date.
As used herein, "Base Rate" means the greater of (a)
the rate of interest publicly announced from time to
time by JP Morgan Chase in New York, New York as its
reference rate, base rate or prime rate and (b) the
Federal Funds Rate plus 0.50% per annum. All interest
and fees shall he computed on the basis of a year of 360
days for the actual days elapsed. After the occurrence
and during the continuance of an event of default, at
the request of the Agent or the requisite lenders,
interest on the obligations shall be increased by 2.0%
per annum and shall be payable on demand.
EARLY REPAYMENT: The Loans may be prepaid without penalty or premium.
CLOSING DATE: The first date on which all Definitive Documentation is
executed by the Borrower, Agent and other third parties
relevant to this transaction, and on which all
conditions set forth therein shall have been satisfied
or waived by the Agent.
COLLATERAL: The Revolver shall be secured by a perfected security
interest in, and lien on, all now owned or hereafter
acquired property and assets of T-NETIX and its
subsidiaries, real and personal, tangible and intangible
(including, without limitation, all bank and deposit
accounts, accounts receivable, contract rights,
equipment, general intangibles, inventory, investment
property, machinery, and real estate), and a perfected
pledge of 100% of the equity securities of Borrower's
subsidiaries. The Term Loan shall be secured by a first
perfected security interest in, and lien on, all the
owned and hereafter acquired property and assets of
NewCo, including without limitation, 100% of the stock
of T-NETIX owned by NewCo. All such security interests
and liens shall be first priority, subject to no other
lien, security interest, charge or encumbrance, except
as set forth in the Definitive Documentation. NewCo
shall comply with Regulation U.
Summary of Terms - Bridge, Dated January 26, 2004
-5-
CONDITIONS PRECEDENT: The obligation of the Agent and Lender to make any Loan
will he subject to customary conditions precedent,
including, without limitation:
1. Satisfaction with the legal structure and
documentation of the transactions, including the
Acquisition, and after giving affect thereto NewCo
will own more than 50% of the stock of T-NETIX and
in no event stock representing less than voting
control of T-NETIX.
2. T-NETIX shall have a minimum trailing twelve-month
pro forma adjusted EBITDA at closing satisfactory
to Dymas subject to such add-backs to be mutually
agreed upon by Dymas and HIG.
3. T-NETIX shall have, at the closing, a minimum
unused but available borrowing capacity under the
Revolver of not less than $3.0 million, in each
instance, after (i) giving effect to the initial
Loans made on the Closing Date, (ii) existing
letters of credit, and (iii) the payment of all
fees and expenses related to the Revolver portion
of the Bridge Facility.
4. Satisfaction by the Agent, in its sole discretion,
with the capital structure of the holding company,
Borrower and its subsidiaries, and the terms of
any outstanding indebtedness, including any
subordinated indebtedness issued to
Summary of Terms - Bridge, Dated January 26, 2004
-6-
facilitate this transaction, and of the ability of
the Agent to exercise remedies.
5. Satisfaction by the Agent, in its sole discretion,
with any indebtedness due and owing by any
Borrower to any affiliate (including, without
limitation, the indebtedness due and owing to the
seller), which indebtedness shall be subordinated
to the obligations of the Borrower with respect to
the Bridge Facility pursuant to a subordination
agreement in form and substance satisfactory to
the Agent.
6. Fully funded cash equity of not less than $20.0
million of NewCo's pro forma capitalization
invested by HIG and its co-investors.
7. Fully funded unsecured subordinated indebtedness
of at least $24.0 million and not more than $26.0
million of NewCo's pro forma capitalization
invested by a third-party acceptable to Agent,
such acceptance not to be unreasonably withheld.
8. No claim, action, suit, investigation, litigation
or proceeding, pending or threatened in any court
or before any arbitrator or governmental
instrumentality, that relates to the Bridge
Facility, the Acquisition, the Merger or that, in
the opinion of Agent, has any reasonable
likelihood of having a material adverse effect on
the business, operations, performance, assets,
properties, liabilities, condition (financial or
otherwise) or prospects of any Borrower.
9. No Material Adverse Change, or development that
the Administrative Agent considers reasonably
likely to result in a Material Adverse Change.
10. Evidence satisfactory to the Agent of the absence
of any other liens on the collateral described
herein, other than such liens previously mentioned
or approved by the Agent in its sole discretion.
11. Satisfaction of the Agent, in its reasonable
discretion, with the Acquisition documents for
T-NETIX (it being agreed, however, that the text
of the Agreement and Plan of Merger dated as of
January 22, 2004, a copy of which has been
provided to Agent, is satisfactory to Agent).
12. The Borrowers shall have obtained all required
licenses, approvals, waivers and consents,
governmental and otherwise, in connection with the
Bridge Facility and the related transactions to be
consummated on the closing date, all of which
shall remain in full force and effect.
13. Insurance satisfactory to the Agent, such
insurance with respect to the collateral to name
the Agent as loss payee.
14. Execution and delivery of agreements, instruments
and other documents as the Agent may determine are
appropriate for the transactions contemplated by
this term sheet, in each case in form and
substance satisfactory to the Agent, and
satisfaction of the conditions precedent contained
therein.
OTHER CONDITIONS: No management fee shall be payable prior to payment in
full of the Bridge Facility.
REPRESENTATIONS AND The Definitive Documentation shall contain customary
WARRANTIES: representations and warranties for a transaction and
company of this nature, including, without limitation,
corporate existence and good standing, authority to
enter into the Definitive Documentation and other
transaction documents, governmental approvals,
non-violation of other
Summary of Terms - Bridge, Dated January 26, 2004
-7-
agreements, financial statements, litigation, compliance
with environmental, pension and other laws, taxes,
insurance, absence of Material Adverse Change, absence
of default or unmatured default, regulatory approvals,
and perfection and priority of the Agent's liens.
COVENANTS: Covenants to be determined in Definitive Documentation,
but would be standard and customary for transactions of
this type.
EVENTS OF DEFAULT: The Definitive Documentation shall contain customary
events of default for a transaction and company of this
nature, including, without limitation, payment,
cross-default on other indebtedness or liability,
violation of covenants, breach of representation or
warranty, environmental, challenge to validity of
documents, lien ceases to be perfected, first priority,
no judgments, change of control, ERISA, injunction or
restraint on material portion of business, strike,
lockout or other act restricting conduct of business, or
indictment of a Borrower or any senior officer.
GOVERNING LAW: The Definitive Documentation shall be governed by the
laws of the State of New York.
ASSIGNMENT: The Definitive Documentation will permit the Lenders to
assign any Loan in its sole discretion without the
consent of Borrower to affiliates of such Lender and to
accounts or funds managed by a Lender and, with the
consent of Borrower not to be unreasonably withheld, to
non-Affiliated institutions (except in Events of
Default).
Accepted and Agreed to
this 26th day of January, 2004:
H.I.G. Capital LLC
By: /s/ Brian Schwartz
---------------------------------
Title: Managing Director
Summary of Terms - Bridge, Dated January 26, 2004
-8-