March 24, 1998
BMC Industries, Inc.
2 Appletree Square, Suite 400
8011 34th Avenue South
Minneapolis, MN 55425
Attention: Jeffrey J. Hattara
Vice President of Finance & Administration,
Chief Financial Officer
Ladies and Gentlemen:
You have informed Bankers Trust Company ("BTCo") and NBD Bank ("NBD"
and together with BTCo, the "Underwriters") that you are presently considering a
transaction (the "Acquisition") in which BMC Industries, Inc., a Minnesota
corporation (the "Company"), will acquire substantially all of the assets of
Orcolite, a division of Monsanto Company (the "Orcolite Assets") and the
business related to the Orcolite Assets (the "Business"), for approximately $100
million in cash.
The Underwriters understand that the Company will require a credit
facility (the "Credit Facility") aggregating up to $275 million (the "Credit
Amount"). The Credit Amount will be used to provide funds necessary to finance
the Acquisition, to refinance certain indebtedness of the Company, to pay
certain fees and expenses incurred in connection with the Acquisition and for
general corporate and working capital purposes. We currently contemplate that
the Credit Facility would consist of a $275 million five year senior unsecured
revolving facility.
BTCo is pleased to confirm that it is willing to commit to provide on
the terms and conditions set forth herein and in Exhibit A attached hereto (the
"Term Sheet") two-thirds of the Credit Amount ($183,334,250). NBD is pleased to
confirm that it is willing to commit to provide on the terms and conditions set
forth herein and in Exhibit A attached hereto (the "Term Sheet") the remaining
one-third of the Credit Amount ($91,665,750). In connection with the Credit
Facility, BTCo shall act as administrative agent (the "Administrative Agent")
for the Credit Facility. BTCo and NBD each reserve the right, prior to or after
execution of the definitive credit documentation with respect to the Credit
Facility, to syndicate all or part of its commitments to one or more financial
institutions or other institutional "accredited investors" (as defined in
Regulation D of the Securities
Page 12
Act of 1933, as amended) (collectively, the "Lenders" and each a "Lender") that
will become parties to such definitive credit documentation pursuant to a
syndication managed by BTCo.
The proposed financial terms and conditions for the Credit Facility
are based upon our review to date of certain information about the Company and
its subsidiaries provided to the Underwriters by you. If either of the
Underwriter's due diligence review of materials about the Company and its
subsidiaries discloses, or either of the Underwriter's otherwise discovers,
information not previously disclosed to such Underwriter which such Underwriter
reasonably believes has or is reasonably likely to have a material adverse
effect on the business, assets, financial condition or prospects of the Company
and its subsidiaries taken as a whole, and the transactions contemplated hereby,
the Underwriters may, in their sole discretion, suggest alternative financing
amounts or structures that ensure adequate protection for the Underwriters or
decline to provide the financing.
The Underwriters intend to commence syndication efforts promptly after
your execution of this letter, and you agree actively to assist the Underwriters
in achieving a syndication that is satisfactory to the Underwriters and you.
Such syndication will be accomplished by a variety of means, including direct
contact during the syndication between senior management and advisors of the
Company and its affiliates and the proposed syndicate members. To assist the
Underwriters in their syndication efforts, you hereby agree (i) to provide and
cause your advisors to provide the Underwriters and the other syndicate members
upon request with all information reasonably deemed necessary by the
Underwriters to complete syndication, including but not limited to financial
projections, pro forma financial statements and other information and
evaluations prepared by the Company and its affiliates and their respective
advisors, or on their behalf, relating to the transactions contemplated hereby,
(ii) to assist the Underwriters upon their reasonable request in the preparation
of an Information Memorandum to be used in connection with the syndication of
the Credit Facilities, and (iii) to otherwise assist the Underwriters in its
syndication efforts, including by making officers of the Company and its
affiliates available from time to time to attend and make presentations
regarding the business and prospects of the Company and its subsidiaries, as
appropriate, at a meeting or meetings of Lenders or prospective Lenders.
The Underwriters will not be obligated to enter into or make the
initial loan under the Credit Facility unless and until all of the following
conditions and the conditions otherwise set forth herein and in the Term Sheet
have been met:
(a) The structure and all terms of, and the documentation for, each
component of the Acquisition shall be satisfactory to the Underwriters
including, without limitation, the agreements and documentation pertaining
to the Credit Facility (the "Loan Documentation") The Loan Documentation
shall contain such covenants, terms, conditions, representations,
warranties and events of default (in addition to those referred to herein
or in the Term Sheet) as are customarily included by the Underwriters in
agreements governing transactions of the kind and subject to negotiation
between the Underwriters and the Company;
Page 13
(b) The Acquisition shall have been consummated in all material
respects in accordance with the documentation therefore and all applicable
laws. All necessary material governmental and third party approvals and/or
consents in connection with the Acquisition, the transactions contemplated
by the Credit Facility and otherwise referred to herein shall have been
obtained and remain in effect;
(c) There shall not exist any judgment, order, injunction or other
restraint prohibiting or imposing materially adverse conditions upon the
Acquisition or the transactions contemplated by the Credit Facility;
(d) The results of each of the Underwriters' due diligence review,
analysis and testing of the assets, liabilities, commitments,
contingencies, results of operations and prospects of the Company and its
subsidiaries and the Orcolite Assets and Orcolite Business shall be
acceptable to the Underwriters;
(e) Financial projections and pro forma financial statements for
Borrower and its subsidiaries shall have been delivered to the Underwriters
in form satisfactory to the Underwriters and such projections and pro forma
financial statements, including any assumptions made therein, shall be
reasonable, as determined by the Underwriters in their sole discretion;
(f) Since December 31, 1997, there shall have been no (i) material
adverse change in, or event materially and adversely affecting, the assets
liabilities, business, operations or condition (financial or otherwise) of
the Company and its subsidiaries taken as a whole or (ii) material adverse
change in, or event materially and adversely affecting, the assets,
liabilities, business, operations or condition (financial or otherwise) of
the Orcolite Business which, on a pro forma basis, would have a material
adverse effect on the Company and its subsidiaries taken as a whole; and
(g) There shall have been no material adverse change after the date
hereof in the syndication market for credit facilities similar in nature to
the Credit Facility contemplated herein, and there shall not have occurred
and be continuing any material disruption of, or a material adverse change
in, the financial, banking or capital markets that would have a material
adverse effect on the syndication of the Credit Facility, in each case, as
determined by each Underwriter in its sole discretion.
The Loan Documentation shall be prepared by Winston & Strawn as
special counsel to BTCo and the Administrative Agent. The reasonable costs and
expenses of Winston & Strawn in connection with the preparation, execution and
delivery of this letter, the Loan Documentation and the transactions
contemplated hereby and thereby and all other reasonable out-of-pocket costs and
expenses of BTCo and the Administrative Agent (including, without limitation,
the costs and expenses of syndication and of outside advisors and consultants)
in connection therewith (including in connection with the transactions
contemplated by the Acquisition Agreement and the Loan Documentation) shall be
for your account, whether or not
Page 14
any portion of the Credit Facilities is made available and whether or not the
Acquisition Agreement or the Acquisition is consummated.
To induce the Underwriters to enter into this letter, the Company
hereby agrees to indemnify and hold harmless each of the Underwriters and each
director, officer, employee, agent, attorney and affiliate thereof (each an
"Indemnified Person") from and against any and all actions, suits, proceedings
(including any investigations or inquiries), claims, losses, damages,
liabilities or expenses of any kind or nature whatsoever which may be incurred
by or asserted against or involve either or both of the Underwriters or any such
indemnified person as a result of or arising out of or in any way related to or
resulting from this letter or the transactions contemplated hereby and, upon
demand, to pay and reimburse the Underwriters and each indemnified person for
any reasonable legal or other out-of-pocket expenses incurred in connection with
investigating, defending or preparing to defend any such action, suit,
proceeding (including any inquiry or investigation) or claim (whether or not the
Underwriters or any such indemnified person is a party to any action or
proceeding out of which any such expenses arise); Provided, However, the Company
shall not indemnify any indemnified person pursuant to this paragraph against
any loss, claim, damage, expense or liability resulting from the gross
negligence or willful misconduct of such indemnified person. The foregoing
provisions of this paragraph shall be in addition to any rights that an
indemnified party shall have at common law or otherwise. Neither the
Underwriters nor any indemnified person shall be responsible or liable for
consequential or punitive damages which may be alleged as a result of this
letter.
Each of the Underwriters reserves the right to employ the services of
its affiliates in providing the services contemplated by this letter and to
allocate, in whole or in part to such affiliate, certain fees payable to BTCo or
NBD in such manner as such affiliates and BTCo or NBD, as applicable, may agree
in their sole discretion. You acknowledge that each Underwriter may share with
any of its affiliates, and such affiliates may share with BTCo or NBD, as
applicable, any information relating to the matters contemplated hereby,
including the Acquisition, the Orcolite Assets, the Orcolite Business, the
Company and its subsidiaries and affiliates, including any information as to the
creditworthiness of any such entities. Each of the Underwriters agrees to treat,
and cause any such affiliate to treat, any non-public information provided to it
by you, the Company or any of your affiliates, as confidential information in
accordance with customary banking industry practices.
Except as described above, the provisions of the immediately preceding
three paragraphs shall survive any termination of this letter.
You hereby represent and covenant that (i) all information which has
been or is hereafter made available to the Underwriters or the other Lenders by
you or any of your representatives in connection with the transactions
contemplated hereby (the "Information") is and will be complete and correct in
all material respects and does not and will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained therein not materially misleading (it being understood by
the
Page 15
Underwriters that any representations by you as to any information relating
to Seller and its subsidiaries is made to your best knowledge and is based
solely on publicly available information) and (ii) all financial projections
concerning the Company and its subsidiaries and Seller and its subsidiaries
that have or are hereafter made available to the Underwriters or the other
Lenders by you in connection with the transactions contemplated hereby (the
"Projections") have been or will be prepared in good faith based upon
reasonable assumptions. You agree to supplement the Information and the
Projections from time to time until the closing date of the Acquisition so
that the representation and warranty in the preceding sentence is true and
correct on such closing date. You acknowledge that in arranging and
syndicating the Credit Facility, the Underwriters will be using and relying
on the Information and Projections without independent verification thereof.
In issuing this commitment and undertaking, as the case may be, the
Underwriters are relying on the accuracy of the information furnished by you
or on your behalf.
Each of the Underwriters' obligations hereunder shall terminate on the
first to occur of (x) May 15, 1998 unless a definitive agreement providing for
the Acquisition has been entered into by the Company (and/or its respective
Affiliates) and Monsanto Company (with such agreement being herein called the
"Acquisition Agreement"), (y) on June 1, 1998, unless the Acquisition has been
consummated and the initial borrowing date under the Credit Facility (the
"Closing Date") shall have occurred or (z) at any time prior to June 1, 1998 if
the Acquisition Agreement, or your rights to consummate the Acquisition
thereunder, terminates.
If you are in agreement with the foregoing, please sign and return to
BTCo a copy of this letter, together with an executed copy of the letter
agreement dated the date hereof providing for certain fees and expenses payable
to BTCo (the "BTCo Fee Letter") and return to NBD a copy of this letter,
together with an executed copy of the letter agreement dated the date hereof
providing for certain fees and expenses payable to NBD (the "NBD Fee Letter").
This offer shall terminate at 4:00 p.m., New York time, on March 31, 1998 unless
a signed copy of this letter, together with a signed copy of the BTCo Fee
Letter, has been delivered to BTCo and a signed copy of this letter, together
with a signed copy of the NBD Fee Letter, has been delivered to NBD (including
by way of facsimile transmission) by such time. If this letter is not accepted
by you as provided in the immediately preceding sentence, you are to immediately
return this letter (and any copies hereof) to the undersigned. After such
acceptance, this letter and its contents shall not be disclosed by you except in
furtherance of, and to other proposed participants in, the transactions
contemplated by such letter and, in any event, this letter shall not be
disclosed publicly (unless required by law) without the prior written consent of
the Underwriters, except that, following your acceptance of this letter, you may
make public disclosure of the existence and amount of each of the Underwriters'
commitment, you may file a copy of this letter in any public record in which it
is required by law to be filed and you may make such other public disclosures of
the terms and conditions hereof as you are required by law, in the opinion of
your counsel, to make. The BTCo Fee Letter and the contents thereof, shall not
be disclosed by you without the prior written consent of BTCo. The NBD Fee
Letter and the contents thereof, shall not be disclosed by you without the prior
written consent of NBD.
Page 16
This letter may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
shall be an original, but all of which when taken together shall constitute one
agreement. This letter, together with the BTCo Fee Letter and the NBD Fee
Letter embodies the entire agreement and understanding between you and the
Underwriters with respect to the Credit Facility and supersedes all prior
agreements and understandings relating to the subject matter hereof. You
acknowledge, however, that BTCo and NBD and/or any of their affiliates may be
providing other services and/or other financing to you in connection with the
Acquisition and that this letter relates only to the Credit Facility, with all
such other services and financing to be agreed upon pursuant to other
documentation. This letter may only be amended in writing.
Page 17
THIS LETTER WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAWS AND ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR CONTEMPLATED BY THIS LETTER IS HEREBY WAIVED. YOU
HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK
STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE
RELATED TO THIS LETTER OR ANY MATTERS CONTEMPLATED HEREBY.
Very truly yours,
BANKERS TRUST COMPANY
By: /s/ Virginia M. Sermier
Name: Virginia M. Sermier
Title: Managing Director
NBD BANK
By: /s/ Carolann M. Morykwas
Name: Carolann M. Morykwas
Title: Authorized Agent
Accepted and Agreed to
this 24th day of March, 1998
BMC INDUSTRIES, INC.
By: /s/ Jeffrey J. Hattara
Name: Jeffrey J. Hattara
Title: Vice President, Finance and Administration,
Chief Financial Officer
Page 18