SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
(RULE 13E-100)
TRANSACTION STATEMENT UNDER SECTION 13(E) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 13E-3 THEREUNDER
RULE 13E-3 TRANSACTION STATEMENT UNDER SECTION 13(E) OF THE
SECURITIES EXCHANGE ACT OF 1934
BNC MORTGAGE, INC.
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(Name of the Issuer)
KELLY W. MONAHAN
PETER R. EVANS
AL LAPENA
GARY VANDER-HAEGHEN
MARLES M. CROW
JAMIE LANGFORD
BNCM ACQUISITION CO.
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(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
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(Title of Class of Securities)
05561Y10
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(CUSIP Number of Class of Securities)
KAREN C. MANSON, ESQ.
SECRETARY
MORTGAGE INVESTCO LLC
3 WORLD FINANCIAL CENTER, 24TH FLOOR
NEW YORK, NY 10285
(212) 526 1936
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(Name, Address, and Telephone Numbers of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
- with copies to -
W. MICHAEL BOND, ESQ. DAVID H. SANDS, ESQ.
WEIL, GOTSHAL & MANGES LLP TROOP, STEUBER, PASICH, REDDICK & TOBEY, LLP
1615 L. STREET, N.W., SUITE 700 2029 CENTURY PARK EAST, 24TH FLOOR
WASHINGTON, DC 20036 LOS ANGELES, CA 90067
(202) 682-7000 (310) 728-3000
This statement is filed in connection with (check the appropriate box):
a. /X/ The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. / / A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: /X/
Check the following box if the filing is a final amendment reporting the results
of the transaction: / /
CALCULATION OF FILING FEE
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Transaction
Valuation: $52,564,566* Amount of Filing Fee: $10,513
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* For purposes of calculating the filing fee only. The Transaction Valuation was
determined based upon the sum of (a) the product of 5,151,194 shares of BNC
Mortgage, Inc. common stock outstanding and the merger consideration of $10.00
per share in cash, and (b) the product of 619,058 shares of BNC Mortgage, Inc.
common stock subject to outstanding options to purchase BNC Mortgage, Inc.
common stock and the difference between $10.00 per share and the exercise price
per share of each of such options. In accordance with Rule 0-11 under the
Securities Exchange Act of 1934, as amended, the filing fee was determined by
multiplying the Transaction Valuation by 1/50 of one percent.
/X/ Check the box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $10,513 Filing Party: BNC Mortgage, Inc.
Form or Registration No.: Date Filed: April 5, 2000
Preliminary Schedule 14A
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ITEM 1. SUMMARY TERM SHEET.
The information set forth under the caption "Summary Term Sheet" of the
preliminary proxy statement filed by BNC Mortgage, Inc. ("BNC Mortgage") with
respect to the merger of BNCM Acquisition Co. ("BNCM Acquisition") with and into
BNC Mortgage (the "Proxy Statement") is incorporated herein by reference.
ITEM 2. SUBJECT COMPANY INFORMATION.
(a) Name and Address. BNC Mortgage, Inc. is the subject company. Its
principal executive offices are located at 1063 McGaw Avenue, Irvine,
California, 92614-5532 and its telephone number at that address is (949)
260-6000.
(b) Securities. As of February 3, 2000, there were 5,151,194 shares of the
common stock of BNC Mortgage, par value $0.001 per share, outstanding.
(c) Trading Market and Price. The information set forth under the caption
"Price Range of Common Stock and Dividends" of the Proxy Statement is
incorporated herein by reference.
(d) Dividends. The information set forth under the caption "Price Range of
Common Stock and Dividends" of the Proxy Statement is incorporated herein by
reference.
(e) Prior Public Offerings. Not applicable.
(f) Prior Stock Purchases. The information set forth in Appendix D to the
Proxy Statement is incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) Identity of Filing Person.
This Schedule 13E-3 is filed jointly by Kelly W. Monahan, Peter R. Evans,
Al Lapena, Gary Vander-Haeghen, Marles Crow, Jamie Langford (such individuals,
collectively, the "Management Investors") and BNCM Acquisition Co. ("BNCM
Acquisition" and together with the Management Investors, the "Filing Persons").
Kelly W. Monahan is President and a director of BNC Mortgage. His business
address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California 92614-5532,
and his business telephone number is (949) 260-6000.
Peter R. Evans is Chief Financial Officer of BNC Mortgage. His business
address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California 92614-5532,
and his business telephone number is (949) 260-6000.
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Al Lapena is Vice President of Operations of BNC Mortgage. His business
address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California 92614-5532,
and his business telephone number is (949) 260-6000.
Gary Vander-Haeghen is Vice President of Sales of BNC Mortgage. His
business address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California
92614-5532, and his business telephone number is (949) 260-6000.
Marles M. Crow is Director of Human Resources of BNC Mortgage. Her
business address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California
92614-5532, and her business telephone number is (949) 260-6000.
Jamie Langford is Vice President of Funding of BNC Mortgage. Her business
address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California 92614-5532,
and her business telephone number is (949) 260-6000.
BNCM Acquisition's principal offices are located at c/o BNC Mortgage,
Inc., 1063 McGaw Avenue, Irvine, California 92614-5532 and its telephone number
at that address is (949) 260-6000.
Mortgage Investco LLC ("Mortgage Investco") is currently the sole
stockholder of BNCM Acquisition. It is anticipated that immediately prior to the
merger of BNCM Acquisition with and into BNC Mortgage, all of the common stock
of BNCM Acquisition will be owned by the Management Investors and that Mortgage
Investco and its affiliates will hold warrants and preferred stock representing
the right to acquire 75% of the surviving company's common stock on a fully
diluted basis. The warrants will be exercisable, and the preferred stock will be
convertible, beginning two years after the merger. Mortgage Investco's principal
offices are located at 3 World Financial Center, 200 Vesey Street, New York, New
York 10285 and its telephone number is (212) 526-7000.
Lehman Brothers Holdings Inc. ("Holdings") is the sole member of Mortgage
Investco. Its principal offices are located at 3 World Financial Center, 200
Vesey Street, New York, New York 10285 and its telephone number is (212)
526-7000.
The names, business addresses and telephone numbers of the executive
officers and directors of BNCM Acquisition, Mortgage Investco and Holdings are
as set forth in Appendix E to the Proxy Statement, which is incorporated herein
by reference.
(b) Business and Background of Entities.
BNCM Acquisition is a Delaware corporation with no business operations. It
was organized for the sole purpose of effecting a merger with and into BNC
Mortgage, with BNC Mortgage as the surviving corporation of such merger.
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Mortgage Investco is a Delaware limited liability company and a holding
company for mortgage-related investments.
Holdings is a Delaware corporation and a global investment bank.
During the last five years, none of BNCM Acquisition, Mortgage Investco or
Holdings (i) has been convicted in a criminal proceeding (excluding traffic
violations and similar misdemeanors), or (ii) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction
resulting in a judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
(c) Business and Background of Natural Persons.
The current principal occupation or employment, 5-year employment history
and citizenship of each of the Management Investors and of the executive
officers and directors of BNCM Acquisition, Mortgage Investco and Holdings is as
set forth in Appendix E to the Proxy Statement, which is incorporated herein by
reference.
During the last five years, none of the Management Investors, and to the
knowledge of the Filing Persons, none of the executive officers and directors of
BNCM Acquisition, Mortgage Investco or Holdings listed in Appendix E to the
Proxy Statement (i) has been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors), or (ii) has been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
resulting in a judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
ITEM 4. TERMS OF THE TRANSACTION.
(a) Material Terms. The information set forth under the following captions
of the Proxy Statement is incorporated herein by reference:
o "Notice of Special Meeting of Stockholders";
o "Summary- The Special Meeting";
o "Summary- The Merger";
o "Special Factors-Purpose of the Merger; Certain Effects of the Merger";
o "Special Factors-Certain Federal Income Tax Consequences";
o "Special Factors-Accounting Treatment."
(c) Different Terms. The information set forth under the captions
"Summary-Interests in the Merger that Differ From Your Interests" and "Special
Factors-Interests in the Merger that Differ from your Interests" of the Proxy
Statement is incorporated herein by reference.
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(d) Appraisal Rights. The information set forth under the caption "Special
Factors-Dissenters' Rights of Stockholders" of the Proxy Statement is
incorporated herein by reference.
(e) Provisions for Unaffiliated Security Holders. None of the Filing
Persons have made any provisions in connection with the merger to grant BNC
Mortgage's unaffiliated security holders access to the corporate files of the
Filing Persons that are entities or to obtain counsel or appraisal services at
the expense of a Filing Person.
(f) Eligibility for Listing or Trading. Not Applicable.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
(a) Transactions. During calendar years 1998 and 1999, Mortgage Investco
and its affiliates purchased on a whole-loan basis in excess of 70% of the
residential mortgage loans originated by BNC Mortgage.
(b) Significant Corporate Events. The information set forth under the
caption "Special Factors-Background to the Merger" of the Proxy Statement is
incorporated herein by reference.
(c) Negotiations or Contacts. The information set forth under the caption
"Special Factors-Background to the Merger" of the Proxy Statement is
incorporated herein by reference.
(e) Agreements Involving the Subject Company's Securities.
LetterAgreement. The Management Investors and Mortgage Investco are
parties to a letter agreement pursuant to which Mortgage Investco and each of
the Management Investors agreed that, subject to the execution of mutually
acceptable documentation and satisfaction of various other conditions, they
would work together to acquire BNC Mortgage. Each management investor further
agreed that he or she would contribute shares of BNC Mortgage common stock in
exchange for shares of BNCM Acquisition common stock, and would not sell,
convey, transfer or otherwise dispose of any BNC Mortgage common stock or
options to purchase BNC Mortgage common stock currently held by him or her
without the prior consent of Mortgage Investco until the earliest to occur of
the date Mortgage Investco notifies him or her that it had determined not to
proceed with the proposed acquisition of BNC Mortgage or the date of termination
of the merger agreement. The letter refers to such period as the "Stand-Off
Period." Each management investor further agreed that during the Stand Off
Period, he or she would work exclusively with Mortgage Investco with respect to
the proposed acquisition of BNC Mortgage and that unless and until Mortgage
Investco notifies him or her that it has determined not to proceed with the
proposed acquisition of BNC Mortgage, neither such management investor nor his
or her advisors or representatives would (i) solicit or encourage any third
party with respect to any such acquisition, (ii ) enter into any
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discussions or negotiations related to such acquisition, or (iii) provide any
information to any third party with respect to an acquisition except with
respect to clauses (ii) and (iii), to the extent that such management investor
is directed by the BNC Mortgage Board of Directors to do so, in order to permit
the Board to comply with its fiduciary duties under applicable law as advised by
counsel.
VotingAgreements with Management Investors and Evan Buckley. The
information set forth under the caption "Special Factors-Interests in the Merger
that Differ from your Interests-Voting Agreements" of the Proxy Statement is
incorporated herein by reference.
Stock Purchase Agreement with Management Investors. The Management
Investors and BNCM Acquisition have entered into a Stock Purchase Agreement
pursuant to which the Management Investors have agreed to contribute 250,000
shares of BNC Mortgage common stock in the aggregate in exchange for shares of
BNCM Acquisition common stock.
Stock Purchase Agreement with The Buckley Family Trust. The Buckley
Family Trust, a trust for which Evan Buckley, BNC Mortgage's current Chairman
and Chief Executive Officer, and his wife, Karen Buckley, serve as trustees, has
entered into a Stock Purchase Agreement with BNCM Acquisition (the "Buckley
Stock Purchase Agreement"). Pursuant to the Buckley Stock Purchase Agreement,
the Buckley Family Trust has agreed to contribute 250,000 shares of BNC Mortgage
common stock in exchange for 250 shares of 8% cumulative preferred stock of BNCM
Acquisition which the surviving company will be required to redeem over a period
of three years following the merger.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(b) Use of Securities Acquired. No securities will be acquired in the
transaction.
(c) Plans. The information set forth under the following captions of the
Proxy Statement is incorporated herein by reference:
o "Summary-The Merger-Purpose of the Merger; Certain Effects of the
Merger";
o "Special Factors-Purpose of the Merger; Certain Effects of the
Merger";
o "Special Factors-Interests in the Merger that Differ from your
Interests-Employment Agreements"; and
o "Special Factors- Plans for BNC Mortgage Following the Merger".
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ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
The information set forth under the caption "Special Factors-Purpose of
the Merger; Certain Effects of the Merger" of the Proxy Statement is
incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) Fairness. Each of the filing persons reasonably believes that the
merger of BNCM Acquisition with and into BNC Mortgage is fair to BNC Mortgage's
unaffiliated security holders.
(b) Factors Considered in Determining Fairness. The information set forth
under the caption "Special Factors-Position of Investor Group as to the Fairness
of the Merger to You" of the Proxy Statement is incorporated herein by
reference.
(c) Approval of Security Holders. The merger is not structured so as to
require approval of at least a majority of BNC Mortgage's unaffiliated security
holders.
(d) Unaffiliated Representative. The Board of Directors of BNC Mortgage
appointed a special committee of independent directors, on January 13, 2000, to
evaluate any acquisition proposal that might be made by the Management Investors
or others and to negotiate the terms of such a proposal on behalf of BNC
Mortgage should any such proposal appear attractive. The special committee
consisted of Joseph Tomkinson, Keith Honig and Richard Whiting.
(e) Approval of Directors. The information set forth under the caption
"Special Factors-Recommendations of the Special Committee and the Boards of
Directors" of the Proxy Statement is incorporated herein by reference.
(f) Other Offers. The information set forth under the caption "Special
Factors-Background of the Merger" of the Proxy Statement is incorporated herein
by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS.
(a) Report, Opinion or Appraisal. The Filing Persons have not sought a
report, opinion or appraisal from an outside party that is materially related to
the merger. BNC Mortgage received an opinion from Friedman, Billings, Ramsey &
Co., Inc. with respect to the fairness of the consideration to be received by
BNC Mortgage's unaffiliated stockholders in the merger, which is attached to the
Proxy Statement as Appendix B.
(b) Preparer and Summary of the Report, Opinion or Appraisal. The
information set forth under the caption "Special Factors-Background of the
Merger" of the Proxy Statement with respect to the selection of Friedman,
Billings, Ramsey as financial advisor to the special committee, and the
information set forth under the caption "Special Factors-Fairness Opinion of
Friedman, Billings, Ramsey" of the Proxy Statement is incorporated herein by
reference.
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(c) Availability of Documents. Not Applicable.
ITEM 10. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
The information set forth under the caption "Special Factors-Merger
Financing; Source of Funds" of the Proxy Statement is incorporated herein by
reference.
ITEM 11. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) Securities Ownership. The aggregate number and percentage of BNC
Mortgage common stock that is beneficially owned by each Filing Person is set
forth under the caption "Security Ownership of Certain Beneficial Owners and
Management" of the Proxy Statement, which is incorporated herein by reference.
(b) Securities Transactions. During the past 60 days, none of the
Management Investors, BNCM Acquisition, Mortgage Investco, Holdings, and to the
knowledge of the Filing Persons, none of the executive officers or directors of
BNCM Acquisition, Mortgage Investco and Holdings listed in Appendix E to the
Proxy Statement, has effected any transaction in the shares of common stock of
BNC Mortgage.
ITEM 12. THE SOLICITATION OR RECOMMENDATION.
(d) Intent to Tender or Vote in a Going-Private Transaction. The
information set forth under the following captions of the Proxy Statement is
incorporated herein by reference:
o "Summary-The Special Meeting-Vote Required";
o "Information Concerning the Special Meeting-Voting Rights"; and
o "Special Factors-Interests in the Merger that Differ from your
Interests-Voting Agreements."
(e) Recommendations of Others. The information set forth under the
following captions of the Proxy Statement is incorporated herein by reference:
o "Summary-The Merger-Recommendations of the Special Committee and the
Board"; and
o "Special Factors-Recommendation of the Special Committee and the
Board of Directors."
ITEM 13. FINANCIAL STATEMENTS.
(a) Financial Information. The audited financial statements contained in
BNC Mortgage's annual report on Form 10-K for the fiscal year ended June 30,
1999, as amended, and the unaudited financial statements contained in BNC
Mortgage's quarterly
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report on Form 10-Q for the quarter ended December 31,
1999, in each case, filed with the Securities and Exchange Commission (the
"Commission"), are incorporated herein by reference. Copies of the Form 10-K and
Form 10-Q and any other document filed by the Filing Persons or BNC Mortgage
with the Commission in connection with the merger may be accessed via the
Commission's web site at http://www.sec.gov.
(b) Pro-Forma Information. Not material.
ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
(a) Solicitations or Recommendations. The information set forth under the
caption "Information Concerning the Special Meeting-Solicitation of Proxies" is
incorporated herein by reference.
(b) Employees and Corporate Assets. Not Applicable.
ITEM 15. ADDITIONAL INFORMATION.
(b) Other Material Information. Not Applicable.
ITEM 16. EXHIBITS.
(a) Proxy Statement filed with the Commission on March __, 2000.
(b) Commitment Letter from Lehman Commercial Paper Inc.
(c) Fairness Opinion of Friedman Billings Ramsey & Co. LLP is included as
Appendix B to the Proxy Statement.
(d)(1) Letter Agreement among the Management Investors and Mortgage
Investco (incorporated by reference to Exhibit 2 filed as part of the Filing
Persons' Schedule 13D1 filed with the Commission on February 4, 2000).
(d)(2) Form of Voting Agreement between Management Investors and BNCM
Acquisition Co. (incorporated by reference to Exhibit 3 filed as part of the
Filing Persons' Schedule 13D1 filed with the Commission on February 4, 2000).
(d)(3) Buckley Voting Agreement among The Buckley Family Trust, Evan
Buckley and BNCM Acquisition Co. (incorporated by reference to Exhibit 6 filed
as part of the Filing Persons' Schedule 13D1 filed with the Commission on
February 4, 2000).
(d)(4) Stock Purchase Agreement among the Management Investors, Mortgage
Investco and BNCM Acquisition Co. (incorporated by reference to Exhibit 4 filed
as part of the Filing Persons' Schedule 13D1 filed with the Commission on
February 4, 2000).
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(d)(5) Buckley Stock Purchase Agreement between The Buckley Family Trust
and BNCM Acquisition Co. (incorporated by reference to Exhibit 5 filed as part
of the Filing Persons' Schedule 13D1 filed with the Commission on February 4,
2000).
(f) Text of Section 262 of Delaware General Corporation Law is included as
Appendix C to the Proxy Statement.
(g) Not Applicable.
(h) Not Applicable.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: April 5, 2000
/s/ Kelly W. Monahan
---------------------------------------
Kelly W. Monahan
/s/ Peter R. Evans
---------------------------------------
Peter R. Evans
/s/ Al Lapena
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Al Lapena
/s/ Gary Vander-haeghen
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Gary Vander-Haeghen
/s/ Marles M. Crow
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Marles M. Crow
/s/ Jamie Langford
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Jamie Langford
BNCM ACQUISITION CO.
By: /s/ Karen Manson
------------------------------------
Name: Karen Manson
Title: Secretary and Senior Vice-President
LEHMAN BROTHERS
[LOGO]
February 3, 2000
BNCM Acquisition Co.
1063 McGaw Avenue
Irvine, California 92614
Ladies and Gentlemen:
You have advised Lehman Commercial Paper Inc., a New York
corporation ("Lender") that BNCM Acquisition Co., a Delaware corporation (the
"ACQUISITION COMPANY") proposes to acquire BNC Mortgage, Inc., a Delaware
corporation (the "TARGET COMPANY") in a transaction pursuant to which the
Acquisition Company would acquire all of the equity of the Target Company at a
price per share of $10.00 per share (the "ACQUISITION"). The Acquisition would
be on the terms and subject to the conditions contained in an Agreement and Plan
of Merger (the "AGREEMENT") between the Acquisition Company and the Target
Company which would provide, inter alia, for a reverse merger (the "MERGER") of
the Acquisition Company with and into the Target Company, with the Target
Company being the surviving entity. The surviving entity following the
consummation of the Merger is hereinafter referred to as the "COMPANY". You have
indicated that contemporaneously with the Merger, (i) all outstanding Target
Company common shares not exchanged for Acquisition Company common or preferred
shares will be redeemed for cash; (ii) all "IN-THE-MONEY" stock options will be
cancelled in exchange for the difference between the exercise price for such
options and the price per share set forth above or, in the case of the retained
management group ("MANAGEMENT"), may be exchanged for shares in the Acquisition
Company; (iii) the Company will use best efforts to cancel all "OUT OF THE
MONEY" stock options and all other convertible securities (but in any event no
such options or convertible securities shall be exercisable for shares in the
Company after consummation of the Merger; (iv) the Target Company common shares
held by the Acquisition Company will then be cancelled; and (v) the outstanding
common and preferred shares of the Acquisition Company will then be converted
into 100% of the outstanding common and preferred shares of the Company. The
transactions contemplated hereby are collectively referred to herein as the
"TRANSACTION".
You have indicated that the capitalization of the Company
immediately following the Merger shall consist of (i) the Credit Facilities (as
hereinafter defined) and the Preferred Stock (as hereinafter defined), (ii)
contribution by the retiring chief executive officer of the Target Company of a
portion of his common stock and stock options in the Target Company,
representing an aggregate value of $2,500,000 and (iii) contribution by
Management of common stock and stock options in the Target Company, representing
an aggregate value of at least $2,500,000.
LEHMAN COMMERCIAL PAPER INC.
3 WORLD FINANCIAL CENTER, TELEPHONE (212) 526-7406
9TH FLOOR, NEW YORK, NY 10285 FACSIMILE (212) 526-1607
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You have further indicated that the Acquisition and the ongoing
working capital needs of the Company would require the Credit Facilities (as
defined in the Term Sheet) in an aggregate amount of up to $44,500,000 and the
Preferred Stock, and have requested that Lender commit to provide the entire
principal amount of the Credit Facilities and to cause Lender's affiliate to
subscribe the Preferred Stock. Lender is pleased to advise you of its commitment
to provide the Credit Facilities and the Preferred Stock upon the terms and
subject to the conditions set forth or referred to in this commitment letter
(the "COMMITMENT LETTER") and in the Summary of Terms and Conditions attached
hereto as Exhibit A (the "TERM SHEET").
As consideration for Lender's commitment hereunder, the Acquisition
Company and the Company agree to pay to Lender the nonrefundable fees set forth
in Annex I to the Term Sheet and in the Fee Letter dated the date hereof and
delivered herewith (the "FEE LETTER").
It is agreed that no person or entity will receive any fees or
compensation in connection with the Credit Facility and the Preferred Stock,
except as specifically set forth herein.
The commitments and agreements of Lender described herein are
subject to (i) all of the conditions precedent to the obligation of the
Acquisition Company to close the Merger, as set forth in the Agreement and Plan
of Merger of even date herewith between the Acquisition Company and the Target
Company, and (ii) all conditions set forth in the Term Sheet, having been
satisfied. The terms and conditions of Lender's commitment hereunder and of the
Credit Facilities are not limited to those set forth herein and in the Term
Sheet. Those matters that are not covered by the provisions hereof and of the
Term Sheet are subject to the approval and agreement of Lender and Acquisition
Company.
You agree, jointly and severally, (a) to indemnify and hold harmless
Lender, its affiliates and its officers, directors, employees, advisors, and
agents (each, an "INDEMNIFIED PERSON") from and against any and all losses,
claims, damages and liabilities to which any such indemnified person may become
subject arising out of or in connection with this Commitment Letter, the Credit
Facilities, the use of the proceeds thereof, the Acquisition or any related
transaction or any claim, litigation, investigation or proceeding relating to
any of the foregoing, regardless of whether any indemnified person is a party
thereto, and to reimburse each indemnified person upon demand for any legal or
other expenses incurred in connection with investigating or defending any of the
foregoing, PROVIDED that the foregoing indemnity will not, as to any indemnified
person, apply to losses, claims, damages, liabilities or related expenses to the
extent they are found by a final non-appealable judgment of a court of competent
jurisdiction to arise from the willful misconduct or gross negligence of such
indemnified person, and (b) to reimburse Lender and its affiliates on demand for
all out-of-pocket expenses (including due diligence expenses, consultant's fees
and expenses, travel expenses, and fees, charges and disbursements of counsel)
incurred in connection with the Credit Facilities and any
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related documentation (including this Commitment Letter, the Term Sheet, the Fee
Letter and the definitive financing documentation) or the administration,
amendment, modification or waiver thereof. No indemnified person shall be liable
for any indirect or consequential damages in connection with its activities
related to the Credit Facilities. You further hereby (a) agree that you will not
make any claim against any indemnified person for any special, indirect,
consequential or punitive damages in respect of any breach or wrongful conduct
(whether the claim therefor is based on contract, tort or duty imposed by law)
in connection with, arising out of or in any way related to the Acquisition and
the relationship established by this letter, or any act, omission or event
occurring in connection therewith and (b) waive, release and agree not to sue
upon any such claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in your favor. You further agree that no
indemnified person shall have any liability (whether direct or indirect, in
contract, tort or otherwise) to you, the Company or any of your or their
respective shareholders or creditors for or in connection with the Acquisition.
Lender agrees that no owner of an interest in the Company or the Acquisition
Company shall have any liability for the indemnification provided for in this
paragraph.
You acknowledge that Lender and its affiliates may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. Lender will
not use confidential information obtained from you by virtue of the transactions
contemplated by this Commitment Letter or their other relationships with you in
connection with the performance by Lender of services for other companies, and
Lender will not furnish any such information to other companies. You also
acknowledge that Lender has no obligation to use in connection with the
transactions contemplated by this Commitment Letter, or to furnish to you,
confidential information obtained from other companies.
This Commitment Letter shall not be assignable by you without the
prior written consent of Lender (and any purported assignment without such
consent shall be null and void), is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto. This Commitment
Letter may not be amended or waived except by an instrument in writing signed by
you and Lender. This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this Commitment Letter by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof. This Commitment Letter and
the Fee Letter are the only agreements that have been entered into among us with
respect to the Credit Facilities and set forth the entire understanding of the
parties with respect thereto.
THE PARTIES HERETO HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING IN CONNECTION WITH THIS
COMMITMENT LETTER, THE FEE LETTER, ANY TRANSACTION RELATING HERETO OR THERETO,
OR
3
<PAGE>
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THEREWITH, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. THE
PARTIES HERETO CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW
YORK COUNTY, CITY OF NEW YORK, NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG ANY OF THE PARTIES
HERETO PERTAINING TO THIS COMMITMENT LETTER, THE FEE LETTER, THE CREDIT
FACILITIES OR THE TRANSACTION UNDER CONSIDERATION, ANY OTHER FINANCING RELATED
THERETO, AND ANY INVESTIGATION, LITIGATION, OR PROCEEDING RELATED TO OR ARISING
OUT OF ANY SUCH MATTERS. THE PARTIES HERETO EXPRESSLY SUBMIT AND CONSENT IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND HEREBY WAIVE ANY OBJECTION WHICH EITHER OF THEM MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR INCONVENIENT FORUM.
This Commitment Letter, the Term Sheet and the Fee Letter shall be
governed by and shall be construed in accordance with the laws of the State of
New York applicable to contracts made and performed in that State.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except (a) to your officers, agents and advisors who are directly
involved in the consideration of this matter or (b) as may be compelled in a
judicial or administrative proceeding or as otherwise required by law or if
advised in writing by counsel that such disclosure is required by law (in which
case you agree to inform us promptly thereof), provided, that the foregoing
restrictions shall cease to apply (except in respect of the Fee Letter and its
terms and substance) after this Commitment Letter has been accepted by you.
The compensation, reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force and
effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or Lender's commitment hereunder.
Lender or its affiliates also will provide financial advisory
services to the Acquisition Company and the Company with respect to the
transaction to which this Commitment Letter relates. The parties hereto agree
that Lender has the right to place advertisements in financial and other
newspapers and journals at its own expense describing its services to the
Acquisition Company and the Company. Furthermore, the Company agrees to include
a reference to the role of Lender and its affiliates in any press release
announcing the transaction.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to Lender executed counterparts hereof and of the Fee Letter not later
than 5:00 p.m., New York City time, on February 4, 2000. The commitments and
agreements of Lender
4
<PAGE>
herein will expire at such time in the event Lender has not received such
executed counterparts and such amounts in accordance with the immediately
preceding sentence.
5
<PAGE>
Lender is pleased to have been given the opportunity to assist you
in connection with this financing, and we look forward to working with you.
Very truly yours,
LEHMAN COMMERCIAL PAPER INC.
By:
---------------------------
Authorized Signatory
Accepted and agreed to
as of the date first
written above by:
BNCM ACQUISITION CO.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
EXHIBIT A
BNC MORTGAGE, INC.
CREDIT FACILITIES AND PREFERRED STOCK
Summary of Terms and Conditions
February 3, 2000
-----------------------------------------------
I. PARTIES
-------
Acquisition
Company: BNCM Acquisition Co.
Target: BNC Mortgage, Inc., a Delaware corporation
Company: BNC Mortgage, Inc., a Delaware corporation (the
"COMPANY").
Lender: Lehman Commercial Paper Inc., a New York corporation
(in such capacity, the "LENDER").
II. TYPES AND AMOUNTS OF
--------------------
CREDIT FACILITIES:
-----------------
1. ACQUISITION LOAN
FACILITY: An acquisition loan facility (the "ACQUISITION
-------- LOAN FACILITY") in an aggregate principal amount
equal to $25,500,000 (the loan thereunder, the
"ACQUISITION LOAN") to be made to the Acquisition
Company contemporaneously with consummation of the
Merger. The Company shall assume the Acquisition
Loan as part of the Merger and shall repay the
Acquisition Loan in full immediately upon
consummation of the Merger. The proceeds of the
Acquisition Loan shall be used to finance a
portion of the Acquisition.
2. TERM LOAN
FACILITY: 7-year term loan facility (the "TERM LOAN
-------- FACILITY") in the amount of $14,000,000 (the loan
thereunder, the "TERM LOAN") to be made in a
single drawing on the Closing Date (as defined
below). The Term Loan shall initially be made to
the Acquisition Company, and shall be assumed by
the Company upon consummation of the Merger.
<PAGE>
Purpose: The proceeds of the Term Loan shall be used to
finance a portion of the Acquisition.
Amortization: Level quarterly principal payments utilizing a
7-year amortization period.
3. REVOLVING CREDIT
----------------
FACILITY: 3-year revolving credit facility (the "REVOLVING
-------- CREDIT FACILITY"; together with the Acquisition
Loan and the Term Loan Facility, the "CREDIT
FACILITIES") in the amount of $5,000,000 (the
loans thereunder, the "REVOLVING CREDIT LOAN").
Availability: The Revolving Credit Facility shall be available
on a revolving basis during the period commencing
on the Closing Date and ending on the third
anniversary thereof (the "REVOLVING CREDIT
TERMINATION DATE").
Maturity: The Revolving Credit Termination Date.
Purpose: The proceeds of the Revolving Credit Loan shall be
used to finance the working capital needs and
general corporate purposes of the Company in the
ordinary course of business (but not to repay any
other indebtedness) and pursuant to an annual
budget which must be approved by the Lender in its
sole discretion. Proceeds of the Revolving Credit
Loan shall be made available upon compliance with
standard financial covenants and conditions. No
portion of the Revolving Credit Facility may be
used to pay costs associated with the Acquisition
or the Transaction.
Non-Use Fee: None
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 Company in minimum amounts of
$100,000 without premium or penalty. Optional
prepayments of the Term Loan shall be applied to
the installments thereof in inverse order of
maturity and may not be reborrowed.
2
<PAGE>
Mandatory Prepayments
and Commitment
Reductions: 100% of "EXCESS CASH" as of the end of each fiscal
quarter of the Company shall be applied to prepay
the Term Loan and reduce the Revolving Credit Loan
on or before the fifth business day of the
following calendar quarter.
For purposes hereof, "EXCESS CASH" shall mean the
amount of "CASH" held by the Company on the last
business day of each calendar quarter in excess of
5% of the Company's average monthly sub-prime
mortgage loan origination volume for such calendar
quarter. "EXCESS CASH" shall be computed after
giving effect to any scheduled principal and
interest payments on the Term Loan or the
Revolving Credit Loan or any payments on account
of redeemable preferred stock which must be paid
during such calendar quarter, and any reserve
related to the scheduled redemption of preferred
stock. "CASH" shall be defined in the financing
documentation, but will generally mean as of any
date all cash, cash equivalents and marketable
securities (other than mortgage loans), PLUS
accounts receivable, PLUS unutilized, current
available advance capacity under then existing
warehouse lending facilities MINUS accounts
payable and MINUS accrued liabilities.
Additionally, 100% of the proceeds of any capital
transaction (including without limitation, any
sale or issuance of equity in the Company, any
issuance of debt by the Company, or sale of
material assets other than in the ordinary course
of business) shall be paid to the Lender to
amortize the Loans contemporaneously with the
closing of any such transaction.
All such amounts shall be applied to the
prepayment of the Revolving Credit Loan and to the
permanent reduction of the Term Loan. No
prepayment of the Term Loan may be reborrowed.
IV. WARRANTS: Lender will receive for no additional
-------- consideration warrants (the "WARRANTS") to acquire
a total of 50% of the fully diluted common stock
of the Company (after giving effect to the
consummation of the Merger) exercisable in whole
or in part at a cumulative exercise price of $.01
per share at any time during the 30 day period
after each anniversary of the Closing Date
beginning with the second anniversary of the
Closing Date. The Warrants will expire on the date
that
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<PAGE>
is 30 days after the tenth (10th) anniversary of
the Closing Date. The Warrants will have
anti-dilution protection, "TAG-ALONG" rights and
demand and "PIGGY-BACK" registration rights, all
as satisfactory to Lender. The stock for which
such Warrants will be exercisable will be the same
class or series of stock issued to Management on
the Closing Date and shall be subject to the same
stockholder's agreement between Management and an
affiliate of Lender being entered into on the
Closing Date.
V. PREFERRED STOCK: Lender will cause its affiliates to purchase from
--------------- the Acquisition Company on the Closing Date
$6,000,000 of preferred stock (the "PREFERRED
STOCK"). Upon consummation of the Merger, the
Preferred Stock shall be converted into preferred
stock in the Company. The Preferred Stock will be
perpetual, bear an annual cash dividend yield
(which will be cumulative) of 8%, be paid
annually, and will be convertible at any time
after two years (in whole or in part) into 25% of
the fully diluted common stock of the Company upon
full conversion of the Preferred Stock.
VI. ANTI-DILUTION: The Warrants and the Preferred Stock shall each
------------- provide that the conversion of the Preferred Stock
and the exercise of the Warrants (whenever
occurring, and whether simultaneously or at
different times) shall result in ownership by
Lender and Lender's affiliates of 75% of the
Company on a fully diluted basis (other than
dilution for stock issuances or other dilutive
transactions approved by a majority of the members
of the Board of the Company).
VII. COLLATERAL: To secure all obligations of the Company to the
---------- Lender, the Lender will receive a fully perfected
first priority security interest in all of the
existing and after acquired personal, tangible and
intangible assets of the Acquisition Company (and
after consummation of the Merger, the Company),
including, without limitation, all cash, cash
equivalents, bank accounts, accounts, other
receivables, chattel paper, contract rights,
inventory (wherever located), instruments,
documents, securities (whether or not marketable),
equipment, fixtures, franchise rights, patents,
trade names, trademarks, copyrights, intellectual
property, real property, general intangibles,
investment property and all substitutions,
accessions and proceeds of the foregoing
(including insurance proceeds), but shall not
include any
4
<PAGE>
mortgage loans or proceeds thereof which have been
pledged pursuant to the terms of any warehouse
lending facilities. The foregoing collateral
described in this paragraph being collectively,
the "COLLATERAL".
All Collateral will be free and clear of other
liens, claims and encumbrances, except permitted
liens and encumbrances acceptable to the Lender.
All obligations of the Company to the Lender will
be cross-defaulted to each other and to all other
material indebtedness of the Company.
VIII. CERTAIN CONDITIONS
------------------
INITIAL CONDITIONS: The availability of the Credit Facilities shall be
------------------ conditioned upon satisfaction of, among other
things, the following conditions precedent on or
before July 31, 2000 (the date on which all such
conditions are satisfied is referred to herein as
the "CLOSING DATE"); provided, however, that the
Closing Date must occur on the same business day
upon which the Merger is consummated:
(a) Management, Acquisition Company and the
Company shall have executed and delivered
satisfactory definitive financing
documentation with respect to the Credit
Facilities (the "CREDIT DOCUMENTATION").
(b) The Merger shall have been consummated in
accordance with its terms and in compliance
with all applicable laws and regulation and
neither the Company nor the Acquisition
Company shall be in default under any
material indebtedness or other material
agreement as a result of the Acquisition or
the borrowing under the Credit Facilities.
The Acquisition Company shall not have
waived any conditions to the consummation of
the Merger set forth in the Agreement and
Plan of Merger between the Acquisition
Company and the Target Company, without the
prior written consent of Lender.
(c) Intentionally deleted.
(d) The Acquisition shall have been consummated
for an aggregate purchase price of $10.00
per share.
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<PAGE>
(e) Intentionally deleted.
(f) Intentionally deleted.
(g) The Lender shall have received unaudited
interim consolidated financial statements of
the Company for each fiscal month and
quarterly period ended subsequent to
December 31, 1999.
(h) The Lender shall have received a PRO FORMA
consolidated balance sheet of the Company as
at the date of the most recent consolidated
balance sheet delivered pursuant to
paragraph (g) above, adjusted to give effect
to the consummation of the Transaction and
the financings contemplated hereby as if
such transactions had occurred on such date.
(i) Intentionally deleted.
(j) The Lender shall have received the results
of a recent lien search in each relevant
jurisdiction with respect to the Company,
and such search shall reveal no liens on any
of the assets of the Company except for
liens permitted by the Credit Documentation
or liens to be discharged on or prior to the
Closing Date pursuant to documentation
satisfactory to the Lender.
(k) The fees and expenses to be incurred in
connection with the Transaction and to be
paid by the Acquisition Company and the
Company and the financing thereof shall not
exceed $2,000,000 in the aggregate (other
than any fees and other amounts paid to
Lender or any affiliates thereof).
(l) The Company shall have obtained key man life
insurance on Kelly Monahan in satisfactory
amounts and on satisfactory terms.
(m) The Lender shall have received such legal
opinions (including opinions (i) from
counsel to the Acquisition Company and the
Company, (ii) delivered to the Acquisition
Company and the Company by counsel to the
Target Company, accompanied by reliance
letters in favor of the Lender and (iii)
from such special and local counsel as may
be required by the Lender), documents and
other instruments as are customary for
transactions of this type or as they may
reasonably request.
6
<PAGE>
(n) Intentionally deleted.
(o) Intentionally deleted.
On-Going
Conditions: The making of each extension of credit shall be
conditioned upon (a) the accuracy of all
representations and warranties in the Credit
Documentation (including, without limitation, the
material adverse change and litigation
representations) 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, development or circumstance
occurring after the consummation of the Merger
that has had or could reasonably be expected to
have a material adverse effect on (a) the
business, assets, property, condition (financial
or otherwise) or prospects of the Acquisition
Company or the Company taken as a whole, or (b)
the validity or enforceability of any of the
Credit Documentation or the rights and remedies of
the Lender thereunder.
IX. CERTAIN
-------
DOCUMENTATION:
-------------
MATTERS: The Credit Documentation shall contain
------- representations, warranties, covenants and events
of default customary for financings of this type
and other terms deemed appropriate by the Lender,
including, without limitation:
Representations and
Warranties: Accuracy of financial statements (including pro
forma financial statements); absence of
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; no burdensome restrictions;
solvency; labor matters; taxes; Federal Reserve
regulations; ERISA; Investment Company Act;
environmental matters; solvency; labor matters;
accuracy of disclosure; creation and perfection of
security interests.
7
<PAGE>
Affirmative
Covenants: Delivery of financial statements including: (i)
audited annual financial statements within 120
days of the end of each fiscal year; (ii)
quarterly financial statements within 45 days of
the end of each fiscal quarter; (iii) not later
than the 25th day of each month, a monthly
forecast for the following month together with a
reconciliation of the prior month's actual versus
projected forecast; (iv) at least 30 days prior to
the beginning of each fiscal year an annual budget
for such fiscal year; (v) within 45 days after the
end of each fiscal quarter, a reconciliation of
actual results for such quarter to the annual
budget; and (vi) any other information reasonably
requested by Lender; delivery of monthly mortgage
loan portfolio servicing information reports (on
readable computer disks), including fields
specified by the Lender from time to time;
reports, accountants' letters, projections,
officers' certificates and other information
requested by the Lender; timely payment of other
obligations; timely performance of obligations;
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 and records; right
of the Lender to inspect property and books and
records; notices of defaults, litigation and other
material events; compliance with environmental
laws; further assurances (including, without
limitation, with respect to security interests in
after-acquired property); and agreement to obtain
interest rate protection agreements as may be
required by Lender from time to time. All
financial statements that are required to be
audited shall be audited by Ernst & Young or
another "Big 5" accounting firm.
Financial
Covenants: Financial covenants, (including, without
limitation, the following):
(i) Quarterly positive net income (exclusive of
fees to Lender pursuant to the Fee Letter)
as determined in accordance with generally
accepted accounting principles.
(ii) Quarterly positive cash flow (as determined
on a cash rather than an accrual basis),
exclusive
8
<PAGE>
of fees to Lender pursuant to the Fee Letter
and exclusive of principal reductions in
excess of the minimum amortization of the
Loans.
(iii) Minimum net worth of (i) $3,000,000 until
the first anniversary of the Closing Date,
and (ii) thereafter, $5,000,000.
(iv) Maximum ratio of total debt (exclusive of
warehouse lines) to stockholder's equity of
5:1. For purposes of this calculation,
redeemable preferred stock shall be included
in total debt and excluded from
stockholder's equity.
(v) Restrictions on the payment of dividends
(other than those payable with respect to
the Preferred Stock) while any portion of
the Term Loan or Revolving Loan remains
outstanding.
Negative
Covenants: Limitations on indebtedness; liens; guarantee
obligations; mergers, consolidations, liquidations
and dissolutions; sales or other dispositions of
assets; leases; dividends and other payments in
respect of capital stock; redemptions and
repurchases of capital stock; changes in ownership
of capital stock; formation of subsidiaries;
capital expenditures; investments, loans and
advances; optional payments and modifications of
subordinated and other debt instruments;
transactions with affiliates; permitted warehouse
lines; granting of liens; sale and leasebacks;
changes in fiscal year; negative pledge clauses;
changes in lines of business.
Events of Default: Nonpayment of principal when due; nonpayment of
interest, fees or other amounts after a grace
period to be agreed upon; material inaccuracy of
representations and warranties; violation of
covenants (subject, in the case of certain
affirmative covenants, to a grace period to be
agreed upon); cross-default; bankruptcy events;
certain ERISA events; material judgments; actual
or asserted invalidity of any guarantee or
security document or security interest; and a
change of control (the definition of which is to
be agreed).
Assignments
and Participations: The Lender shall be permitted to assign and sell
participations in the Loans and the Revolving
Credit Facility.
9
<PAGE>
Yield Protection: The Credit Documentation shall contain customary
provisions (a) protecting the Lender against
increased costs or loss of yield resulting from
changes in reserve, tax, capital adequacy and
other requirements of law and from the imposition
of or changes in withholding or other taxes and
(b) indemnifying the Lender for "BREAKAGE COSTS"
incurred in connection with, among other things,
any prepayment of a LIBOR Loan (as defined in
Annex I) on a day other than the last day of an
interest period with respect thereto.
Tax, Cost and
Yield Protection: Standard provisions for facilities and
transactions of this type.
Expenses and
Indemnification: The Company shall pay (a) all reasonable
out-of-pocket expenses of the Lender associated
with the Credit Facilities and the preparation,
execution, delivery and administration of the
Credit Documentation and any amendment or waiver
with respect thereto (including the reasonable
fees, disbursements and other charges of counsel)
and (b) all out-of-pocket expenses of the Lender
(including the fees, disbursements and other
charges of counsel) in connection with the
enforcement of the Credit Documentation (subject
to the limitations set forth in Section VIII (k)
hereof).
The Lender (and its affiliates and their
respective officers, directors, employees,
advisors and agents) will have no liability for,
and will be indemnified and held harmless 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).
Governing Law: State of New York.
Counsel to
the Lender: Weil, Gotshal & Manges LLP
10
<PAGE>
ANNEX I
-------
INTEREST AND CERTAIN FEES
Interest Rate Options: The Loans comprising each borrowing bear interest
at a rate per annum equal to he LIBOR Rate PLUS
the Applicable Margin. ----
As used herein:
"APPLICABLE MARGIN" means (a) 2%, in the case of
the Acquisition Loan, (b) 4%, in the case of the
Term Loan, and 6%, in the case of the Revolving
Credit Loan.
"INTEREST ACCRUAL PERIOD" means the calendar
month.
"LIBOR ADJUSTMENT DATE" means the first business
day of each calendar month.
"LIBOR RATE" means with respect to each Interest
Accrual Period, the arithmetic average (rounded
upward, if necessary, to the nearest one-sixteenth
of one percent (1/16%)) of the one-month London
Interbank Market offered rates from time to time
as determined by Lender.
The Financing documentation will contain (a)
mutually agreeable LIBOR breakage provisions and
LIBOR borrowing mechanics, and (b) LIBOR Rate
definitions.
Interest Payment Dates: The first business day of each month.
Default Rate: At any time when the Company is in default in the
payment of any amount of principal due under the
Credit Facilities, such amount shall bear interest
at 5% above the rate otherwise applicable thereto.
Overdue interest, fees and other amount shall bear
interest at 5% above the rate applicable to Base
Rate Loans.
Rate and Fee Basis: All per annum rates shall be calculated on the
basis of a year of 360 days.
