<PAGE>
EXHIBIT 10.2
------------
October 18, 2000
Triad Hospitals Holdings, Inc.
13455 Noel Road
20th Floor
Dallas, TX 75240
Re: Project Quarterback -- Credit Facilities Commitment Letter
----------------------------------------------------------
Ladies and Gentlemen:
Triad Hospitals Holdings, Inc. ("you" or "Company" or "Borrower") has
--- ------- --------
advised Merrill Lynch Capital Corporation ("Merrill Lynch" or "we" or "us") that
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(i) Triad Hospitals, Inc., the parent of Company ("Triad"), intends to enter
-----
into a merger agreement (the "Merger Agreement") with a company previously
----------------
identified to us and code-named Titans ("Target") pursuant to which Triad will
------
acquire (the "Acquisition") all of the capital stock of Target; (ii) immediately
-----------
prior to the consummation of the Acquisition, Company will merge with and into
Triad, at which time the separate corporate existence of Company shall cease and
Triad shall continue as the surviving corporation; (iii) Triad will issue in
partial consideration for the Acquisition common equity of Triad as set forth in
the Merger Agreement (the "Equity Issuance"); (iv) Borrower will use a portion
---------------
of the proceeds of the debt financings contemplated hereby to pay part of the
purchase price for the Acquisition; and (v) the sources and uses of the funds
necessary to consummate the Acquisition and the other transactions contemplated
hereby are set forth on Annex I to this Commitment Letter.
-------
In addition, you have advised Merrill Lynch that in connection with
the consummation of the Acquisition, (a) Borrower will raise gross cash proceeds
of not less than $300.0 million from either (A) the issuance by it of $300.0
million of unsecured senior notes (the "Notes") all of which shall be due not
-----
earlier than eight years from the date of issuance and have no scheduled
principal payments prior to maturity (the "Note Offering") or (B) the draw down
-------------
under an unsecured senior interim loan (the "Interim Loan") which would be
------------
anticipated to be refinanced with debt securities substantially similar to the
Notes (the "Take-out Securities"); and (b) Borrower will enter into senior
-------------------
secured credit facilities in the amount of $1,375.0 million (the "Senior Secured
--------------
Credit Facilities" and, together with the Interim Loan, the "Credit
----------------- ------
Facilities").
In addition, you have advised us that, on the date of consummation of
the Acquisition (the "Closing Date"), Borrower will refinance its existing
------------
senior credit facility and Target and its subsidiaries will repay all
indebtedness and preferred stock outstanding prior to the Closing Date and
terminate all commitments to make extensions of credit (such actions by
Borrower, Target and its subsidiaries, the "Refinancing") under their respective
-----------
existing indebtedness (all such debt of Borrower, Target and its subsidiaries,
the "Existing Indebtedness").
---------------------
The Acquisition, the Equity Issuance, the Note Offering (if
consummated), the Refinancing and the entering into and borrowings under the
Credit Facilities by the parties herein described are herein referred to as the
"Transactions".
------------
<PAGE>
You have requested that Merrill Lynch commit to provide the Credit
Facilities to finance the Acquisition and the Refinancing and to pay certain
related fees and expenses.
Accordingly, subject to the terms and conditions set forth below,
Merrill Lynch hereby agrees with you as follows:
1. Commitment. Merrill Lynch hereby commits to provide to Borrower
----------
the Senior Secured Credit Facilities upon the terms and subject to the
conditions set forth or referred to herein, in the Fee Letter (the "Fee Letter")
----------
dated the date hereof and delivered to you, and in the Senior Secured Credit
Facilities Summary of Terms and Conditions attached hereto (and incorporated by
reference herein) as Exhibit A (the "Senior Secured Term Sheet"). Merrill Lynch
--------- -------------------------
hereby also commits to provide to Borrower the Interim Loan upon the terms and
subject to the conditions set forth or referred to herein, in the Fee Letter,
and in the Interim Loan Summary of Terms and Conditions attached hereto (and
incorporated by reference herein) as Exhibit B (the "Interim Loan Term Sheet"
--------- -----------------------
and, together with the Senior Secured Term Sheet, the "Term Sheets"). To the
-----------
extent that an underwriting or purchase agreement is entered into in respect to
the Note Offering, the commitments hereunder shall be terminated on the date of
execution thereof in an amount equal to the expected aggregate gross proceeds
from the Notes covered thereby, first, in respect of the Interim Loan, and
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second, in respect of the Senior Secured Credit Facilities (and first to the
------
Asset Sale Facility thereunder and thereafter in amounts among the other
tranches thereof as determined by Merrill Lynch in consultation with Borrower).
2. Syndication. We reserve the right and intend, prior to or after
-----------
the execution of the definitive documentation for the Credit Facilities (the
"Credit Documents"), to syndicate all or a portion of our commitments to one or
-----------------
more financial institutions (together with Merrill Lynch, the "Lenders"). Our
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commitment hereunder is subject to Merrill Lynch (or one of its affiliates)
acting as a co-lead arranger and co-book-runner for the Senior Secured Credit
Facilities and co-lead arranger and sole book-runner for the Interim Loan. We
(or one of our affiliates) will manage all aspects of the syndication (in
consultation with you), including decisions as to the selection of potential
Lenders to be approached and when they will be approached, when their
commitments will be accepted, which Lenders will participate and the final
allocations of the commitments among the Lenders (which are likely not to be pro
---
rata across facilities among Lenders), and we will perform all functions and
----
exercise all authority as customarily performed and exercised in such
capacities, including selecting counsel for the Lenders and negotiating the
Credit Documents. Notwithstanding anything herein to the contrary, Borrower may
designate other financial institutions reasonably acceptable to Merrill Lynch to
function in connection with the underwriting and syndication of the Credit
Facilities with titles and responsibilities to be designated by Borrower and
reasonably acceptable to Merrill Lynch. Subject to the foregoing, any other
agent or arranger titles (including co-agents) awarded to other Lenders are
subject to our prior approval and shall not entail any role with respect to the
matters referred to in this paragraph without our prior consent. You agree that
no Lender will receive compensation outside the terms contained herein and in
the Fee Letter in order to obtain its commitment to participate in the Credit
Facilities. We may select (with your consent, not to be unreasonably withheld,
delayed or conditioned) a Lender to act as an administrative agent (the
"Administrative Agent") for each of the Senior Secured Credit Fa-
---------------------
<PAGE>
-3-
cilities and the Interim Loan to perform such ministerial and administrative
functions as we shall reasonably designate.
You understand that we intend to commence the separate syndication of
each of the Senior Secured Credit Facilities and the Interim Loan promptly, and
you agree actively to assist us in achieving a timely syndication that is
satisfactory to us. The syndication efforts will be accomplished by a variety
of means, including direct contact during the syndication between senior
management and advisors of Borrower and Target on the one hand, and the proposed
Lenders on the other hand and Borrower hosting, with Merrill Lynch, meetings
with prospective Lenders at such times and places as we may reasonably request.
You agree to, upon our request, (a) provide, and cause your advisors to provide,
and use your reasonable best efforts to have Target provide, to us all
information reasonably requested by us to successfully complete the syndication,
including the information and projections (including updated projections)
contemplated hereby, and (b) assist, and cause your advisors to assist, and use
your reasonable best efforts to have Target assist, us in the preparation of a
Confidential Information Memorandum and other marketing materials (the contents
of which you shall be solely responsible for) to be used in connection with the
syndication, including making available representatives of Target. You also
agree to use your commercially reasonable best efforts to ensure that our
syndication efforts benefit materially from your existing lending relationships.
3. Fees. As consideration for our commitment hereunder and our
----
agreement to arrange, manage, structure and syndicate the Credit Facilities, you
agree to pay to us the fees as set forth in the Fee Letter.
4. Conditions. Merrill Lynch's commitment hereunder is subject to
----------
the conditions set forth elsewhere herein and in the Term Sheets. For purposes
of this Commitment Letter and the Term Sheets, the "subsidiaries" of Borrower
shall be deemed to include those who will become subsidiaries of Borrower in
connection with the Transactions.
Our commitment hereunder is also subject to (a) no disruption or
adverse change (or development that could reasonably be expected to result in an
adverse change) shall have occurred and be continuing in or affecting the loan
syndication or financial, banking or capital market conditions generally from
those in effect on the date hereof that, individually or in the aggregate in our
reasonable judgment would materially adversely affect our ability to syndicate
the Credit Facilities or the ability of Borrower to effect the sale of the Take-
out Securities; (b) we shall be satisfied that, after the date hereof and prior
to and during the syndication of the Credit Facilities, none of Borrower or any
of its subsidiaries shall have syndicated or issued, attempted to syndicate or
issue, announced or authorized the announcement of, or engaged in discussions
concerning the syndication or issuance of any debt facility or debt security of
any of them, including renewals thereof, other than the Credit Facilities and
the Notes and other than the amendment of Borrower's existing senior credit
facility to add a delayed draw term loan tranche of $200 million; (c) none of
the Information and Projections (each as defined below in Section 5 hereof)
shall be misleading or incorrect in any material respect taken as a whole, in
light of the circumstances under which such statements were made; and (d) the
consummation of the Transactions not violating, conflicting with or resulting in
a breach of, or constituting a default under (or resulting in an event which,
with notice or lapse of time or both, would
<PAGE>
-4-
constitute a default) under any note, bond, mortgage, indenture, deed of trust,
concession, lease, contract or other instrument, obligation or agreement to
which Borrower or any of its subsidiaries is a party of by which Borrower or any
of its subsidiaries or any of their respective assets may be bound or affected.
5. Information and Investigations. You hereby represent and
------------------------------
covenant that (a) all information and data (excluding financial projections)
that have been or will be made available by you or any of your representatives
or advisors to us or any Lender (whether prior to or on or after the date
hereof) in connection with the Transactions, taken as a whole (the
"Information"), is (or with respect to Information concerning Target, to the
-----------
best of Borrower's knowledge, is) and will be (or with respect to Information
concerning Target, to the best of Borrower's knowledge, will be) complete and
correct in all material respects and does not (or with respect to Information
concerning Target, to the best of Borrower's knowledge, does not) and will not
(or with respect to Information concerning Target, to the best of Borrower's
knowledge, will not), taken as a whole, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which such statements are made, and (b) all financial projections concerning
Borrower and its subsidiaries and the transactions contemplated hereby (the
"Projections") that have been made or will be prepared by or on behalf of you or
------------
any of your representatives or advisors and that have been or will be made
available to us or any Lender in connection with the transactions contemplated
hereby have been and will be prepared in good faith based upon assumptions
believed by you to be reasonable. You agree to supplement the Information and
the Projections from time to time until the Closing Date and, if requested by
us, for a reasonable period thereafter necessary to complete the syndication of
the Credit Facilities so that the representation and covenant in the preceding
sentence remain correct in all material respects. In syndicating the Credit
Facilities we will be entitled to use and rely primarily on the Information and
the Projections without responsibility for independent check or verification
thereof.
6. Indemnification. You agree (i) to indemnify and hold harmless
---------------
Merrill Lynch and each of the other Lenders and their respective officers,
directors, employees, affiliates, agents and controlling persons (Merrill Lynch
and each such other person being an "Indemnified Party") from and against any
-----------------
and all losses, claims, damages, costs, expenses and liabilities, joint or
several, to which any Indemnified Party may become subject under any applicable
law, or otherwise related to or arising out of or in connection with this
Commitment Letter, the Fee Letter, the Term Sheets, the Credit Facilities, the
loans under the Credit Facilities, the use of proceeds of any such loan, any of
the Transactions and the performance by any Indemnified Party of the services
contemplated hereby and will reimburse each Indemnified Party for any and all
reasonable expenses (including reasonable counsel fees and expenses) as they are
incurred in connection with the investigation of or preparation for or defense
of any pending or threatened claim or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party and whether or not
such claim, action or proceeding is initiated or brought by or on behalf of you,
Target, or any of your or Target's respective affiliates and whether or not any
of the Transactions are consummated or this Commitment Letter is terminated,
except to the extent resulting solely from such Indemnified Party's bad faith,
gross negligence or willful misconduct and (ii) not to assert any claim against
any Indemnified Party for consequential, punitive or exemplary damages on any
theory of
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liability in connection in any way with the transactions described in or
contemplated by this Commitment Letter.
You agree that, without our prior written consent, neither you nor any
of your affiliates or subsidiaries will settle, compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
in respect of which indemnification has been or could be sought under the
indemnification provisions hereof (whether or not any other Indemnified Party is
an actual or potential party to such claim, action or proceeding), unless such
settlement, compromise or consent (i) includes an unconditional written release
in form and substance satisfactory to the Indemnified Parties of each
Indemnified Party from all liability arising out of such claim, action or
proceeding and (ii) does not include any statement as to or an admission of
fault, culpability or failure to act by or on behalf of any Indemnified Party.
You will not be obligated to indemnify an Indemnified Party with respect to any
loss, claim, damage, or liability settled, compromised or consented to without
your prior written consent (not to be unreasonably withheld, delayed or
conditioned).
In the event that an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against you or
any of your subsidiaries or affiliates in which such Indemnified Party is not
named as a defendant, you agree to reimburse such Indemnified Party for all
expenses incurred by it in connection with such Indemnified Party's appearing
and preparing to appear as such a witness, including, without limitation, the
fees and expenses of its legal counsel.
7. Expenses. You agree to reimburse us and our affiliates for our
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and their reasonable expenses upon our request made from time to time
(including, without limitation, all reasonable due diligence investigation
expenses, fees of consultants engaged with your consent (not to be unreasonably
withheld), syndication expenses (including printing, distribution, and bank
meetings), appraisal and valuation fees and expenses, travel expenses,
duplication fees and expenses, audit fees, search fees, filing and recording
fees and the reasonable fees, disbursements and other charges of counsel (and
any local counsel) and any sales, use or similar taxes (and any additions to
such taxes) related to any of the foregoing) incurred in connection with the
negotiation, preparation, execution and delivery, waiver or modification,
collection and enforcement of this Commitment Letter, the Term Sheets, the Fee
Letter and the Credit Documents and the security arrangements (if any) in
connection therewith and whether or not such fees and expenses are incurred
before or after the date hereof or any loan documentation is entered into or the
Transactions are consummated or any extensions of credit are made under the
Credit Facilities or this Commitment Letter is terminated or expires, except
that Borrower shall have no obligation to reimburse Merrill Lynch for any such
expenses relating to any offering of Senior Notes which is consummated to the
extent excluded from being for the account of Borrower in any underwriting or
purchase agreement relating thereto that is executed and delivered by Borrower
and Merrill Lynch.
8. Confidentiality. This Commitment Letter, the Term Sheets, the
---------------
contents of any of the foregoing and our and/or our affiliates' activities
pursuant hereto or thereto are confidential and shall not be disclosed by or on
behalf of you or any of your affiliates to any person without our prior written
consent, except that you may disclose this Commitment Letter and the Term Sheets
(i) to
<PAGE>
-6-
your and Target's and your and its respective officers, directors, employees and
advisors, and then only in connection with the Transactions and on a
confidential need-to-know basis, (ii) to ratings agencies in connection with the
Credit Facilities or the Senior Notes, and (iii) as you are required to make by
applicable law or compulsory legal process (based on the advice of legal
counsel); provided, however, that in the event of any such compulsory legal
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process you agree to use best efforts to give us prompt notice thereof and to
cooperate with us in securing a protective order in the event of compulsory
disclosure and that any disclosure made pursuant to public filings shall be
subject to our prior review. You agree that you will permit us to review and
approve any reference to any of us or any of our affiliates in connection with
the Credit Facilities or the transactions contemplated hereby contained in any
press release or similar public disclosure prior to public release. You agree
that we and our affiliates may share information concerning you, Target and your
and Target's respective subsidiaries and affiliates solely among ourselves on a
confidential and "need-to-know" basis solely in connection with the performance
of our services hereunder and the evaluation and consummation of financings and
Transactions contemplated hereby.
9. Termination. Our commitment hereunder is based upon the
-----------
financial and other information regarding Target previously provided to us. In
the event that by means of continuing review or otherwise we become aware of or
discover material new information or developments concerning conditions or
events previously disclosed to us that is inconsistent in any material adverse
respect with the Projections or the Information provided to us prior to the date
hereof, or if any event or condition has occurred or become known that in our
reasonable judgment has had or could reasonably be expected to have a material
adverse effect on the business, operations, financial condition, liabilities
(contingent or otherwise) or prospects of Borrower and its subsidiaries taken as
a whole (after giving effect to the Transactions) since December 31, 1999, this
Commitment Letter and Merrill Lynch's commitment hereunder shall terminate upon
written notice by Merrill Lynch. In addition, Merrill Lynch's commitment
hereunder shall terminate in its entirety (A) on June 30, 2001 if the Credit
Documents are not executed and delivered by Borrower and the Lenders by such
date and (B) on the date of execution and delivery of the Credit Documents by
Borrower and the Lenders. Notwithstanding the foregoing, the provisions of
Sections 6, 7, 8 and 11 hereof shall survive any termination pursuant to this
Section 9.
10. Assignment; etc. This Commitment Letter and our commitment
---------------
hereunder shall not be assignable by any party hereto without the prior written
consent of the other parties hereto, and any attempted assignment shall be void
and of no effect; provided, however, that nothing contained in this Section 10
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shall prohibit us (in our sole discretion) from (i) performing any of our duties
hereunder through any of our affiliates, and you will owe any related duties
(including those set forth in Section 2 above) to any such affiliate, and (ii)
granting (in consultation with you) participations in, or selling (in
consultation with you) assignments of all or a portion of, the commitments or
the loans under the Credit Facilities pursuant to arrangements satisfactory to
us. This Commitment Letter is solely for the benefit of the parties hereto and
does not confer any benefits upon, or create any rights in favor of, any other
person.
11. Governing Law; Waiver of Jury Trial. This Commitment Letter
-----------------------------------
shall be governed by, and construed in accordance with, the laws of the State of
New York. Each of the par
<PAGE>
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ties hereto waives all right to trial by jury in any action, proceeding or
counterclaim (whether based upon contract, tort or otherwise) related to or
arising out of any of the Transactions or the other transactions contemplated
hereby, or the performance by us or any of our affiliates of the services
contemplated hereby.
12. Amendments; Counterparts; etc. No amendment or waiver of any
-----------------------------
provision hereof or of the Term Sheets shall be effective unless in writing and
signed by the parties hereto and then only in the specific instance and for the
specific purpose for which given. This Commitment Letter, the Engagement
Letter, the Term Sheets and the Fee Letter are the only agreements between the
parties hereto with respect to the matters contemplated hereby and thereby and
set forth the entire understanding of the parties with respect thereto. This
Commitment Letter may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart by telecopier shall
be effective as delivery of a manually executed counterpart.
13. Public Announcements; Notices. Following your public
-----------------------------
announcement of the Transactions, we may, subject to your prior consent (not to
be unreasonably withheld, delayed or conditioned) at our expense, publicly
announce as we may choose the capacities in which we or our affiliates have
acted hereunder. Any notice given pursuant hereto shall be mailed or hand
delivered in writing, if to (i) you, at your address set forth on page one
hereof, with a copy to Morton A. Pierce, Esq., at Dewey Ballantine LLP, 1301
Avenue of the Americas, New York, New York 10019; and (ii) Merrill Lynch, at
World Financial Center, North Tower, 250 Vesey Street, New York, New York 10281,
Attention: Christopher J. Birosak, with a copy to Michael E. Michetti, Esq., at
Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005.
(Signature Page Follows)
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-8-
Please confirm that the foregoing correctly sets forth our agreement
of the terms hereof and the Fee Letter by signing and returning to Merrill Lynch
the duplicate copy of this letter and the Fee Letter enclosed herewith. Unless
we receive your executed duplicate copies hereof and thereof by 5:00 p.m., New
York City time, on October 18, 2000, our commitment hereunder will expire at
such time.
We are pleased to have this opportunity and we look forward to working
with you on this transaction.
Very truly yours,
MERRILL LYNCH CAPITAL CORPORATION
By: /s/ Christopher Birosak
-----------------------
Christopher Birosak
Managing Director
Accepted and agreed to as of the date first written above:
TRIAD HOSPITALS HOLDINGS, INC.
By: /s/ Burke Whitman
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Burke Whitman
Executive Vice President
Chief Financial Officer
and Treasurer
<PAGE>
Annex I
Sources and Uses of Funds
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(in $ in millions)
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<TABLE>
<CAPTION>
Sources Uses
------- ----
<S> <C>
Term Loan Facilities $1,125.0 Purchase price of equity of Target/1/ $1,457.3
Revolving Facility/2/ 205.3 Refinance Debt 1,133.7
Notes or Interim Loan 300.0 Severance Costs 25.0
Equity Issuance 1,148.9 Qui Tam Settlement 91.0
Estimated fees and expenses 72.3
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Total Sources $2,779.3 Total Uses $2,779.3
======== ========
</TABLE>
____________________
/1/ Assumes a purchase price for each share of Target stock of $3.50 and 0.4107
shares of Triad stock, a 78.8% stock, 21.2% cash transaction and a closing
as if it had occurred as of December 31, 2000.
/2/ $250.0 of commitments at closing.
<PAGE>
CONFIDENTIAL EXHIBIT A
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SENIOR SECURED CREDIT FACILITIES
--------------------------------
SUMMARY OF TERMS AND CONDITIONS/1/
Borrower: Triad Hospitals Holdings, Inc. ("Borrower").
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Co-Book-Runner and Merrill Lynch & Co. ("Merrill Lynch") together with
-------------
Co-Lead Arrangers: one or more other financial institutions designated
by Borrower and reasonably acceptable to Merrill
Lynch (together, the "Lead Arrangers").
--------------
Syndication Agent: Merrill Lynch.
Administrative Agent: A Lender or other financial institution to be
selected by Borrower and reasonably acceptable to the
Lead Arrangers (the "Administrative Agent").
---------------------
Lenders: Merrill Lynch Capital Corporation (or one of its
affiliates) and a syndicate of financial institutions
(the "Lenders") arranged by the Lead Arrangers and
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reasonably acceptable to Borrower (including
financial institutions designated by Borrower and
reasonably acceptable to the Lead Arrangers).
Credit Facilities: Senior secured credit facilities (the "Credit
------
Facilities") in an aggregate principal amount of up
----------
to $1,375,000,000, such Credit Facilities comprising:
(A) Term Loan Facilities. Term loan facilities in
--------------------
an aggregate principal amount of $1,125,000,000
(the "Term Loan Facilities"), such aggregate
principal amount to be allocated among (i) a Term
of $400,000,000 (the "Term Loan A Facility"),
--------------------
(ii) an Asset Sale Facility in an aggregate
principal amount of $225,000,000 (the "Asset Sale
-----------
Facility"), (iii) a Term
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_______________________
Capitalized terms used herein and notes defeined shall have the meaning assigned
to such terms in the attached Credit Facilities Commitment Letter (the
"Commitment Letter").
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[SENIOR SECURED]
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Loan B Facility in an aggregate principal amount of
$250,000,000 (the "Term Loan B Facility"), and (iv) a
--------------------
Term Loan C Facility in an aggregate principal amount
of $250,000,000 (the "Term Loan C Facility"). Loans
--------------------
under the Term Loan Facilities are herein referred to
as "Term Loans".
----------
(B) Revolving Credit Facility. A reducing revolving
-------------------------
credit facility in an aggregate principal amount of
$250,000,000 (the "Revolving Facility"). Loans under
------------------
the Revolving Facility are herein referred to as
"Revolving Loans"; the Term Loans and the Revolving
---------------
Loans are herein referred to collectively as "Loans".
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An amount to be agreed of the Revolving Facility will
be available as a letter of credit subfacility and as a
swing line subfacility.
Documentation: Usual for facilities and transactions of this type and
reasonably acceptable to Borrower and the Lenders. The
documentation for the Credit Facilities will include,
among others, a credit agreement (the "Credit
------
Agreement"), guarantees and appropriate pledge, security
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interest, mortgage and other collateral documents
(collectively, the "Credit Documents"). Borrower and the
----------------
Guarantors (as defined below under "Guarantors") are
herein referred to as the "Credit Parties" and
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individually referred to as a "Credit Party".
------------
Transactions: As described in the Commitment Letter.
Availability/Purpose: (A) Term Loan Facilities. Term Loans will be
--------------------
available to finance the Acquisition and the Refinancing
and to pay related fees and expenses, subject to the
terms and conditions set forth in the Credit Documents,
on the date of consummation of the Acquisition in one
draw (the "Closing Date"). Term Loans repaid or prepaid
------------
may not be reborrowed.
(B) Revolving Facility. The Revolving Facility will be
------------------
available for the purposes described above and for
working capital and general corporate purposes on a fully
revolving basis, subject to the terms and conditions set
forth in the Credit Documents, in the form of revolving
loans, swing line loans and letters of credit on and
after the Closing Date until the date that is six years
after the Closing Date (the "R/C Maturity Date").
-----------------
[SENIOR SECURED]
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Guarantors: Each of Borrower's direct and indirect wholly-owned domestic
subsidiaries existing on the Closing Date or thereafter
created or acquired and each other direct or indirect
subsidiary (whether or not wholly-owned) of Borrower that
guarantees any other debt or other obligation of Borrower or
any of its subsidiaries shall unconditionally guarantee, on
a joint and several basis, all obligations of Borrower under
the Credit Facilities and (to the extent relating to the
Loans as designated therein) under each interest rate
protection agreement entered into with a Lender or an
affiliate of a Lender. Each guarantor of any of the Credit
Facilities is herein referred to as a "Guarantor" and its
---------
guarantee is referred to herein as a "Guarantee".
---------
Security: The Credit Facilities, the Guarantees, and (to the extent
relating to the Loans as designated therein) the obligations
of Borrower under each interest rate protection agreement
entered into with a Lender or any affiliate of a Lender will
be secured by (A) a perfected lien on, and pledge of, all of
the capital stock and intercompany notes of each of the
direct and indirect subsidiaries of Borrower existing on the
Closing Date or thereafter created or acquired which capital
stock or intercompany notes are owned by Borrower or any of
its wholly owned subsidiaries, and (B) a perfected lien on,
and security interest in, all of the tangible and intangible
properties and assets (including all contract rights, real
property interests (other than real property interests of
Target), trademarks, trade names, equipment and proceeds of
the foregoing) of each Credit Party (collectively, the
"Collateral"), except in each case for those properties and
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assets as to which the Lead Arrangers shall determine in its
sole discretion that the costs of obtaining such security
interest are excessive in relation to the value of the
security to be afforded thereby (it being understood that
none of the foregoing shall be subject to any other liens or
security interests, except for customary exceptions and
others to be agreed upon). All such security interests will
be created pursuant to documentation reasonably satisfactory
in all respects to the Lead Arrangers, and on the Closing
Date, such security interests shall have become perfected
(or arrangements for the perfection thereof reasonably
satisfactory to the Lead Arrangers shall have been made) and
the Lead Arrangers shall have received reasonably
satisfactory evidence as to the enforceability and priority
thereof.
[SENIOR SECURED]
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Termination of Commitments: The commitments in respect of the Credit
Facilities (including pursuant to the
Commitment Letter) will terminate in their
entirety on June 30, 2001 if the initial
funding under the Credit Facilities does not
occur on or prior to such date.
Final Maturity: (A) Term Loan Facilities. The Term Loan A
--------------------
Facility will mature on the sixth anniversary
of the Closing Date, the Asset Sale Facility
will mature on the second anniversary of the
Closing Date, the Term Loan B Facility will
mature on the seventh anniversary of the
Closing Date and the Term Loan C Facility
will mature on the seven and one-half
anniversary of the Closing Date.
(B) Revolving Facility. The Revolving
------------------
Facility will mature on the R/C Maturity
Date.
Amortization Schedule: The Term Loan A Facility will amortize on a
quarterly basis (beginning with six months
after the Closing Date) in amounts to be
agreed.
The Asset Sale Facility will amortize from
net cash proceeds of asset sales as they
occur with the balance paid in a single
bullet payment at final maturity.
The commitments under the Revolving Facility
will reduce after the Closing Date pursuant
to a schedule to be agreed upon (but such
mandatory reductions will not result in the
commitments being reduced below an amount to
be agreed).
Each of the Term Loan B Facility and the Term
Loan C Facility will amortize at a rate of
1.00% per annum on a quarterly basis
--- -----
(beginning with six months after the Closing
Date) for the first six and six and one-half
years, respectively, after the Closing Date
with the balance paid in four equal quarterly
installments thereafter.
Letters of Credit: Letters of credit under the Revolving
Facility ("Letters of Credit") will be issued
-----------------
by a Lender to be agreed by the Lead
Arrangers and Borrower (in such capacity, the
"L/C Lender"). The issuance of all Letters of
----------
Credit shall be subject to the customary
procedures of the L/C Lender.
Letter of Credit Fees: Letter of Credit fees will be payable for the
account of the Revolving Facility Lenders on
the daily average undrawn
[SENIOR SECURED]
<PAGE>
-5-
face amount of each Letter of Credit at a
rate per annum equal to the applicable margin
--- -----
for Revolving Loans that are Euro LIBOR rate
loans in effect at such time, which fees
shall be paid quarterly in arrears. In
addition, an issuing fee on the face amount
of each Letter of Credit equal to 0.250% per
---
annum shall be payable to the L/C Lender for
-----
its own account, which fee shall also be
payable quarterly in arrears.
Interest Rates and Fees: Interest rates and fees in connection with
the Credit Facilities will be as specified on
Annex I attached hereto.
-------
Default Rate: Overdue principal, interest and other amounts
shall bear interest at a rate per annum equal
--- -----
to 2% in excess of the applicable interest
rate (including applicable margin).
Mandatory Prepayments/ Subject to the next paragraph, the Credit
Reductions in Commitments: Facilities will be required to be prepaid
with (a) 75% (50% after the Asset Sale
Facility has been repaid in full) of annual
Excess Cash Flow (to be defined), (b) 100% of
the net cash proceeds (including insurance
proceeds) of asset sales and other asset
dispositions by Borrower or any of its
subsidiaries (subject to baskets and
exceptions to be agreed upon (including
exclusions for (i) amounts reinvested within
12 months and (ii) an annual amount per annum
to be agreed)), (c) 100% of the net cash
proceeds of the issuance or incurrence of
debt or of any sale and lease-back by
Borrower or any of its subsidiaries (subject
to baskets and exceptions to be agreed upon),
and (d) 50% (or 100% so long as the Asset
Sale Facility is outstanding) of the net cash
proceeds from any issuance of equity
securities in any public offering or private
placement or from any capital contribution
(subject to baskets and exceptions to be
agreed upon); provided, however, that there
-------- -------
shall be no such obligation to prepay the
Credit Facilities with Excess Cash Flow as
described in the foregoing clause (a) so long
as the Total Leverage Ratio is less than
3.25:1.0.
The proceeds of the Notes and of any equity
issuance shall be applied to reduce to zero
the commitments in respect of or, if after
the Closing Date, to reduce to zero the
funded amount of, first, the Interim Loan,
-----
and second, the Credit Facilities.
------
[SENIOR SECURED]
<PAGE>
-6-
Mandatory prepayments to be applied to the Credit
Facilities will be applied first to the Asset Sale
Facility and after it has been repaid in full pro
---
rata among the remaining Term Loan Facilities
----
based on the aggregate principal amount of Term
Loans then outstanding under each such Term Loan
Facility. Any application to any Term Loan
Facility shall be applied pro rata to the
--- ----
remaining scheduled amortization payments in
respect thereof. Notwithstanding the foregoing,
any holder of Term Loans under the Term Loan B
Facility or Term Loan C Facility may, to the
extent that Term Loans are then outstanding under
the Term Loan A Facility, elect not to have
mandatory prepayments applied to such holder's
Term Loans under the Term Loan B Facility or Term
Loan C Facility, in which case the aggregate
amount so declined shall be applied to the
remaining scheduled amortization payments under
the Term Loan A Facility pro rata. To the extent
--- ----
that the amount to be applied to the prepayment of
Term Loans exceeds the aggregate amount of Term
Loans then outstanding, such excess shall be
applied to the Revolving Facility to permanently
reduce the commitments thereunder (first pro rata
to scheduled reductions and thereafter the
remaining commitments).
Revolving Loans will be immediately prepaid to the
extent that the aggregate extensions of credit
under the Revolving Facility exceed the
commitments then in effect under the Revolving
Facility. To the extent that the amount to be
applied to the repayment of the Revolving Loans
exceeds the amount thereof then outstanding,
Borrower shall cash collateralize outstanding
Letters of Credit.
Voluntary Prepayments/ (A) Term Loan Facilities. Term Loans may be
--------------------
Reductions in Commitments: prepaid at any time in whole or in part at the
option of Borrower, in a minimum principal amount
and in multiples to be agreed upon, without
premium or penalty (except, in the case of LIBOR
borrowings, breakage costs related to prepayments
not made on the last day of the relevant interest
period). Voluntary prepayments will be applied
first to the Asset Sale Facility and after it has
been repaid in full pro rata among the remaining
--- ----
Term Loan Facilities based on the aggregate
principal amount of Term Loans then outstanding
under each such Term Loan Facility. Any
application to (x) the Term Loan A Facility shall
be applied pro rata to the re-
--- ----
[SENIOR SECURED]
<PAGE>
-7-
maining scheduled amortization payments
thereunder, and (y) the Term Loan B Facility or
Term Loan C Facility shall be applied to the
remaining scheduled amortization payments in
respect thereof pro rata among the amortization
payments in the last year prior to final maturity
and thereafter in inverse order of maturity.
(B) Revolving Facility. The unutilized portion of
------------------
the commitments under the Revolving Facility may
be reduced and loans under the Revolving Facility
may be repaid at any time, in each case, at the
option of Borrower, in a minimum principal amount
and in multiples to be agreed upon, without
premium or penalty (except, in the case of LIBOR
borrowings, breakage costs related to prepayments
not made on the last day of the relevant interest
period).
Conditions to Effectiveness The effectiveness of the credit agreement and the
and to Initial Loans: making of the initial Loans under the Credit
Facilities shall be subject to conditions
precedent that are usual for facilities and
transactions of this type, to those specified
herein and in the Commitment Letter and to such
additional conditions precedent as may reasonably
be required by the Lead Arrangers (all such
conditions to be satisfied in a manner reasonably
satisfactory to the Lead Arrangers and the Lenders
or the Required Lenders (as the case may be) (as
defined below under "Required Lenders")),
including, but not limited to, execution and
delivery of the Credit Documents acceptable in
form and substance to the Lenders by each Credit
Party party thereto prior to the Closing Date;
delivery of reasonably satisfactory borrowing
certificates and other customary closing
certificates; receipt of valid security interests
as contemplated hereby; absence of defaults,
prepayment events or creation of liens under debt
instruments or other material agreements as a
result of the transactions contemplated hereby;
absence of material litigation; evidence of
authority; compliance with applicable laws and
regulations in all material respects; delivery of
reasonably satisfactory legal opinions; and
adequate insurance.
The making of the initial Loans will be subject to
the following conditions:
[SENIOR SECURED]
<PAGE>
(A) The delivery, on or prior to the Closing Date, of
a certificate on behalf of Borrower from the chief
financial officer of Borrower and in form and
substance reasonably satisfactory to the Lead
Arrangers with respect to the solvency (on a
consolidated basis) of each Credit Party
immediately after the consummation of the
Transactions to occur on the Closing Date.
(B) Simultaneously with the making of the initial
Loans, either (i) the Note Offering shall be
consummated for gross proceeds of not less than
$300,000,000, or (ii) the drawdown of the Interim
Loan shall be consummated for gross proceeds of
not less than $300,000,000 pursuant to
documentation and on terms and conditions
reasonably satisfactory to the Lead Arrangers.
(C) The Equity Issuance shall have been consummated on
terms and conditions pursuant to documentation
reasonably satisfactory to the Lead Arrangers.
(D) To the extent requested by the Lead Arrangers, the
Lead Arrangers shall have received copies,
certified by Borrower, of all filings made with
any governmental authority in connection with the
Transactions.
(E) The Transactions and the financing therefor shall
be in compliance with all laws and regulations in
all material respects or the Lead Arrangers shall
have determined such to be inapplicable to the
Transactions.
(F) Simultaneously with the making of the initial
Loans, the Acquisition shall have been consummated
in all material respects in accordance with the
terms of the Merger Agreement (without the waiver
or amendment of any material condition unless
consented to by the Lead Arrangers and the
Lenders). Each of the parties thereto shall have
complied in all material respects with all
covenants set forth in the Merger Agreement to be
complied with by it on or prior to the Closing
Date (without the waiver or amendment of any of
the material terms thereof unless consented to by
the Lead Arrangers).
[SENIOR SECURED]
<PAGE>
-9-
(G) Simultaneously with the making of the initial
Loans, Borrower shall have effected the
Refinancing on terms and conditions and
pursuant to documentation reasonably
satisfactory to the Lead Arrangers. All liens
in respect of the Existing Indebtedness
(excluding capital leases and other currently
secured debt permitted to remain outstanding)
shall have been released and the Lead
Arrangers shall have received evidence
thereof satisfactory to the Lead Arrangers
(or arrangements for such release reasonably
satisfactory to the Lead Arrangers shall have
been made) and a "pay-off" letter or letters
reasonably satisfactory to the Lead Arrangers
with respect to such Existing Indebtedness.
(H) No law or regulation shall be applicable in
the reasonable judgment of the Lead Arrangers
that restrains, prevents or imposes material
adverse conditions upon the Transactions or
the financing thereof, including the Credit
Facilities.
(I) After giving effect to the Transactions,
Borrower and its subsidiaries shall have
outstanding no indebtedness or preferred
stock (or direct or indirect guarantee or
other credit support in respect thereof)
other than the Loans, the Notes or the
Interim Loan, $325,000,000 aggregate
principal amount of senior subordinated notes
due May 2009 of Borrower and such other debt
or preferred stock as is reasonably
acceptable to the Lead Arrangers.
(J) There shall not have occurred or become known
any material adverse change or any condition
or event that could reasonably be expected to
result in a material adverse change in the
business, operations, financial condition,
liabilities (contingent or otherwise) or
prospects (each, a "Material Adverse Change")
-----------------------
of Borrower and its subsidiaries taken as a
whole (after giving effect to the
Transactions) since December 31, 1999.
(K) The Lead Arrangers shall have received
reasonably satisfactory evidence (including
satisfactory supporting schedules and other
data) that the ratio of pro
[SENIOR SECURED]
<PAGE>
-10-
forma consolidated debt to pro forma EBITDA
(to be defined) of Borrower and its
subsidiaries calculated in a manner
reasonable acceptable to the Lead Arrangers
and after giving effect to the Transactions
for the trailing four quarters ended
immediately prior to the Closing Date was not
greater than 4.25:1.0.
(L) All requisite governmental authorities and
material third parties shall have approved or
consented to the Transactions and the other
transactions contemplated hereby to the
extent required (without the imposition of
any materially burdensome condition or
qualification in the reasonable judgment of
the Lead Arrangers) and all such approvals
shall be in full force and effect, all
applicable waiting periods shall have expired
and there shall be no governmental or
judicial action, actual or threatened, that
has or could have a reasonable likelihood of
restraining, preventing or imposing
materially burdensome or materially adverse
conditions on any of the Transactions.
(M) All accrued fees and expenses (including the
reasonable fees and expenses of counsel to
the Lead Arrangers) of the Lead Arrangers in
connection with the Credit Documents shall
have been paid.
(N) The Lenders shall have received such other
customary legal opinions, corporate documents
and other instruments and/or certificates as
they may reasonably request.
Conditions to All Each extension of credit under the Credit
Extensions of Credit: Facilities will be subject to customary
conditions, including the (i) absence of any
Default or Event of Default (to be defined), and
(ii) continued accuracy of representations and
warranties in all material respects.
Representations and Customary for facilities similar to the Credit
Warranties: Facilities and such additional representations and
warranties as may reasonably be required by the
Lead Arrangers.
Affirmative Covenants: Customary for facilities similar to the Credit
Facilities and such affirmative covenants as may
reasonably be required by the Lead Arrangers.
[SENIOR SECURED]
<PAGE>
-11-
Negative Covenants: Customary for facilities similar to the
Credit Facilities and such others as may
reasonably be required by the Lead Arrangers
(all such covenants to be subject to
customary baskets and exceptions and such
others to be agreed upon), including, but not
limited to, limitation on indebtedness;
limitation on liens and further negative
pledges; limitation on investments;
limitation on contingent obligations;
limitation on dividends, redemptions and
repurchases of equity interests; limitation
on mergers, acquisitions and asset sales;
limitation on capital expenditures;
limitation on sale-leaseback transactions;
limitation on transactions with affiliates;
limitation on dividend and other payment
restrictions affecting subsidiaries;
limitation on changes in business conducted;
limitation on amendment of documents relating
to other material indebtedness and other
material documents; limitation on creation of
subsidiaries; and limitation on prepayment or
repurchase of subordinated indebtedness.
Financial Covenants: The Credit Facilities will contain financial
covenants appropriate in the context of the
proposed transaction based upon the financial
information provided to the Lead Arrangers,
including, but not limited to (definitions
and numerical calculations to be set forth in
the Credit Agreement): minimum net worth;
minimum ratio of trailing four quarter EBITDA
(to be defined) to total interest expense for
the same period; minimum ratio of trailing
four quarter EBITDA to the sum of interest
expense , scheduled principal payments,
capital expenditures and tax expenses for the
same period; maximum ratio (the "Total
-----
Leverage Ratio") of total debt to trailing
--------------
four quarter EBITDA; and maximum ratio of
total senior debt to trailing four quarter
EBITDA. The financial covenants contemplated
above will be tested on a quarterly basis and
will apply to Borrower and its subsidiaries
on a consolidated basis.
Interest Rate Management: An amount designated by the Lead Arrangers of
the projected outstandings under the Credit
Facilities and the Interim Loan must be
hedged on terms and for a period of time
reasonably satisfactory to the Lead Arrangers
with a counterparty reasonably acceptable to
the Lead Arrangers.
Events of Default: Customary for facilities similar to the
Credit Facilities and others as may
reasonably be required by the Lead Arrangers.
[SENIOR SECURED]
<PAGE>
-12-
Yield Protection and Usual for facilities and transactions of this
Increased Costs: type.
Assignments and Each assignment (unless to another Lender or its
Participations: affiliates) shall be in a minimum amount of $5.0
million (unless Borrower and the Lead Arrangers
otherwise consent or unless the assigning
Lender's exposure is thereby reduced to $ 0).
Assignments (which may be non-pro rata among
loans and commitments) shall be permitted with
Borrower's and the Lead Arrangers' consent (such
consent not to be unreasonably withheld, delayed
or conditioned), except that no such consent of
Borrower need be obtained to effect an assignment
to any Lender (or its affiliates) or if any
default has occurred and is continuing.
Participations shall be permitted without
restriction. Voting rights of participants will
be subject to customary limitations.
Required Lenders: Lenders having a majority of the outstanding
credit exposure (the "Required Lenders"), subject
----------------
to amendments of certain provisions of the Credit
Documents requiring the consent of Lenders having
a greater share (or all) of the outstanding
credit exposure.
Expenses and Indemnification: In addition to those out-of-pocket expenses
reimbursable under the Commitment Letter, all
reasonable out-of-pocket expenses of the Lead
Arrangers and the Administrative Agent (and the
Lenders for enforcement costs and documentary
taxes) associated with the preparation, execution
and delivery of any waiver or modification
(whether or not effective) of, and the
enforcement of, any Credit Document (including
the reasonable fees, disbursements and other
charges of counsel for the Lead Arrangers) are to
be paid by the Credit Parties.
The Credit Parties will indemnify each of the
Lead Arrangers, the Administrative Agent and the
other Lenders and hold them harmless from and
against all costs, expenses (including reasonable
fees, disbursements and other charges of counsel
for the Lead Arrangers) and liabilities arising
out of or relating to any litigation or other
proceeding (regardless of whether the Lead
Arrangers, the Administrative Agent or any such
other Lender is a party thereto) that relate to
the Transactions or any transactions related
thereto (excluding
[SENIOR SECURED]
<PAGE>
-13-
litigation among the Lenders), except to the
extent arising solely from such person's bad
faith, gross negligence or willful misconduct.
Governing Law and Forum: New York.
Waiver of Jury Trial: All parties to the Credit Documents waive the
right to trial by jury.
Special Counsel for Lead Cahill Gordon & Reindel (including local counsel
Arranger: as selected by the Lead Arrangers).
[SENIOR SECURED]
<PAGE>
-1-
ANNEX I
-------
Interest Rates and Fees: Borrower will be entitled to make borrowings
based on the ABR plus the Applicable Margin or
LIBOR plus the Applicable Margin. The "Applicable
Margin" shall be (A) with respect to LIBOR Loans
under the (i) Revolving Facility, 3.00% per
---
annum; (ii) Term Loan A Facility, 3.00% per
----- ---
annum; (iii) Asset Sale Facility, 3.00% per
----- ---
annum; (iv) Term Loan B Facility, 3.50% per
----- ---
annum; and (v) Term Loan C Facility, 3.75% per
----- ---
annum; and (B) with respect to ABR Loans under
-----
the (i) Revolving Facility, 2.00% per annum; (ii)
---------
Term Loan A Facility, 2.00% per annum; (iii)
---------
Asset Sale Facility, 2.00% per annum; (iv) Term
---------
Loan B Facility, 2.50% per annum; and (v) Term
---------
Loan C Facility, 2.75% per annum.
---------
Notwithstanding the foregoing, on and after the
date (the "Trigger Date") which is the latest of
------------
(A) if the Interim Loan is drawn down, the date
of issuance of Take-out Securities generating
gross proceeds to Borrower of at least $300.0
million, (B) the repayment in full of the Asset
Sale Facility, and (C) the first date after the
Closing Date on which Borrower delivers financial
statements and a computation of the Total
Leverage Ratio for the first fiscal quarter ended
at least six months after the Closing Date in
accordance with the Credit Agreement, the
Applicable Margins for the Revolving Facility and
Term Loan A Facility shall be subject to a grid
based on the most recent Total Leverage Ratio to
be negotiated.
"ABR" means the higher of (i) the corporate base
---
rate of interest announced by the Administrative
Agent from time to time, changing effective on
the date of announcement of said corporate base
rate changes, and (ii) the Federal Funds Rate
plus 0.50% per annum. The corporate base rate is
---------
not
[SENIOR SECURED]
<PAGE>
-2-
necessarily the lowest rate charged by the
Administrative Agent to its customers.
"LIBOR" means the rate determined by the
------
Administrative Agent to be available to the
Lenders in the London interbank market for
deposits in US Dollars in the amount of, and for
a maturity corresponding to, the amount of the
applicable LIBOR Loan, as adjusted for maximum
statutory reserves.
Borrower may select interest periods of one, two,
three or six (or if available from all Lenders, 9
or 12) months for LIBOR borrowings. Interest will
be payable in arrears (i) in the case of ABR
Loans, at the end of each quarter and (ii) in the
case of LIBOR Loans, at the end of each interest
period and, in the case of any interest period
longer than three months, no less frequently than
every three months; provided, however, that if
-------- -------
the Interim Loan is drawn down, interest shall be
paid not less frequently than interest is paid on
the Interim Loan and in any event at least 15
days prior to payment of interest on the Interim
Loan. Interest on all borrowings shall be
calculated on the basis of the actual number of
days elapsed over (x) in the case of LIBOR Loans,
a 360-day year, and (y) in the case of ABR Loans,
a 365- or 366-day year, as the case may be.
Commitment fees accrue on the undrawn amount of
the Credit Facilities, commencing on the date of
the execution and delivery of the Credit
Documents. The commitment fee in respect of the
Credit Facilities will initially be 0.50% per
---
annum subject to a stepdown after the Trigger
-----
Date to subject to a grid based on the most
recent Total Leverage Ratio to be negotiated.
All commitment fees will be payable in arrears at
the end of each quarter and upon any termination
of any commitment, in each case for the actual
number of days elapsed over a 360-day year.
[SENIOR SECURED]
<PAGE>
-3-
[SENIOR SECURED]
<PAGE>
CONFIDENTIAL EXHIBIT B
---------
INTERIM LOAN
------------
SUMMARY OF TERMS AND CONDITIONS*
--------------------------------
Borrower: Triad Hospitals Holdings, Inc. ("Borrower").
--------
Sole Book-Runner and Merrill Lynch & Co. (the "Lead Arranger").
Co-Lead Arranger:
Syndication Agent: Merrill Lynch & Co.
Administrative Agent: A Lender or other financial institution to be
selected by Borrower and reasonably acceptable to
the Lead Arranger (the "Administrative Agent").
--------------------
Lenders: Merrill Lynch Capital Corporation (or one of its
affiliates) and a syndicate of financial
institutions (the "Lenders") arranged by the Lead
-------
Arranger and reasonably acceptable to Borrower.
Interim Loan: Senior Unsecured Interim Loan (the "Interim
-------
Loan").
-----
Principal Amount: Up to $300,000,000.
Documentation: Usual for facilities and transactions of this
type and reasonably acceptable to Borrower and
the Lenders. The documentation for the Interim
Loan will include, among others, a credit
agreement (the "Interim Loan Agreement"),
----------------------
guarantees and other appropriate documents
(collectively, the "Interim Loan Documents").
----------------------
Transactions: As described in the Commitment Letter.
Use of Proceeds: Together with proceeds derived from the Senior
Secured Credit Facilities, to finance the
Acquisition and the Refinancing and to pay the
fees and expenses related to the Transactions.
Termination of Commitments: The commitment in respect of the Interim Loan
(including pursuant to the Commitment Letter)
will automatically and permanently terminate on
June 30, 2001 if not drawn down on or
____________________________
*
Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the attached Credit Facilities Commitment Letter
(the "Commitment Letter")
------------------
[INTERIM LOAN]
<PAGE>
-2-
prior to such date. In addition, the commitments
in respect of the Interim Loan will automatically
and permanently terminate on the date of the
consummation of the Acquisition to the extent not
drawn down on such date.
Maturity: The Interim Loan will mature on the date (the
"Initial Maturity Date") that is twelve months
---------------------
after the initial funding date (the "Funding").
-------
Upon the satisfaction of the terms and conditions
described under "Exchange Feature; Rollover
Securities and Rollover Loans", the Interim Loan
will be exchanged for, at the option of each
Lender, either (i) unsecured senior debt
securities ("Rollover Securities"), evidenced by
-------------------
an indenture in a form attached to the Interim
Loan Agreement and maturing on the eighth
anniversary of the Initial Maturity Date, or (ii)
unsecured senior loans maturing on the eighth
anniversary of the Initial Maturity Date (the
"Rollover Loans"), evidenced by the Interim Loan
--------------
Agreement.
Interest Rate: (A) Interim Loan. The Interim Loan will bear
------------
interest at a rate per annum expressed as a basis
---------
point spread over 30-day LIBOR (as adjusted every
30 days and adjusted for all applicable reserve
requirements):
From the To the
--------
Beginning End of
---------
of Month Month Spread
--------- --------- -----------
-------------
1 3 550 bps
4 6 600 bps
7 9 700 bps
8 12 800 bps
(B) Rollover Securities and Rollover Loans. The
--------------------------------------
Rollover Securities and the Rollover Loans will
bear interest at a rate per annum equal to the
--- -----
then-applicable six-month LIBOR rate (as adjusted
each six months and as adjusted for all
applicable reserves) plus 900 bps. Any holder of
Rollover Securities or Rollover Loans may elect,
at its sole option, to fix the interest rate per
---
annum on its Rollover Securities or Rollover
-----
Loans at the then effective rate of interest per
annum (in which case interest shall then be paid
semi-annually in arrears).
Interest Cash Cap - 14% per annum; Total Interest
---------
Cap - 17% per annum (in each case exclusive of
--- -----
any additional interest
[INTERIM LOAN]
<PAGE>
-3-
payable due to an event of default and any fees
paid by adding the amount thereof to principal).
To the extent that the accrued interest exceeds
the interest that would accrue at the maximum
cash interest rate, the excess will be paid by
adding the amount thereof to the outstanding
principal.
Notwithstanding the foregoing, in no event will
the interest rate be less than 12% per annum.
--- -----
To the extent that LIBOR cannot be determined or
any Lender is unable to maintain a LIBOR loan,
the Interim Loan shall bear interest at a rate
per annum equal to the higher of (x) the Federal
--- -----
Funds Rate plus 0.50% per annum or (y) the Prime
--- -----
Rate (as determined by the Administrative Agent),
plus in each case the spread as indicated above
(minus 100 bps).
Default Rate: Overdue principal, interest and other amounts
shall bear interest at a rate per annum equal to
--- -----
2% in excess of the applicable interest rate
(including applicable margin). Interest Payment
Dates:
(A) Interim Loan. Monthly, in arrears.
------------
(B) Rollover Securities and Rollover Loans.
--------------------------------------
Quarterly, in arrears.
Security: None (including in respect of the Rollover
Securities and Rollover Loans).
Guarantee: The Interim Loan will be guaranteed on an
unsecured senior basis by each subsidiary of
Borrower that guarantees the Senior Secured
Credit Facilities. Each such guarantee is herein
referred to as a "Guarantee" and each such
---------
guarantor, a "Guarantor." The Guarantors and
---------
Borrower are herein referred to as the "Credit
------
Parties."
-------
Ranking: The Interim Loan (and the Rollover Securities and
Rollover Loans) will be an unsecured senior
obligation of Borrower ranking pari passu with
---- -----
other senior indebtedness of Borrower, and senior
to all subordinated indebtedness of Borrower
which is not pari passu therewith.
---- -----
Optional Prepayment: The Interim Loan will be prepayable at par at any
time at Borrower's option, in whole or in part,
plus accrued and unpaid interest. Breakage costs,
if any, will be paid by Borrower.
[INTERIM LOAN]
<PAGE>
-4-
Mandatory Prepayment: To the extent not prohibited by the Senior
Secured Credit Facilities, upon the receipt by
Borrower or any of its subsidiaries of the net
cash proceeds from (i) the issuance of any debt
(other than under the Senior Secured Credit
Facilities and subject to exceptions and
baskets to be negotiated), (ii) any capital
contribution or the sale or issuance of any
capital stock or any securities convertible
into or exchangeable for capital stock or any
warrants, rights or options to acquire capital
stock (subject to baskets and exceptions to be
agreed upon); and (iii) insurance proceeds or
asset sales and other asset dispositions
(subject to baskets and exceptions to be agreed
upon), Borrower will prepay the Interim Loan in
an amount equal to such net proceeds not
previously applied to such prepayments at par,
together with accrued interest thereon. In
addition, upon the occurrence of a Change of
Control (to be defined), Borrower will be
required to offer to prepay the entire
aggregate principal amount of the Interim Loan
(or the Rollover Securities and Rollover Loans)
in cash for a purchase price equal to 101% of
the principal amount thereof, plus accrued and
unpaid interest. Breakage costs, if any, will
be paid by Borrower.
Exchange Feature; Rollover On the Initial Maturity Date, unless Borrower
Securities and Rollover Loans: is in bankruptcy or there has been an
acceleration of the Senior Secured Credit
Facilities (or any refinancing thereof) or the
Interim Loan and subject to the receipt of all
fees due to the Lenders, each Lender (and
participant) shall have its interest in the
Interim Loan exchanged for, at the option of
each Lender, either Rollover Securities or
Rollover Loans. The Rollover Securities and the
Rollover Loans will be (i) mandatorily
redeemable or repayable (as the case may be) on
the basis applicable to the Interim Loan,
except that, in lieu of mandatory prepayments,
Borrower shall be required to make mandatory
offers to purchase such Rollover Securities or
Rollover Loans and (ii) optionally redeemable
or repayable (as the case may be) at declining
premiums on terms customary for high-yield debt
securities, including four year no-call
provisions. All mandatory offers to purchase
and all optional prepayments shall be made pro
---
rata between the Rollover Securities and the
----
Rollover Loans.
The Rollover Securities will be evidenced by an
indenture in form for qualification under the
Securities Act and will otherwise contain
provisions customary for public debt securities
and the Rollover Loans will be evidenced by the
Interim Loan
[INTERIM LOAN]
<PAGE>
-5-
Agreement. The holders of the Rollover
Securities will be entitled to exchange offer
and other registration rights to permit
resale by the holders of Rollover Securities
without restriction under applicable
securities laws no less favorable to holders
than those customarily applicable to an
offering pursuant to Rule 144A.
Conditions to Effectiveness and to The making of the Interim Loan shall be
Interim Loan: subject to the same conditions precedent that
are set forth in Exhibit A to the Commitment
Letter with respect to the Senior Secured
Credit Facilities and to the following
additional conditions:
(a) Borrower shall have provided to the Lead Arranger not later than 25
days prior to the Closing Date a printed preliminary ("red herring")
offering memorandum or prospectus usable in a customary high-yield
road show relating to the issuance of the Notes, which contains all
financial statements and other data to be included therein (including
all audited financial statements, all unaudited financial statements
(each of which shall have undergone a SAS 71 review)) and all
appropriate pro forma financial statements prepared in accordance
with, or reconciled to, generally accepted accounting principles in
the United States and prepared in accordance with Regulation S-X
under the Securities Act of 1933, as amended (the "Securities Act"),
--------------
and substantially all other data (including selected financial data)
that the Securities and Exchange Commission would require in a
registered offering of the Senior Notes (collectively, the "Required
--------
Information").
-----------
(b) Borrower shall have cooperated reasonably and in good faith with the
marketing effort for the Note Offering with the view towards
effecting the issuance of the Notes in lieu of the draw down of the
Interim Loan. MLPF&S shall have had a period of not less than 25 days
to market the Notes prior to the Closing Date.
(c) If requested in the reasonable judgment of the Lead Arranger, there
shall have been provided in any confidential information memorandum
relating to syndication of the Interim Loan, or in any other document
relating to the syndication of the Interim Loan, reasonably detailed
pro forma consolidated financial projections prepared by or on behalf
of Borrower for Borrower and its consolidated entities for 1999 and
the five subsequent fiscal years that are not different in a
materially adverse manner as compared with those previously made
available to the Lenders.
(d) Borrower shall have entered into the Senior Secured Credit Facilities
with Merrill Lynch providing for $1,375,000,000 under the Senior
Secured Credit Facilities pursuant to agreements and on terms and
conditions thereunder, in form and substance reasonably satisfactory
to the Lead Arranger.
[INTERIM LOAN]
<PAGE>
-6-
Representations and Warranties: Customary for facilities similar to the Interim
Loan and such additional representations and
warranties as may reasonably be required by the
Lead Arranger.
Affirmative Covenants: Customary for facilities similar to the Interim
Loan and such affirmative covenants as may
reasonably be required by the Lead Arranger.
In addition, the Interim Loan Agreement will
contain provisions pursuant to which Borrower
shall undertake to (i) cooperate with the Take-
out Banks (as defined below under "Refinancing
of Interim Loan") and provide the Take-out
Banks with information required by the Take-out
Banks in connection with the Debt Offering (as
defined below under "Refinancing of Interim
Loan") or other means of refinancing the
Interim Loan and the Rollover Securities and
the Rollover Loans, (ii) assist the Take-out
Banks in connection with the marketing of the
Take-out Securities (including promptly
providing to the Take-out Banks any information
reasonably requested to effect the issue and
sale of the Take-out Securities and making
available senior management of Borrower for
investor meetings), and (iii) cooperate with
the Take-out Banks in the timely preparation of
any registration statement or private placement
memorandum relating to the Debt Offering and
other marketing materials to be used in
connection with the syndication of the Interim
Loan.
Upon issuance of the Rollover Securities and
the Rollover Loans, the affirmative covenants
shall conform to a customary high-yield
indenture and, subject to market conditions,
shall be substantially similar to those
contained in the 11% Senior Subordinated Notes
due 2009 of Borrower (the "Existing Notes").
--------------
Negative Covenants: Customary for facilities similar to the Interim
Loan and such others as may reasonably be
required by the Lead Arranger (with customary
baskets and exceptions to be agreed upon),
including, but not limited to, limitation on
indebtedness; limitation on liens; limitation
on investments; limitation on contingent
obligations; limitation on dividends,
redemptions and repurchases of equity
interests; limitation on mergers, acquisitions
and asset sales; limitation on issuance, sale
or other disposition of subsidiary stock;
limitation on sale-leaseback transactions;
limitation on transactions with affiliates;
limitation on dividend and other payment
restrictions affecting subsidiaries;
[INTERIM LOAN]
<PAGE>
-7-
limitation on changes in business conducted;
and limitation on prepayment or repurchase of
subordinated or other pari passu indebtedness.
---- -----
Upon issuance of the Rollover Securities and
the Rollover Loans, the negative covenants
shall conform to a customary high-yield
indenture and, subject to market conditions,
shall be substantially similar to the Existing
Notes.
Events of Default: Customary for facilities similar to the Interim
Loan and such others as may reasonably be
required by the Lead Arranger.
Refinancing of Interim Loan: Borrower shall undertake to use its reasonable
best efforts to (i) prepare an offering
memorandum for a private placement through
resale pursuant to Rule 144A or (ii) file a
registration statement under the Securities Act
with respect to the Take-out Securities (in
each case, the "Debt Offering"), to refinance
-------------
in full the Interim Loan or the Rollover
Securities and the Rollover Loans and
consummate such Debt Offering as soon as
practicable thereafter in an amount sufficient
to refinance the Interim Loan or the Rollover
Securities and the Rollover Loans. Such Debt
Offering shall be on such terms and conditions
(including (without limitation) covenants,
events of default, interest rate, yield and
redemption prices and dates) as the financial
institutions party to the Engagement Letter
(the "Take-out Banks") may in their judgment
--------------
determine to be appropriate in light of
prevailing circumstances and market conditions
and the financial condition and prospects of
Borrower and its subsidiaries at the time of
sale and reasonably acceptable to Borrower and
containing such other customary terms as
determined by the Take-out Banks and reasonably
acceptable to Borrower. If any Take-out
Securities are issued in a transaction not
registered under the Securities Act, all such
Take-out Securities shall be entitled to the
benefit of a registration rights agreement to
be entered into by the relevant issuer (and any
guarantor thereof) in respect of indebtedness
being refinanced in customary form reasonably
acceptable to the Take-out Banks (which shall
include provisions for a customary registered
exchange offer with respect to any Take-out
Securities).
Yield Protection and Increased Usual for facilities and transactions of this
Costs: type.
[INTERIM LOAN]
<PAGE>
-8-
Required Lenders: Lenders having a majority of the outstanding
credit exposure (the "Required Lenders"),
----------------
subject to amendments of certain provisions of
the Interim Loan Documents requiring the
consent of Lenders having a greater share (or
all) of the outstanding credit exposure.
Assignments and Participations: Each assignment (unless to another Lender or
its affiliates) shall be in a minimum amount of
$1.0 million (unless Borrower and the Lead
Arranger otherwise consent or unless the
assigning Lender's exposure is thereby reduced
to $0). Assignments shall be permitted with
Borrower's and the Lead Arranger's consent
(such consent not to be unreasonably withheld,
delayed or conditioned), except that no such
consent of Borrower need be obtained to effect
an assignment to any Lender (or its affiliates)
or if any default or event of default has
occurred and is continuing for any assignment
by Merrill Lynch or its affiliates.
Participations shall be permitted without
restriction. Voting rights of participants will
be subject to customary limitations.
Expenses and Indemnification: In addition to those out-of-pocket expenses
reimbursable under the Commitment Letter, all
reasonable out-of-pocket expenses of the Lead
Arranger and the Administrative Agent (and the
Lenders for enforcement costs and documentary
taxes) associated with the preparation,
execution and delivery of any waiver or
modification (whether or not effective) of, and
the enforcement of, any Interim Loan Document
(including the reasonable fees, disbursements
and other charges of counsel for the Lead
Arranger) are to be paid by Borrower.
Borrower will indemnify each of the Lead
Arranger, the Administrative Agent and the
other Lenders and hold them harmless from and
against all costs, expenses (including
reasonable fees, disbursements and other
charges of counsel for the Lead Arranger) and
liabilities arising out of or relating to any
litigation or other proceeding (regardless of
whether the Lead Arranger, the Administrative
Agent or any such other Lender is a party
thereto) that relates to the Transactions
(excluding litigation among Lenders), except to
the extent arising solely from such person's
bad faith, gross negligence or willful
misconduct.
Governing Law and Forum: New York.
[INTERIM LOAN]
<PAGE>
-9-
Waiver of Jury Trial: All parties to the Interim Loan Documents waive
right to trial by jury.
Special Counsel for Cahill Gordon & Reindel (and such local counsel
Lead Arranger: as may be selected by the Lead Arranger).
[INTERIM LOAN]
