<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
SCHEDULE 14D-1
(AMENDMENT NO. 2)
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
(AMENDMENT NO. 2)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
---------------
SHOREWOOD PACKAGING CORPORATION
(Name of Subject Company)
---------------
CHESAPEAKE CORPORATION
SHEFFIELD, INC.
(Bidders)
---------------
Common Stock, $0.01 Par Value Per Share
(Including Associated Rights)
(Title of Class of Securities)
---------------
825229107
(CUSIP Number of Class of Securities)
---------------
Thomas H. Johnson
President & Chief Executive Officer
Chesapeake Corporation
1021 East Cary Street
Richmond, Virginia 23218-2350
(804) 697-1000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
Copies to:
Gary E. Thompson, Esq.
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
(804) 788-8200
---------------
December 15, 1999
(Date of Event Which Requires Filing of This Statement)
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<PAGE>
This Amendment No. 2 to Schedule 14D-1 supplements and amends the Tender
Offer Statement on Schedule 14D-1, filed on December 3, 1999 (the "Schedule
14D-1"), by Sheffield, Inc., a Delaware corporation ("Purchaser"), and
Chesapeake Corporation ("Chesapeake"), a Virginia corporation and the direct
owner of all of the outstanding capital stock of Purchaser. The Schedule 14D-1
relates to the offer by Purchaser to purchase all outstanding shares of common
stock, $0.01 par value per share (the "Common Stock"), including the
associated rights to purchase preferred stock (the "Rights" and together with
the Common Stock, the "Shares"), of Shorewood Packaging Corporation, a
Delaware corporation (the "Company"), not directly or indirectly owned by
Chesapeake and its subsidiaries, for a purchase price of $17.25 per Share, net
to the seller in cash, without interest thereon, on the terms and subject to
the conditions set forth in the Offer to Purchase, dated December 3, 1999 (the
"Offer to Purchase"), and in the related Letter of Transmittal and any
amendments or supplements thereto (which collectively constitute the "Offer").
Capitalized terms used and not otherwise defined herein have the meanings set
forth in the Schedule 14D-1. This Amendment No. 2 to Schedule 14D-1 also
constitutes Amendment No. 2 to the statement on Schedule 13D of Purchaser and
Chesapeake, filed on November 30, 1999.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company
Item 3 is hereby amended and supplemented by adding thereto the following:
(b) On December 10, 1999, the Company filed preliminary consent revocation
materials on Schedule 14A with the SEC.
On December 15, 1999, Chesapeake issued the following press release which
contained the full text of a letter which was sent on such date by Mr. Johnson
to each member of the Company Board:
FOR IMMEDIATE RELEASE
CHESAPEAKE SENDS LETTER TO SHOREWOOD DIRECTORS
Reiterates Commitment to Tender Offer
(Richmond, VA--December 15, 1999) Chesapeake Corporation (NYSE: CSK), today
announced that Thomas H. Johnson, president and chief executive officer, is
sending the following letter to Marc Shore, chairman and chief executive
officer of Shorewood Packaging Corporation (NYSE: SWD):
December 15, 1999
Mr. Marc Shore
Chairman and Chief Executive Officer
Shorewood Packaging Corporation
277 Park Avenue
New York NY 10172
Dear Marc:
As you may know, Chesapeake today announced a recommended cash tender offer to
acquire Boxmore International plc, headquartered in Belfast, Northern Ireland.
Boxmore's board of directors has unanimously recommended Chesapeake's offer to
Boxmore's shareholders. Like Shorewood, this is a company we have been
evaluating for some time. We are delighted with the enhancement of our global
platform that this company offers and believe the acquisition of Boxmore
enhances the strategic rationale for our acquisition of Shorewood.
At the same time, we want to reinforce our commitment to our $17.25 cash
tender offer for Shorewood. We want you and your board to know that we have in
place a fully committed credit facility from First Union National Bank that
permits us to complete the acquisitions of both Boxmore and Shorewood on the
terms of our offers. Accordingly, neither offer is subject to any financing
conditions.
2
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We reiterate our offer to meet with the Shorewood board to negotiate the
terms, including price and structure, of an acquisition of Shorewood by
Chesapeake. In this regard, we are ready to meet with you and your advisors at
your earliest convenience.
Sincerely,
/s/ Thomas H. Johnson
Thomas H. Johnson
cc: Shorewood Board of Directors
On December 3, 1999 Chesapeake announced that it would commence a tender offer
to acquire all the outstanding shares of Shorewood for $17.25 in cash per
share, or approximately $500 million. Chesapeake's tender offer represents an
approximate 45% premium to Shorewood's closing stock price on November 9,
1999, the day prior to Chesapeake's initial proposal to Shorewood's board of
directors.
Chesapeake Corporation, headquartered in Richmond, Va., is a global leader in
specialty packaging and merchandising services. Chesapeake is the largest
North American producer of temporary and permanent point-of-purchase displays,
the North American leader for litho-laminated packaging, the leading European
folding carton, leaflet and label supplier, and a local leader in specific
U.S. markets for customized, corrugated packaging. Chesapeake has over 40
locations in North America, Europe and Asia. Chesapeake's net sales in 1998
were $950.4 million. Chesapeake's website is www.cskcorp.com.
# # #
This news release, including comments by Thomas H. Johnson, contains forward-
looking statements that are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The accuracy of such
statements is subject to a number of risks, uncertainties, and assumptions
that may cause Chesapeake's actual results to differ materially from those
expressed in the forward-looking statements including, but not limited to:
competitive products and pricing; production costs, particularly for raw
materials such as corrugated box, folding carton and display materials;
fluctuations in demand; government policies and regulations affecting the
environment; interest rates; currency translation movements; Year 2000
compliance; and other risks that are detailed from time to time in reports
filed by the Company with the Securities and Exchange Commission.
<TABLE>
<S> <C>
For media relations, call: For investor relations, call:
Molly Remes William Tolley/Joel Mostrom
804-697-1110 804-697-1157/804-697-1147
</TABLE>
Joele Frank or Andy Brimmer
Abernathy MacGregor Frank
212-371-5999
Item 4. Source and Amount of Funds or Other Consideration
The text set forth in Section 12 of the Offer to Purchase is hereby amended
and restated in its entirety as follows:
Purchaser estimates that the total amount of funds required to purchase all
of the outstanding Shares (other than those already owned by Purchaser) on a
fully diluted basis pursuant to the Offer and the Proposed Merger and to pay
related fees and expenses will be approximately $525 million. Purchaser
intends to obtain all funds needed for the Offer and the Proposed Merger
through a capital contribution or a loan from Chesapeake.
3
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Chesapeake plans to provide the funds for such capital contribution or loan
from its available cash and working capital and pursuant to the Credit
Facilities described below. At September 30, 1999, Chesapeake had short-term
cash and investments of approximately $36.06 million and working capital of
approximately $139.5 million.
Chesapeake has entered into a commitment letter dated November 10, 1999, and
accepted and agreed to by Chesapeake on December 2, 1999, as amended and
restated as of November 10, 1999, and accepted and agreed to on December 14,
1999 (the "Commitment Letter"), with First Union National Bank (the "Bank")
and First Union Securities, Inc., an affiliate of the Bank ("FUS"). Pursuant
to the Commitment Letter, the Bank has committed to provide to Chesapeake, or
to any subsidiary of Chesapeake, fully guaranteed by Chesapeake, subject to
the terms and conditions stated in the Commitment Letter and the Amended and
Restated Summary of Terms and Conditions attached thereto (the "Term Sheet"),
(1) a 90-day senior secured bridge term loan facility of up to $875,000,000
(the "U.S. Tender Offer Facility"), (2) a 180-day senior secured term loan
facility (including a maximum 5.25 year loan note guarantee subfacility) of up
to $200,000,000 (the "U.K. Acquisition Facility") and (3) senior secured
credit facilities of up to $1,125,000,000 (the "Take Out Facilities"),
comprised of (i) an 18-month secured senior term loan facility of $250,000,000
(the "18-Month Facility"), (ii) a 5.25 year secured senior term loan facility
of up to $400,000,000 (the "Term Loan A Facility"), (iii) a 6.5 year senior
secured term loan facility of $350,000,000 (the "Term Loan B Facility," and
together with the 18-Month Facility and the Term Loan A Facility, the "Term
Loan Facilities"), and (iv) a five-year revolving credit facility of
$125,000,000 (the "Revolving Credit Facility"). The U.S. Tender Offer
Facility, the U.K. Acquisition Facility and the Take Out Facilities
(collectively, the "Credit Facilities") initially will be underwritten by the
Bank, and FUS will serve as the sole lead arranger and sole book runner to
syndicate all or part of the Credit Facilities to financial institutions
selected by FUS.
The proceeds of the U.S. Tender Offer Facility may be used by Chesapeake to
purchase the Shares pursuant to the Offer, to refinance certain debt of
Chesapeake and the Company and to pay certain costs and expenses relating to
the Offer and the U.S. Tender Offer Facility. The proceeds of the U.K.
Acquisition Facility may be used by Chesapeake to acquire up to all of the
issued and outstanding shares of Boxmore International plc pursuant to
Chesapeake's recommended cash tender offer, commenced on December 15, 1999,
and to pay certain costs and expenses related thereto. The proceeds of the
Term Loan Facilities may be used to provide for cash payments upon
consummation of the Proposed Merger with respect to Shares not tendered and
purchased pursuant to the Offer, to refinance the U.S. Tender Offer Facility
and the U.K. Acquisition Facility and to refinance certain indebtedness. The
proceeds of the Revolving Credit Facility may be used to refinance the U.S.
Tender Offer Facility and the U.K. Acquisition Facility, to finance capital
expenditures and certain permitted acquisitions, to refinance certain
indebtedness, to pay certain costs and expenses related to the Credit
Facilities and the Offer, and for working capital and general corporate
purposes. The initial borrowing under the U.S. Tender Offer Facility will be
subject to the satisfaction of certain conditions, including the valid tender
of not less than a majority of the outstanding Shares, the absence of any
legal prohibitions to a merger between Purchaser and the Company, no material
changes to the Offer without the consent of the Bank, and satisfaction of all
material terms and conditions of the Offer. The initial borrowing under the
Take Out Facilities will be subject to the satisfaction of certain conditions,
including the consummation of the Proposed Merger.
Under the Credit Facilities, Chesapeake will have the option of borrowing
funds at variable interest rates based either on a base rate of interest or
LIBOR (grossed up for statutory reserve requirements), plus, in each case, a
variable applicable margin. Interest on loans based on a base rate of interest
("Base Rate Loans") will be payable at the higher of the base rate of interest
charged by the Bank and the federal funds rate plus .50%. Interest on a loan
based on LIBOR ("LIBOR Loans") will be payable at the rate at which eurodollar
deposits in U.S. dollars are offered by the Bank in the London interbank
market in the same amount and for the same duration as the LIBOR Loan to be
made by the Bank. The applicable margin for Base Rate Loans will vary from
1.50% to 2.75% and for LIBOR Loans will vary from 2.50% to 3.75%. The
applicable margins for the U.S. Tender Offer Facility and the U.K. Acquisition
Facility are subject to increase as provided in the Term Sheet. In addition,
Chesapeake will be required to pay certain commitment and agency fees in the
amounts and on the dates set forth in a confidential fee letter amended and
restated as of November 10, 1999, among Chesapeake, the Bank and FUS.
4
<PAGE>
Each of the material direct and indirect subsidiaries of Chesapeake will
guarantee the Credit Facilities. The Credit Facilities will be secured by a
security interest in all material assets of Chesapeake and its subsidiaries,
including the stock of the material subsidiaries. After the 18-Month Facility
has been repaid, the guaranties and the security interests may be released if
Chesapeake achieves a debt to EBITDA ratio to be mutually determined by the
Bank and Chesapeake, or Chesapeake achieves an investment grade rating on its
senior unsecured unsupported long-term debt.
The documents governing the Credit Facilities will contain representations,
warranties, conditions to borrowing, covenants (including financial covenants
comprised of an EBITDA to interest coverage ratio, a Debt to EBITDA Ratio and
a limitation on capital expenditures) and events of default customary for
facilities of this nature.
The foregoing description of the terms and conditions of the Credit
Facilities is qualified in its entirety by reference to the Commitment Letter
and the Term Sheet, which have been filed as an exhibit to the Tender Offer
Statement on Schedule 14D-1 and are incorporated herein by reference.
No final decisions have been made concerning the method Chesapeake will
employ to repay its borrowings incurred to consummate the Offer. These
decisions, when made, will be based on Chesapeake's review from time to time
of the advisability of particular actions, as well as on prevailing interest
rates, stock market and financial and other economic conditions. Furthermore,
of course, there can be no assurance that Chesapeake will be able to utilize
any one or more of the repayment options or as to the amount that will be
available under any of them.
Item 10. Additional Information
Item 10 is hereby amended and supplemented by adding thereto the following:
(e) On December 8, 1999, the Court of Chancery of the State of Delaware
scheduled a trial for January 10, 11 and 13, 2000, on certain of the issues in
the matter of Chesapeake v. Shore, et al., filed in the Court of Chancery of
the State of Delaware on December 3, 1999. At the trial, Chesapeake and
Purchaser plan to request that the Court enter an order: (i) declaring that
the Company Board breached its fiduciary duties to the Company's stockholders
under Delaware law by adopting an amendment to the Company's Bylaws on
November 22, 1999, that purports to require the affirmative vote of holders of
two-thirds of the outstanding shares of Common Stock for the stockholders to
amend, add to, alter or repeal the Company's Bylaws (the "Super Majority
Bylaw"); (ii) declaring that the Super Majority Bylaw is ultra vires and void;
(iii) declaring that the Consent Solicitation complies with and will comply
with Delaware law and the Company's Charter and Bylaws; and (iv) enjoining the
Company, its directors, officers, employees and agents from relying on,
implementing, applying or enforcing the Super Majority Bylaw.
On December 3, 1999, Chesapeake was served with notice that an alleged
shareholder of Chesapeake had filed, in the Circuit Court of the City of
Richmond, Virginia, a Derivative Bill of Complaint (the "Derivative
Complaint") against nine of Chesapeake's directors, as defendants, and
Chesapeake, as nominal defendant. The Derivative Complaint seeks, among other
things, an order (i) declaring that the Chesapeake Board had breached its
fiduciary duties in rejecting the Shorewood Proposal and (ii) granting
rescission of Chesapeake's Rights Agreement, dated as of March 15, 1998. The
defendants have not yet filed a responsive pleading, but believe that the
allegations are without merit under Virginia law.
(f) On December 15, 1999, Chesapeake issued a press release announcing that
it had commenced a recommended cash tender offer to acquire all of the
outstanding shares of Boxmore International plc, a leading European packaging
company, headquartered in Belfast, Northern Ireland. A copy of such press
release is attached hereto as Exhibit (f)(2).
5
<PAGE>
Item 11. Material to be Filed as Exhibits
Item 11 is hereby amended and supplemented by adding thereto the following:
(b)(2) Amended and Restated Commitment Letter, dated November 10, 1999,
among Chesapeake, First Union National Bank and First Union Securities, Inc.
with attached Amended and Restated Summary of Terms and Conditions, accepted
and agreed to by Chesapeake on December 14, 1999.
(f)(2) Text of Press Release, dated December 15, 1999, by Chesapeake
regarding Chesapeake's recommended cash tender offer for Boxmore
International, plc.
6
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SIGNATURES
After due 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: December 15, 1999
CHESAPEAKE CORPORATION
/s/ J. P. Causey Jr.
By: _________________________________
J. P. Causey Jr.
Senior Vice President, Secretary
& General Counsel
SHEFFIELD, INC.
/s/ J. P. Causey Jr.
By: _________________________________
J. P. Causey Jr.
Vice President & Secretary
7
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EXHIBIT INDEX
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<CAPTION>
Exhibit Description
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<C> <S>
(b)(2) Amended and Restated Commitment Letter, dated November 10, 1999, among
Chesapeake, First Union National Bank and First Union Securities, Inc.
with attached Amended and Restated Summary of Terms and Conditions,
accepted and agreed to by Chesapeake on December 14, 1999.
(f)(2) Text of Press Release, dated December 15, 1999, by Chesapeake
regarding Chesapeake's recommended cash tender offer for Boxmore
International, plc.
</TABLE>
8
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For Immediate Release
- ---------------------
Chesapeake Corporation Makes Recommended Cash Offer for Boxmore;
- ----------------------------------------------------------------
Affirms Commitment to Shorewood Acquisition
-------------------------------------------
(Richmond, Va.--December 15, 1999) Chesapeake Corporation (NYSE: CSK)
announced today it has commenced a recommended cash tender offer to acquire
all of the outstanding shares of Boxmore International plc, a leading European
packaging company, headquartered in Belfast, Northern Ireland. The cash tender
offer, which will be made through a Chesapeake subsidiary, Chesapeake UK
Acquisitions II plc, values each Boxmore share at 265p, and the existing
issued share capital of Boxmore at approximately (pound)191 million,
(approximately U.S. $310 million). Boxmore's board of directors unanimously
recommended Chesapeake's offer to Boxmore's shareholders.
The acquisition of Boxmore is expected to be accretive to Chesapeake's
earnings in the first year. Synergies between Chesapeake and Boxmore are
expected to result from better utilization of the combined network of
specialty packaging facilities, as well as operating and overhead savings.
Boxmore is a manufacturer, distributor and seller of specialty folding carton
and packaging products for: the pharmaceutical, healthcare and toiletries
sectors; the food and beverage sector; and for the agrochemical sector. The
company operates 19 facilities in Ireland, the United Kingdom, France,
Belgium, Germany, and, through joint ventures, in South Africa and China.
Boxmore reported profits before tax of (pound)13.6 million (U.S. $22 million),
on revenue of (pound)106.8 million (U.S. $173.0 million), at the end of 1998.
For the first six months of this year, ending June 30, 1999, Boxmore reported
unaudited profits before tax of (pound)7.5 million (U.S. $12.2 million) on
revenue of (pound)60.4 million (U.S. $97.8 million).
Chesapeake President and Chief Executive Officer Thomas H. Johnson said, "As
the European leader in specialty packaging, Chesapeake is committed to
continuing to strengthen our network of capabilities. We believe Europe is an
attractive area for future growth, and see Boxmore as an important addition to
expand our pan-European supply network. Since the acquisition of Field Group
in March, 1999, we've been evaluating the potential acquisition of Boxmore.
Boxmore has an excellent track record of business development and has earned
an outstanding reputation with its customers. We look forward to maximizing
the potential of Chesapeake's enlarged European specialty packaging group
through the addition of Boxmore."
Johnson said the acquisition of Boxmore complements Chesapeake's recently
announced tender offer to acquire Shorewood, a U.S. folding cartons company.
Chesapeake announced a cash tender offer at $17.25 a share for Shorewood on
December 3. "Boxmore solidifies our position as a European leader for
specialty packaging, and Shorewood would expand our presence in the U.S. for
targeted end-use markets. The acquisitions of Shorewood and Boxmore will allow
Chesapeake to provide our customers with an even larger, synergistic array of
products and services."
Both the Boxmore and Shorewood transactions will be financed by Chesapeake
with cash on hand and a committed credit facility from First Union National
Bank, and, therefore, neither transaction is subject to any financing
condition. Chesapeake's offer for Boxmore is subject to customary closing
conditions, including the receipt of a satisfactory level of acceptances of
the offer.
Donaldson, Lufkin & Jenrette is the financial advisor to Chesapeake in
relation to the offer for Boxmore. Slaughter and May is the legal advisor for
Chesapeake.
Chesapeake Corporation, headquartered in Richmond, Va., is a global leader in
specialty packaging and merchandising services. Chesapeake is the largest
North American producer of temporary and
<PAGE>
permanent point-of-purchase displays, the North American leader for litho-
laminated packaging, the leading European folding carton, leaflet and label
supplier, and a local leader in specific U.S. markets for customised,
corrugated packaging. Chesapeake has over 40 locations in North America,
Europe and Asia. Chesapeake's net sales in 1998 were $950.4 million.
Chesapeake's website is www.csk.com.
This news release, including comments by Thomas H. Johnson, contains forward-
looking statements that are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The accuracy of such
statements is subject to a number of risks, uncertainties, and assumptions
that may cause Chesapeake's actual results to differ materially from those
expressed in the forward-looking statements including, but not limited to:
competitive products and pricing; production costs, particularly for raw
materials such as corrugated box, folding carton and display materials;
fluctuations in demand; government policies and regulations affecting the
environment; interest rates; currency translation movements; Year 2000
compliance; and other risks that are detailed from time to time in reports
filed by the Company with the Securities and Exchange Commission.
This press release does not constitute an offer or an invitation to purchase
or sell any securities. Chesapeake's offer will be made only pursuant to the
Offer Document and related Form of Acceptance to be dispatched by Donaldson,
Lufkin and Jenrette on behalf of Chesapeake in the United Kingdom. The offer
will not be made, directly or indirectly, in or into the United States,
Canada, Australia or Japan and will not be eligible for acceptance within the
United States, Canada, Australia, or Japan.
For media relations, call: For investor relations, call:
Molly Remes Joel Mostrom
Director, Corporate Communications Vice President-Investor
804-697-1110 Relations
804-697-1147
2
<PAGE>
CONFIDENTIAL
As of November 10, 1999
Chesapeake Corporation
James Center II
Richmond, VA 23218-2350
Attention: William T. Tolley
Senior Vice President Finance & CFO
Re: Amended and Restated Commitment Letter--Proposed U.S. Tender and U.K.
Acquisition Financing Credit Facilities
Ladies and Gentlemen:
Pursuant to the Commitment Letter (the "Original Commitment Letter''), dated
November 10, 1999, by First Union National Bank ("Bank'') and First Union
Securities, Inc. ("FUS'') to Chesapeake Corporation, a Virginia corporation
("you'' or the "Company''), Bank was pleased to offer to be the sole
administrative agent for a syndicate of financial institutions and was willing
to provide the credit facilities described therein (the "Original
Transaction'') and FUS was pleased to offer to act as the sole-lead arranger
and sole book runner for the Original Transaction, all upon and subject to the
terms and conditions of the Original Commitment Letter, the Summary of Terms
and Conditions attached thereto (the "Original Term Sheet'') and the
confidential fee letter (the "Original Fee Letter'') dated the date thereof
among you, Bank and FUS. You have requested that Bank and FUS amend and
restate the Original Commitment Letter to, among other things, add an
additional credit facility and, accordingly, the Original Commitment Letter is
hereby amended and restated as set forth below.
The Company has advised Bank that it (a) (i) has formed a corporation ("U.S.
AcquisitionCo'') to acquire, through an unsolicited and non-negotiated tender
offer (the "U.S. Tender Offer''), up to all of the issued and outstanding
capital stock (the "U.S. Shares'') and associated rights to purchase preferred
stock (the "U.S. Rights'') of Shorewood Packaging Corporation, a Delaware
corporation ("U.S. Target''), for a purchase price per U.S. Share not in
excess of an amount you have previously identified to us (the "U.S.
Acquisition''), (ii) intends, as promptly as is practicable following the
consummation of the U.S. Acquisition, to merge U.S. AcquisitionCo with and
into U.S. Target, such that the surviving entity of such merger is a wholly-
owned subsidiary of Company (the "U.S. Merger'') and (iii) intends, as
promptly as practicable, to commence a written consent solicitation requesting
shareholders of U.S. Target to, among other things, remove and replace U.S.
Target's Board of Directors (the "U.S. Solicitation'' and, together with the
U.S. Merger, the U.S. Acquisition and the U.S. Tender Offer, the "U.S.
Transaction'') and (b) has formed a corporation ("U.K. AcquisitionCo'') to
acquire substantially all of the outstanding issued capital stock (the "U.K.
Shares'') of a British company which you have identified to us (the "UK
Target''), through a recommended cash offer (the "U.K. Offer''), for a
purchase price per U.K. Share not in excess of an amount you have previously
identified to us (the "U.K. Acquisition'' and, together with the U.S.
Acquisition, the "Acquisitions'').
In connection with the foregoing, you have informed us that as a result of
the Acquisitions, existing debt of (a) U.S. Target (the "U.S. Refinancing''),
(b) U.K. Target (the "U.K. Refinancing''), and (c) Company (the "Company
Refinancing'', and together with the U.K. Refinancing and the U.S.
Refinancing, the "Refinancings'' and, together with the U.S. Transaction, the
U.K. Acquisition and the transactions related thereto, the "Transaction''), in
each case, in outstanding principal amounts that you have previously
identified to us, is expected to be refinanced. You have also informed us that
Company will require up to $1,125,000,000 in senior secured credit facilities
(the "Credit Facilities'') in order to (i) finance the U.S. Tender Offer, (ii)
consummate the U.S. Solicitation and the U.S. Refinancing, (iii) finance the
U.S. Merger, (iv) finance the U.K. Acquisition, (v) consummate the U.K.
<PAGE>
Refinancing, (vi) consummate the Company Refinancing, (vii) pay fees and
expenses in connection with each Transaction and (viii) provide working
capital for, and for the general corporate purposes of, Company and its
subsidiaries after the consummation of each Transaction.
Based upon and subject to the foregoing and the terms and conditions set
forth below, Bank is pleased to confirm to you its commitment to provide the
full amount of the Credit Facilities on the terms set forth in the Term Sheet
(as defined below) (our "Commitment'') and to act as the sole administrative
agent for a syndicate of financial institutions (together with Bank, the
"Lenders'') that it intends to form to provide a portion of the Credit
Facilities. It is agreed that FUS will also serve as the sole lead arranger
and sole book runner of the Credit Facilities and that no additional agents or
co-agents or arrangers will be appointed or fees paid to any other lenders in
connection with the Credit Facilities without the prior written consent of
Bank and FUS.
Attached as Exhibit A to this letter is a Summary of Terms and Conditions
(the "Term Sheet'') setting forth a summary outline of the principal terms and
conditions on and subject to which Bank is willing to make available the
Credit Facilities. In addition, whether before or after the closing of the
Credit Facilities, Bank shall be entitled, after consultation with you, to
change the pricing, structure (including the reallocation of tranches of
loans) and/or terms of the Credit Facilities if Bank determines that such
changes are necessary in order to ensure a successful pre-closing or post-
closing syndication or an optimal credit structure of the Credit Facilities,
such right to continue and survive (together with your other obligations with
respect to syndication provided for herein) until the completion of such
syndication notwithstanding any termination of the Commitment or funding under
the Credit Facilities; provided that the total amount of the senior secured
Credit Facilities remains unchanged.
Bank and Arranger shall manage all aspects of the syndication of the Credit
Facilities, and you agree to assist Bank and to cause, from and after
consummation of the U.S. Tender Offer and/or the U.S. Solicitation, U.S.
Target, and from and after consummation of the U.K. Acquisition, U.K. Target,
to assist Bank in forming such syndicate and to provide Bank and the other
Lenders, promptly upon request, with all information reasonably requested by
them to complete successfully the syndication, including, but not limited to,
(a) an information package for delivery to potential syndicate members and
participants and (b) all information and projections prepared by you or your
advisers relating to the transactions described herein. You also agree to use
your best efforts to ensure that Bank's syndication efforts benefit from your
existing lending relationships as well as, from and after consummation of the
U.S. Tender Offer and/or the U.S. Solicitation, those of U.S. Target, and from
and after consummation of the U.K. Acquisition, those of U.K. Target. You
further agree to make appropriate senior officers and representatives of
Company and from and after consummation of the U.S. Tender Offer and/or the
U.S. Solicitation, U.S. Target, and from and after consummation of the U.K.
Acquisition, U.K. Target, available to participate in information meetings for
potential syndicate members and participants at such times and places as Bank
may reasonably request. Bank reserves the right to engage the services of FUS
and other of its affiliates in furnishing the services to be performed as
contemplated herein and to allocate (in whole or in part) to any such
affiliates any fees payable to it in such manner as it and its affiliates may
agree in their sole discretion. You agree that Bank may share with any of its
officers, affiliates and advisors any information related to the Transaction
or any other matter contemplated hereby, on a confidential basis.
You represent and warrant and covenant that:
(a) all information which has been or is hereafter made available to Bank
by you or any of your representatives or, from and after consummation of
the U.S. Tender Offer and/or the U.S. Solicitation, U.S. Target or any of
its representatives or, from and after consummation of the U.K.
Acquisition, U.K. Target or any of its representatives, in connection with
the transactions contemplated hereby is and will be complete and correct in
all material respects and does not and
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will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein
not materially misleading in light of the circumstances under which such
statements are made; and
(b) all financial projections that have been or are hereafter prepared by
you or on your behalf and made available to Bank or any other participant
in any Credit Facility have been or will be prepared in good faith based
upon reasonable assumptions.
You agree to supplement the information and projections referred to in clauses
(a) and (b) above from time to time until completion of each syndication so
that the representations and warranties in the preceding sentence remain
correct in all material respects. In arranging and syndicating the Credit
Facilities, Bank will use and rely on such information and projections without
independent verification thereof.
In connection with the syndication of the Credit Facilities, Bank may, in
its discretion, allocate to other Lenders portions of any fees payable to Bank
in connection with the Credit Facilities. You agree that no Lender will
receive any compensation of any kind for its participation in any Credit
Facility, except as expressly provided for in this letter or in the Fee Letter
referred to below or as may be mutually agreed upon in writing.
The commitments of Bank hereunder are also subject to (a) there not
occurring or becoming known to us any material adverse condition or material
adverse change in or affecting the business, property, operations, nature of
assets, assets, revenues, operations, tax position, liabilities, debt services
capacity, condition (financial or otherwise) or prospects of Company or
Company and its subsidiaries taken as a whole or U.S. Target or U.S. Target
and its subsidiaries taken as a whole or U.K. Target or U.K. Target and its
subsidiaries taken as a whole, (b) our not being aware after the date hereof
of any information or other matter which is inconsistent in a material and
adverse manner with any information or other material disclosed to us prior to
the date of the Original Commitment Letter, (c) there not having occurred a
material disruption of or material adverse change in financial, banking or
capital market conditions that, in our judgment, could materially impair the
syndication of the Credit Facilities, (d) there not being any competing
offering, placement or arrangement of any debt securities or bank financing by
or on behalf of Company or any of its affiliates, U.K. Target or any of its
affiliates or, after the consummation of the U.S. Tender Offer, U.S. Target or
any of its affiliates, unless otherwise agreed to by Bank, (e) our review and
reasonable satisfaction with the terms of the documentation governing the
Transaction, (f) the negotiation, execution and delivery (i) on or before
January 19, 2000 of definitive documentation with respect to the U.S. Tender
Offer Facility (as defined in the Term Sheet) reasonably satisfactory to Bank
and its counsel, (ii) on or before January 19, 2000 of definitive
documentation with respect to the U.K. Acquisition Facility (as defined in the
Term Sheet) reasonably satisfactory to Bank and its counsel and (iii) on or
before January 19, 2000 of definitive documentation with respect to the Take-
Out Facilities (as defined in the Term Sheet) satisfactory to Bank and its
counsel, (g) compliance with all applicable laws and regulations (including
without limitation compliance of the Commitment and the transactions described
herein, with Regulation U and all other applicable banking laws, rules and
regulations), (h) sources and uses of funds being as we have previously
discussed, and (i) the other conditions set forth in the Term Sheet.
Additionally, it shall be a condition to our commitments hereunder that the
definitive documents to be filed with the Securities and Exchange Commission
with respect to the U.S. Tender Offer (including the U.S. Target shareholder
consent solicitation materials), and any definitive documents filed with
United Kingdom governmental authorities in connection with the U.K.
Acquisition, shall be provided to us prior to such filing and that all matters
relating to the Credit Facilities and the financing of the Transaction shall
be in form and substance reasonably satisfactory to us.
The reasonable out-of-pocket costs and expenses of Bank and Arranger
(including, without limitation, the fees and expenses of Mayer, Brown & Platt,
counsel to Bank and any appropriate local
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counsel and Bank's due diligence, syndication and other out-of-pocket
expenses) arising in connection with the preparation, execution and delivery
of this letter and the definitive financing agreements and otherwise in
connection with the Transaction shall be for your account and shall be payable
initially on the earlier to occur of the initial funding under the Credit
Facilities or upon termination or expiration of the Commitments and thereafter
on demand. You further agree to indemnify and hold harmless each Lender, Bank
and Arranger and each director, officer, employee, affiliate and agent of each
thereof (each, an "indemnified person'') against, and to reimburse each
indemnified person, upon its demand, for, any losses, claims, damages,
liabilities or other expenses ("Losses'') to which such indemnified person may
become subject insofar as such Losses arise out of or in any way relate to or
result from the Transaction or any aspect thereof, this letter or the
financings contemplated hereby, including, without limitation, Losses
consisting of legal or other expenses incurred in connection with
investigating, defending or participating in any legal proceeding relating to
any of the foregoing (whether or not such indemnified person is a party
thereto); provided that the foregoing will not apply to any Losses of an
indemnified person to the extent they are found by a final decision of a court
of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such indemnified person. Your obligations under this
paragraph shall remain effective whether or not definitive financing
documentation is executed and notwithstanding any termination or expiration of
this letter or the offer contained herein. Neither Bank nor Arranger nor any
of their affiliates nor any other indemnified person shall be responsible or
liable to any other person or entity for consequential damages which may be
alleged as a result of this letter or the financings contemplated hereby and
neither Bank nor any other indemnified person shall be responsible or liable
for any damages which may be alleged as a result of its failure, in accordance
with the terms of this letter, to provide or participate in the Credit
Facilities.
The provisions of this letter are supplemented as set forth in, and are
conditioned upon, a separate amended and restated confidential fee letter
dated the date hereof from us to you (the "Fee Letter'') and are subject to
the terms of such Fee Letter. By executing this letter, you acknowledge that
this letter and the Fee Letter are the only agreements between you and Bank
with respect to the Credit Facilities and set forth the entire understanding
of the parties with respect thereto. This letter and the Fee Letter and the
respective obligations and rights hereunder and thereunder shall not be
delegated or assigned by you without our prior written consent. This letter
may not be amended or otherwise modified except pursuant to a writing signed
by each of the parties hereto. This letter may be executed by the signatories
hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together one and the same letter.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE UNDERSIGNED PARTIES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF OR IN CONNECTION
WITH, THIS COMMITMENT LETTER AND THE FEE LETTER, AND ANY OTHER COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
ANY OF THE UNDERSIGNED PARTIES IN CONNECTION HEREWITH OR THEREWITH.
By your acceptance hereof, you agree that neither this letter (including,
without limitation, the Term Sheet), the Fee Letter, nor any of their terms or
substance, shall be disclosed, directly or indirectly, to any other person
except (a) this letter and the Term Sheet (but not the Fee Letter) may be
disclosed to U.S. Target and U.K. Target and those of your employees, agents
and advisers who are directly involved in the consideration of this matter and
(b) this letter, the Term Sheet and the Fee Letter may be disclosed if and to
the extent disclosure is compelled in a judicial or administrative proceeding
or as otherwise required by law or by an express request from the Securities
and Exchange Commission (provided that in any such case Company shall request,
to the maximum extent possible, confidential treatment for the Fee Letter)
(and in each such event of permitted disclosure you agree promptly to inform
us and, to the extent not proscribed by such proceeding or legal requirement,
provide us with a
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reasonable opportunity to review and comment upon the contents of such
disclosure). Your obligations under this paragraph shall remain effective
whether or not definitive financing documentation is executed and
notwithstanding any termination or expiration of this letter or the offer
contained herein.
If you are in agreement with the foregoing, please sign and return to Bank
and Arranger the enclosed copies of this letter and the Fee Letter (together
with payment of the fees described therein) no later than 5:00 p.m., New York
time, on December 14, 1999, at which time this offer shall terminate (and we
shall have no obligations whatsoever to you) unless prior thereto we shall
have received signed copies of such letters and payment of such fees.
Following your execution and delivery of this letter and the Fee Letter in
accordance with the preceding sentence, our commitments hereunder shall
terminate (and we shall have no obligations whatsoever to you) at 5:00 p.m.,
New York time, on January 19, 2000 unless on or prior to such time definitive
documentation with respect to the U.S. Tender Offer Facility and the U.K.
Acquisition Facility satisfactory to us and our counsel has been executed and
delivered by you, any applicable Lenders and us and at 5:00 p.m., New York
time, on January 19, 2000, unless on or prior to such time, definitive
documentation with respect to the Take-Out Facilities satisfactory to us and
our counsel has been executed and delivered by you, the applicable Lenders and
us.
This letter, once executed and delivered by all parties hereto, supersedes
in all respects the Original Commitment Letter.
We look forward to working with you on this transaction.
Sincerely,
First Union National Bank
By: _________________________________
Title:
First Union Securities, Inc.
By: _________________________________
Title:
Accepted and agreed to as of the
date first above written:
Chesapeake Corporation
By: _________________________________
Title:
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EXHIBIT A
$1,125,000,000 CHESAPEAKE CORPORATION CREDIT FACILITIES
Amended and Restated
Summary of Terms and Conditions
As of November 10, 1999
(Unless otherwise defined, terms used and not defined in this Summary of Terms
and Conditions have the meanings assigned thereto in the letter agreement
dated as of November 10, 1999 (the "Commitment Letter''), to which this
Summary of Terms and Conditions is an exhibit.)
----------------
I.Parties
Borrowers: Collectively, Chesapeake Corporation, a Virginia
corporation ("Company''), and/or, for purposes of
the U.S. Acquisition, a newly-formed wholly-owned
subsidiary thereof established solely for the
purpose of being an acquisition vehicle named
Sheffield, Inc., a Delaware corporation ("U.S.
AcquisitionCo''), and/or, for purposes of the
U.K. Acquisition, a newly-formed wholly-owned
subsidiary thereof established solely for the
purpose of being an acquisition vehicle named
Chelsea UK Acquisitions II PLC, a public limited
company organized and existing under the laws of
England and Wales ("U.K. AcquisitionCo'') which,
in turn, is a wholly-owned direct subsidiary of
Chesapeake UK Holdings Limited ("Chesapeake
Holdings'').
Lead Arranger and Sole
Book Runner: First Union Securities, Inc. ("FUS'').
Administrative Agent: First Union National Bank (in such capacity, the
"Administrative Agent'').
Lenders: The banks, financial institutions and other
entities, including Bank, selected by the
Arranger in the syndication effort (collectively,
the "Lenders'').
Letter of Credit Issuer: Bank (or another Lender selected by the
Administrative Agent).
II.Type and Amount of Facilities
A.Acquisition Facilities:
1.U.S. Tender Offer A 90-day senior, secured bridge term loan
Facility: facility (the "U.S. Tender Offer Facility'') in
the aggregate principal amount of the lesser of
(a) up to $875 million (the "U.S. Tender Offer
Facility Commitment Amount'') and (b) after
taking into account Company's equity contribution
referred to below, the sum of (i) the amount
necessary to make payment for all of the U.S.
Shares of U.S. Target tendered and purchased
pursuant to the U.S. Tender Offer, (ii) the
amount necessary to refinance certain
indebtedness of Company and U.S. Target
previously identified by Company to the
Administrative Agent, (iii) the amount necessary
to provide for the working capital needs of
Company during this period, and (iv) the amount
necessary to pay the U.S. Transaction costs and
expenses due on the U.S. Tender Offer Closing
Date (as defined below).
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Borrower:
The Company and/or U.S. AcquisitionCo fully
guaranteed by the Company.
Availability: The U.S. Tender Offer Facility shall be available
in a single drawing on the date upon which is the
conditions precedent to such borrowing set forth
in Articles V.A.1 and V.C. below are satisfied
(the "U.S. Tender Offer Closing Date'').
Amortization: The U.S. Tender Offer Facility shall amortize in
a single installment on the date which is the
earliest of (a) the 90th day following the
drawing of the U.S. Tender Offer Loan, (b) the
date that the consummation of the U.S. Merger
occurs and (c) the Take-Out Closing Date (as
defined below).
Use of Proceeds: The proceeds of the loans under the U.S. Tender
Offer Facility (the "U.S. Tender Offer Loans'')
shall be used by Company and/or U.S.
AcquisitionCo. to (a) pay for the purchase of
U.S. Shares tendered and purchased pursuant to
the U.S. Tender Offer at a purchase price not
greater than the price per U.S. Share previously
identified by you to us, (b) refinance certain
indebtedness of Company and U.S. Target
previously identified by Company to the
Administrative Agent, (c) provide for the working
capital needs of Company during this period, and
(d) pay for U.S. Transaction fees and expenses
incurred in connection with the U.S. Transaction.
2.U.K. Acquisition A 180-day senior, secured bridge term loan
Facility: facility (including a loan note guarantee
subfacility expiring March 31, 2005--hereinafter,
the "Loan Note Guarantee Subfacility'')
(collectively, with the senior secured bridge
term facility, the "U.K. Acquisition Facility''
and together with the U.S. Tender Offer Facility,
the "Acquisition Facilities'') in the aggregate
principal amount of the lesser of (a) up to $200
million (the "U.K. Acquisition Facility
Commitment Amount'') and (b) the sum, after
taking into account Company's equity contribution
described below, of the amount necessary to (i)
consummate the U.K. Acquisition and (ii) pay the
U.K. Transaction costs and expenses due on the
U.K. Acquisition Closing Date (as defined below).
Borrower: The Company and/or U.K. AcquisitionCo fully
guaranteed by the Company and Chesapeake
Holdings.
Availability: The U.K. Acquisition Facility shall be available
in drawings and loan note guarantee issuances
from time to time until June 15, 2000 commencing
on the date upon which the conditions precedent
to such borrowings and issuances set forth in
Articles V.A.2. and V.C. below are satisfied (the
"U.K. Acquisition Closing Date'').
Amortization: The U.K. Acquisition Facility shall amortize in a
single installment on the date which is the
earliest of (a) the 180th day following the
drawing of the U.K. Acquisition Loan, (b) the
date the consummation of the U.K. Merger occurs
or (c) the Take-Out Closing Date.
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Use of Proceeds: The proceeds of the loans under the U.K.
Acquisition Facility (the "U.K. Acquisition
Loans'') shall be used by Company and/or U.K.
AcquisitionCo. to (a) pay for the purchase of up
to all of the issued and outstanding U.K. Shares
of U.K. Target at a purchase price not greater
than the price per U.K. Share previously
identified by you to us, and (b) pay for U.K.
Transaction fees and expenses incurred in
connection with the U.K. Transaction.
B.Take-Out Facilities:
1.Term Loan Facilities:
(a)Eighteen Month Facility
Type of Facility: Eighteen Month Facility: An eighteen month
senior, secured term loan facility in the
aggregate principal amount of $250,000,000 (the
"Eighteen Month Facility'').
Availability: The Eighteen Month Facility shall be available in
a single drawing on the date upon which the
conditions precedent to such borrowing set forth
Articles V.B. and V.C. below are satisfied (the
"Take-Out Closing Date'').
Amortization: Bullet maturity on the date that is eighteen
months after the Take-Out Closing Date.
(b)Term A Facility
Type of Facility: Term A Loan Facility: A senior, secured term loan
facility maturing March 31, 2005 in the aggregate
principal amount of $400,000,000, less the
outstanding guarantee amounts under the Loan Note
Guarantee Subfacility up to $100,000,000 (the
"Term A Loan Facility'').
Availability: The Term A Loan Facility shall be available in a
single drawing on the Take-Out Closing Date.
Amortization: To be mutually agreed upon.
(c)Term B Facility
Type of Facility: Term B Loan Facility: A six and one-half year
senior, secured term loan facility in the
aggregate principal amount of $350,000,000 (the
"Term B Loan Facility'', and, together with the
Eighteen Month Facility and the Term A Loan
Facility, the "Term Loan Facilities'').
Availability: The Term B Loan Facility shall be available in a
single drawing on the Take-Out Closing Date.
Amortization: 1% of the amount of the facility in each of the
first five years after the Take-Out Closing Date;
32% of the amount of the facility in the sixth
year after the Take-Out Closing Date; and 63% of
the amount of the facility in the seventh year
after the Take-Out Closing Date.
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(d) Use of Proceeds
of the Term Loan
Facilities: The proceeds of the loans under the Term Loan
Facilities (the "Term Loans'') shall be used by
Company and its subsidiaries to (a) provide, on
the same terms and conditions as provided for in
the U.S. Tender Offer, for the "cash out" payment
at not more than the price per U.S. Share
previously identified by you to us for all
outstanding U.S. Shares not tendered and
purchased pursuant to the U.S. Tender Offer, (b)
refinance the U.S. Tender Offer Loans and U.K.
Acquisition Loans and (c) refinance certain
indebtedness of Company.
2.Revolving Credit
Facility:
Type of Facility: A secured revolving credit facility in the
aggregate principal amount of $125,000,000, plus
an amount equal to the outstanding guarantee
amounts under the Loan Note Guarantee Subfacility
up to $100,000,000 as a subfacility thereof (the
"Revolving Credit Facility'', and, together with
the Term Loan Facilities, the "Take-Out
Facilities'', and, together with the Acquisition
Facilities, the "Credit Facilities''), pursuant
to which (a) loans may be borrowed, repaid and
reborrowed by Borrowers (the "Revolving Loans'',
and, together with the U.S. Tender Offer Loans,
the U.K. Acquisition Loans and the Term Loans,
the "Loans'') and (b) letters of credit may be
issued, reimbursed and re-issued on behalf of
Borrowers, subject to the subfacility limit
described below (the "Letters of Credit'').
Availability: The Revolving Credit Facility shall be available
on a revolving basis during the period commencing
on the Take-Out Closing Date and ending March 31,
2005 (the "Termination Date'').
Letter of Credit Sub-
Facility Availability: Outstanding Letters of Credit and related
reimbursement obligations may not at any time
exceed an aggregate amount to be agreed upon.
Each issuance of a Letter of Credit will
constitute usage under the Revolving Credit
Facility and will reduce availability of
Revolving Loans dollar for dollar. Letters of
Credit must expire on the earlier of (a) one year
from the date of issuance and (b) five days prior
to the Termination Date. Drawings under each
Letter of Credit shall be reimbursed by Borrowers
on the same business day. To the extent that
Borrowers do not so reimburse the Letter of
Credit Issuer, the Lenders under the Revolving
Credit Facility shall be irrevocably and
unconditionally obligated to reimburse the Letter
of Credit Issuer on a pro rata basis.
Maturity: March 31, 2005.
Use of Proceeds: The proceeds of the loans under the Revolving
Credit Facility (the "Revolving Loans'') shall be
used by Company and its subsidiaries to (a)
refinance a portion of the Acquisition Loans, (b)
refinance certain indebtedness, finance capital
expenditures, certain permitted acquisitions and
for working capital and general corporate
purposes (including for the purpose of making any
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required payments under the Loan Note Guarantee
Subfacility), and (c) pay for Transaction fees
and expenses in an amount which, when added to
the amount of Transaction fees and expenses paid
for out of proceeds of the Acquisition Loans, do
not exceed approximately $65 million. The Letters
of Credit shall be used by Company and its
subsidiaries for working capital purposes.
3. General Take-Out
Facility Provisions:
Borrowers: Company, U.K. AcquisitionCo and US AcquisitionCo.
Multi-Currencies: Available currencies to include U.S. Dollars and
British Pounds Sterling and Euros. Fundings into
the United Kingdom will require either (a) local
funding or (b) tax-efficient cross-border
funding.
III.General Payment Provisions
Fees and Interest Rates: As set forth on Annex I hereto.
Optional Prepayments and Loans may be prepaid and commitments may be
Commitment Reductions: reduced by Borrowers in minimum amounts and in
integral multiples to be mutually agreed upon,
without premium or penalty, but subject to
breakage costs. Proceeds shall be applied to the
Term Facilities and then to the Revolving Credit
Facility.
Mandatory Prepayments and Customary for financings of this type, including
Commitment Reductions: on account of (a) 100% of net insurance and
condemnation proceeds paid on account of the loss
of or damage to or the condemnation of, as the
case may be, any asset of Company or any of its
subsidiaries not used in certain permitted
situations to repair, restore or replace such
asset within a period to be agreed upon, (b) 100%
of the net proceeds of permitted asset sales by
Company and its subsidiaries (except for those in
the ordinary course of business), (c) 100% of the
net cash proceeds of debt issuances and 50% (but
100% prior to the Take-Out Closing Date) of the
net cash proceeds of public and private equity
issuances of Company and its subsidiaries and any
parent company and (d) 50% of Excess Cash Flow
(to be defined). All such reductions after the
Take-Out Closing Date shall be applied first to
the Term Facility (and within the Term Facility,
first to the Eighteen Month Facility) and then to
the Revolving Credit Facility. At such time (the
"Release Date'') as the Eighteen Month Facility
has been paid in full and either (x) a certain
mutually agreeable Debt to EBITDA Ratio has been
achieved or (y) Company achieves an investment
grade rating on its senior unsecured unsupported
long-term debt by either Standard & Poor's
Ratings Group or Moody's Investors Service, Inc.,
and so long as no default shall have occurred and
be continuing, certain of the foregoing
prepayment requirements will be reduced or
eliminated.
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IV.Guarantees and Collateral
Guarantees: Each of the material direct and indirect
subsidiaries of Company (the "Guarantors'', and,
together with Company, the "Credit Parties'')
shall guarantee the Credit Facilities, subject to
exceptions to be mutually agreed upon (including,
for example, non-U.S. subsidiaries shall not be
required to deliver guarantees to the extent it
would result in material increased tax or similar
liabilities for Company and its subsidiaries on a
consolidated basis). After the Release Date, all
of such guaranties will be released.
Collateral: The Credit Facilities shall be secured by (a) a
first-priority pledge of material assets of
Company and its subsidiaries, including the
assets purchased in connection with the Credit
Facilities, (b) a first-priority perfected
security interest on all capital stock of
Company's material existing and future
subsidiaries (including all joint venture
interests), including the U.S. Shares and U.K.
Shares; provided that no more than 65% of the
equity interests of non-U.S. subsidiaries will be
required to be pledged as security in the event
that a pledge of a greater percentage would
result in material increased tax or similar
liabilities for Company and its subsidiaries on a
consolidated basis and (c) a first-priority
perfected security interest in all of the present
and future material assets of Company and its
material and future subsidiaries. After the
Release Date, all of such collateral will be
released.
V.Certain Conditions
A. Conditions to each
Acquisition Facility:
(1)U.S. Tender Offer The availability of the U.S. Tender Offer
Facility: Facility shall be conditioned upon the
substantially concurrent satisfaction of
customary conditions for financings of this
nature, including the following conditions
precedent, on or before February 29, 2000:
1. Execution and delivery of satisfactory credit,
guarantee, security and other related
documentation embodying the structure, terms
and conditions of the U.S. Tender Offer
Facility contained herein (collectively, the
"U.S. Tender Offer Credit Documentation'').
2. The U.S. Tender Offer shall have been
consummated (a) at a price not exceeding the
price per U.S. Share previously identified by
you to us, (b) such that a majority (or any
higher number required by the U.S. Target's
constituent documents) of the Shareholders of
U.S.Target shall have elected the requisite
number of board of directors to approve the
U.S. Merger and such Shareholders shall take
all requisite actions to amend "poison pill,"
"shark repellant" or other similar items
(including such actions so that the Tender
Offer is approved pursuant to Section 203 of
the Delaware General Corporation Law or the
Administrative Agent being
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satisfied that the provisions of such Section
203 are invalid or inapplicable to the U.S.
Tender Offer and U.S. Merger (by action of U.S.
Target's Board of Directors or otherwise)) that
could prevent or delay the U.S. Merger and (c)
such that (i) U.S. AcquisitionCo shall have
accepted for purchase U.S. Shares which were
validly tendered (and not withdrawn) and which
when added to the U.S. Shares already held by
U.S. AcquisitionCo constitute at least 50.1%
(on a fully diluted basis) of the issued and
outstanding common stock of U.S. Target and
(ii) the Rights have been redeemed by U.S.
Target's Board of Directors, or the
Administrative Agent otherwise shall be
satisfied that such Rights are otherwise
invalid or inapplicable to the transactions
contemplated by the U.S. Tender Offer. There
shall not exist (a) any order, decree,
judgment, ruling or injunction which restrains
the consummation of the U.S. Tender Offer
Facility or the consummation of the U.S. Tender
Offer or U.S. Merger in the manner contemplated
hereby, and (b) any pending or threatened
action, suit, investigation or proceeding which
would reasonably be expected to materially and
adversely affect Company and its subsidiaries,
taken as a whole, or U.S. Target and its
subsidiaries, taken as a whole, any transaction
contemplated hereby or the ability of Company
and its subsidiaries to perform their
obligations under the documentation for the
U.S. Tender Offer Facility or the ability of
the Lenders to exercise their rights
thereunder. The documentation for, and the
terms and conditions of, the U.S. Tender Offer
and the U.S. Solicitation shall not be
modified, amended or waived in any material
respect without the prior written consent of
the Administrative Agent, as confirmed in
writing by Company and U.S. AcquisitionCo.
3. The Administrative Agent shall have received a
duly completed Federal Reserve Form U-1 in
connection with the U.S. Tender Offer and shall
be satisfied that the U.S. Tender Offer
Facility will be in full compliance with
Regulation U.
4. The Administrative Agent shall be satisfied
that U.S. AcquisitionCo is a single purpose
acquisition vehicle that has been and will be
"sterilized", preventing it from engaging in
any business activity, other than holding the
stock of U.S. Target (and no changes in its
corporate structure, including the creation of
any new subsidiaries or the merging or
liquidation of any existing subsidiaries, shall
be permitted without the consent of the
Administrative Agent and the Lenders).
5. All amounts outstanding under the debt
agreements refinanced pursuant to the U.S.
Refinancing and Company Refinancing shall have
been repaid in full (and all commitments to
make extensions of credit thereunder shall have
been terminated) and all liens, if any, with
respect thereto shall have been released, in
each case on terms
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<PAGE>
reasonably satisfactory to the Administrative
Agent and the Administrative Agent shall be
reasonably satisfied that concurrent with the
closing of the U.S. Tender Offer Facility, all
pre-existing secured debt of Company and its
subsidiaries (other than capital leases and
other indebtedness to be mutually agreed upon)
shall be repaid in full. No other indebtedness
shall exist at the operating company level
(other than existing capital leases and certain
guarantees).
6. The capital structure (including, without
limitation, the terms and amount of each
component thereof) of Company and its
subsidiaries (including U.S. Target)
immediately before and after each aspect of the
U.S. Transaction and the equity contribution by
Company to U.S. AcquisitionCo in an amount not
less than substantially all available cash to
be used for the purchase of the tendered U.S.
Shares (and such amount shall be applied in
full to such purchase prior to any drawing
under the U.S. Tender Offer Facility) shall be
consistent with prior representations to the
Administrative Agent and satisfactory in all
other respects to the Administrative Agent.
7. The Lenders and the Administrative Agent shall
have received all fees required to be paid on
or before the U.S. Tender Offer Closing Date
and all expenses in connection herewith and
therewith.
8. All governmental and third party approvals
necessary or advisable in connection with the
U.S. Transaction (including the financing
contemplated hereby) and the continuing
operations of Company and its subsidiaries
(after giving effect to the consummation of the
U.S. Transaction), including Hart-Scott Rodino
filings, shall have been obtained and be in
full force and effect and all applicable
waiting periods shall have expired without any
action being taken or threatened by any
competent authority which would restrain,
prevent or otherwise impose adverse conditions
on the U.S. Transaction or the financing
thereof; and the prompt consummation of the
U.S. Merger after the U.S. Tender Offer Closing
Date could not reasonably be expected to be
restrained, prevented or otherwise subject to
material adverse conditions.
9. No material adverse change in the business,
assets, financial condition, revenues, tax
position, debt service capacity, operations or
prospects of any of Company or any of its
subsidiaries including Target, taken as a
whole, since the date of their latest audited
financial statements.
10. The Lenders shall have received (a) guarantees
and first-priority security interests, as set
forth above under the captions "Guarantees"
and "Collateral", respectively, in each case
to the satisfaction of the Administrative
Agent and (b) the results of a recent lien
search in each of the jurisdictions and
offices where assets constituting Collateral
are located or recorded and such search shall
reveal no liens on any such assets except to
the extent consented to by the Administrative
Agent.
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<PAGE>
11. The Lenders shall have received a letter
agreement from Company that suspends its
ability to borrow under the existing credit
facility agented by Bank with Company so long
as the Commitment Letter is in effect, in
form and substance reasonably satisfactory to
the Administrative Agent.
12. The Lenders shall have received such opinions
(including (a) legal opinions (including,
without limitation, opinions relating to the
U.S. Tender Offer) and (b) copies of a
customary "fairness" opinion), instruments,
certificates (including solvency
certificates) and other documents as are
customary for transactions of this type or as
they may reasonably request.
(2)U.K. Acquisition The availability of the U.K. Acquisition Facility
Facility: shall be conditioned upon the substantially
concurrent satisfaction of customary conditions
for financings of this nature, including the
following conditions precedent, on or before
January 19, 2000:
1. Execution and delivery of satisfactory credit,
guarantee, security and other related
documentation embodying the structure, terms
and conditions of the U.K. Acquisition
Facility contained herein (collectively, the
"U.K. Acquisition Credit Documentation'').
2. As to the U.K. Acquisition, (a) subject to
U.K. AcquisitionCo obligations under Note 2 to
Rule 13 of the City Code, no condition of the
U.K. Offer shall have been modified, amended
or waived in any material respect without the
prior written consent of the Administrative
Agent, as confirmed in writing by a
responsible officer of Company and U.K.
AcquisitionCo, (b) the U.K. Offer shall have
been declared unconditional as to acceptances
in respect of at least 90% of all the ordinary
shares of the U.K. Target and shall have
become or been declared unconditional in all
respects, (c) the Administrative Agent and its
counsel shall be satisfied that the U.K. Offer
has been structured so that it will satisfy
the requirements necessary to enable U.K.
AcquisitionCo to invoke the compulsory
acquisition procedures under Sections 428 to
430 of the Companies Act 1985 if acceptances
are received in respect of 90% or more of the
ordinary shares of U.K. Target to which the
U.K. Offer relates, (d) the offer price shall
not exceed (Pounds)2.65 per ordinary share of
the U.K. Target, (e) it shall not be unlawful
for any Lender to make or fund, or to have any
commitment to make or fund, any such funding,
(f) the Administrative Agent and its counsel
shall be satisfied that the U.K. Offer
document shall have contained a unanimous
recommendation from the directors of the U.K.
Target that the shareholders of the U.K.
Target accept the U.K. Offer (and that the
U.K. Target's financial advisers in relation
to the U.K. Offer have informed such directors
that they consider the terms of the U.K. Offer
to be fair and reasonable), (g) no bankruptcy
or insolvency event shall have occurred and be
continuing in relation to Company, U.K.
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<PAGE>
AcquisitionCo, the U.K. Target or any
subsidiary of the U.K. Target save, in the case
of any subsidiary of the U.K. Target, in
circumstances where U.K. AcquisitionCo, in
compliance with its obligations under Note 2 to
Rule 13 of the City Code, is not permitted to
withdraw the U.K. Offer, and (h) the
Administrative Agent shall have received copies
of the announcement of the U.K. Offer and the
U.K. Offer document and any amendments or
supplements thereto, in each case, certified to
be true and complete by a responsible officer
of Company and U.K. AcquisitionCo.
3. The Administrative Agent shall be satisfied
that U.K. AcquisitionCo is a single purpose
acquisition vehicle that has been and will be
"sterilized", preventing it from engaging in
any business activity, other than holding the
stock of U.K. Target and issuing the Loan Notes
guaranteed pursuant to the Loan Note Guarantee
Subfacility (and no changes in its corporate
structure, including the creation of any new
subsidiaries or the merging or liquidation of
any existing subsidiaries, shall be permitted
without the consent of the Administrative Agent
and the Lenders).
4. The capital structure (including, without
limitation, the terms and amount of each
component thereof) of Company and its
subsidiaries (including U.K. Target)
immediately before and after each aspect of the
U.K. Transaction and the equity contribution by
Company to U.K. AcquisitionCo in an amount not
less than $125,000,000 to be used for open
market purchases and the purchase of the U.K.
Shares pursuant to the U.K. Offer (and such
amount shall be applied in full to such
purchase concurrently with any drawing under
the U.K. Acquisition Facility) shall be
satisfactory in all respects to the
Administrative Agent.
5. The Lenders and the Administrative Agent shall
have received all fees required to be paid on
or before the U.K. Acquisition Closing Date and
all expenses in connection herewith and
therewith.
6. All governmental and third party approvals
necessary or advisable in connection with the
U.K. Acquisition (including the financing
contemplated hereby) and the continuing
operations of Company and its subsidiaries
(after giving effect to the consummation of the
U.K. Acquisition), shall have been obtained and
be in full force and effect and all applicable
waiting periods shall have expired without any
action being taken or threatened by any
competent authority which would restrain,
prevent or otherwise impose adverse conditions
on the U.K. Acquisition or the financing
thereof.
7. The Lenders shall have received a guarantee
from the Company and from Chesapeake Holdings,
a first priority pledge of all the stock of
Chesapeake Holdings and U.K. AcquisitionCo and
a pledge arrangement with respect to the shares
of the U.K. Target, in each case to the
reasonable satisfaction of the Administrative
Agent.
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<PAGE>
8. The Lenders shall have received a letter
agreement from Company that suspends its
ability to borrow under the existing credit
facility agented by Bank with Company so long
as the Commitment Letter is in effect, in form
and substance reasonably satisfactory to the
Administrative Agent.
9. The Lenders shall have received such opinions
(including (a) legal opinions (including,
without limitation, opinions relating to the
U.K. Offer) and (b) copies of a customary
investment banker's opinion), resolutions,
instruments, certificates (including
incumbency and solvency certificates) and
other documents as are customary for
transactions of this type.
10. Customary corporate-type representations and
warranties shall be true in all material
respects.
B. Conditions to the Take-
Out Facilities:
1. Conditions to Take-Out
Facilities for the U.S.
Tender Facility: The availability of the Take-Out Facilities for
the U.S. Tender Facility shall be conditioned
upon the substantially concurrent satisfaction of
customary conditions for financings of this
nature, including the following conditions
precedent, on or before the 90th day following
the U.S. Tender Offer Closing Date:
a. Execution and delivery of satisfactory credit,
guarantee, security and other related
documentation embodying the structure, terms
and conditions of the Credit Facilities
contained herein (collectively, the "Take-Out
Credit Documentation'', and, together with the
Tender Offer Credit Documentation, the "Credit
Documentation'').
b. The U.S. Merger shall have been consummated
and no provision of the U.S. Tender Offer or
the materials relating thereto shall have been
waived, amended, supplemented or otherwise
modified in a manner which could reasonably be
expected to be materially adverse to the
rights or interests of the Administrative
Agent or the Lenders.
c. The Administrative Agent shall be reasonably
satisfied with all aspects of the Transaction
consummated on the Take-Out Closing Date,
including, without limitation, the aggregate
sources and uses of proceeds utilized to
consummate the same (including fees and
expenses previously paid in connection with
the U.S. Tender Offer and the U.K.
Acquisition, together with all fees and
expenses payable in connection with the Take-
Out Facilities and the U.S. Merger, not
exceeding approximately $65 million in the
aggregate) and the terms of all agreements and
documents relating to the Transaction.
d. No material adverse change in the business,
assets, financial condition, revenues, tax
position, debt service capacity, operations or
prospects of Company and its subsidiaries
taken as a whole, U.S. Target and its
subsidiaries, taken as a
16
<PAGE>
whole, and U.K. Target and its subsidiaries,
taken as a whole, since the date of their last
audited financial statements.
e. The Lenders and the Administrative Agent shall
have received all fees required to be paid on
or before the Take-Out Closing Date and all
expenses in connection herewith and therewith.
f. The Lenders shall have received satisfactory
unaudited interim consolidated financial
statements for each quarterly period ended
prior to the Take-Out Closing Date of Company
and its subsidiaries and of U.S. Target and its
subsidiaries.
g. The Lenders shall have received a satisfactory
pro forma consolidated balance sheet of Company
(inclusive of U.S. Target and its subsidiaries)
as at the date of the most recent consolidated
balance sheet delivered pursuant to paragraph 6
above, adjusted to give effect to the
consummation on the Take-Out Closing Date of
the Transaction (including the financings
contemplated hereby).
h. The Lenders shall have received guarantees and
first-priority security interests, as set forth
above under the captions "Guarantees'' and
"Collateral", respectively, as well as an
insurance broker's letter, in each case to the
reasonable satisfaction of the Administrative
Agent.
i. The Lenders shall have received environmental
reports (including Phase I reports) on all
material real properties on which mortgages
shall be required to be provided to the
Administrative Agent from independent
consultants satisfactory to the Administrative
Agent, which reports shall be reasonably
satisfactory in all respects to the
Administrative Agent and shall expressly permit
the Administrative Agent and the Lenders to
rely thereon, and the coverage of any issues
disclosed in such reports shall be reasonably
satisfactory to the Administrative Agent.
j. The Lenders shall have received (i)
satisfactory audited consolidated financial
statements for the three most recent fiscal
years ended prior to the Take-Out Closing Date
of Company and its subsidiaries and of U.S.
Target and its subsidiaries and (ii)
satisfactory unaudited interim consolidated
financial statements for each quarterly period
ended subsequent to the date of the latest
financial statements delivered pursuant to
clause (i) of this paragraph as to which such
financial statements are available of Company
and its subsidiaries and of U.S. Target and its
subsidiaries.
k. The Lenders shall have received a satisfactory
business plan for fiscal year 2000,
satisfactory financial projections for the term
of the Credit Facilities and a satisfactory
written analysis of the business and prospects
of Company and its subsidiaries (including U.S.
Target and its subsidiaries) for the term of
the Credit Facilities.
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<PAGE>
l. The Lenders shall have received such opinions
(including legal opinions (including, without
limitation, opinions relating to the U.S.
Merger)), resolutions, instruments,
certificates (including incumbency and
solvency certificates) and other documents as
are customary for transactions of this type or
as they may reasonably request.
2. Conditions to Take-Out
Facilities for the U.K.
Acquisition Facility: The availability of the Take-Out Facilities for
the U.K. Acquisition Facility shall be
conditioned upon the substantially concurrent
satisfaction of customary conditions for
financings of this nature, comprising
substantially the same conditions as set forth
above for the U.K. Acquisition Facility.
C. Conditions to each The making of each extension of credit (including
Credit Extension: the initial loans under each Credit Facility,
except for the Take-Out Facilities for the U.K.
Acquisition Facility) shall be conditioned upon
(a) all representations and warranties in the
Credit Documentation (including, without
limitation, the material adverse change and
litigation representations) being true and
correct in all material respects 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.
VI. Representations, Warranties, Covenants and Events of Default
The Credit Documentation shall contain representations, warranties, covenants
and events of default applicable to Company and each other Credit Party and
their respective subsidiaries customary for financings of this type and other
terms reasonably deemed appropriate by the Lenders, including, without
limitation:
Representations and Accuracy of financial statements (including pro
Warranties: forma financial statements); absence of
undisclosed liabilities; no material adverse
change; corporate existence; compliance with law;
corporate power and authority; authorization by
Board of Directors of each Credit Party;
enforceability of Credit Documentation; no
conflict with law or material contractual
obligations; no material litigation; absence of
any material obligations or liabilities of the
subsidiaries; no default; ownership of property;
liens; intellectual property; no burdensome
restrictions; taxes; compliance with Regulations
T and U and other Federal Reserve regulations;
existence and validity of all material
governmental consents and permits; ERISA;
Investment Company Act; environmental matters;
accuracy of disclosure; creation, perfection and
priority of security interests and Year 2000
matters.
Affirmative Covenants: Delivery of financial statements, reports,
accountants' letters, projections, officers'
certificates and other information requested by
the Lenders; payment of other 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 Lenders to inspect property and
books and records; notices of defaults,
litigation and other
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<PAGE>
material events; maintenance of capital
expenditures and compliance with environmental
laws. Certain of the affirmative covenants shall
be subject to customary "baskets" to be mutually
agreed upon.
Financial Covenants: Financial Covenants shall be comprised of an
EBITDA/Interest ratio and a Debt/EBITDA ratio and
limitation on capital expenditures.
Negative Covenants: Customary for financing of this type, including
without limitation, limitations on: indebtedness
(including preferred stock); liens; guarantee
obligations; mergers, consolidations,
liquidations and dissolutions; sales of assets;
leases; dividends and other payments in respect
of capital stock; capital expenditures;
investments, loans and advances; payments and
modifications of subordinated and other debt
instruments; no material modification of tender
offer or merger documentation; transactions with
affiliates; sale and leasebacks; changes in
fiscal year; negative pledge clauses; and changes
in lines of business. Certain of the negative
covenants shall be subject to customary "baskets"
to be mutually agreed upon.
Events of Default: Nonpayment of principal when due; nonpayment of
interest, fees or other amounts; material
inaccuracy of representations and warranties;
violation of covenants (subject, in the case of
certain affirmative covenants, to a 30-day grace
period); cross-default to any other indebtedness
of any Credit Party; bankruptcy of any Credit
Party; certain ERISA events; material judgments;
actual or asserted invalidity of any guarantee or
security document, subordination provisions or
security interest; if the U.S. Tender Offer
Facility is funded, failure of the U.S. Merger to
occur by April 30, 2000 with unrestricted access
to the cash flow of U.S. Target and its
subsidiaries; if a Credit Facility is funded with
respect to the U.K. Acquisition, failure of the
U.K. Acquisition to be consummated by June 15,
2000 with unrestricted access to the cash flow of
U.K. Target and its Subsidiaries; and a change of
control. Certain of the events of default shall
include customary grace periods and/or baskets to
be mutually agreed upon.
VII.Certain Other Terms
Voting: Amendments and waivers with respect to the Credit
Documentation shall require the approval of
Lenders holding commitments representing not less
than a majority of the aggregate amount of the
commitments under the Credit Facilities (the
"Required Lenders''), except that (a) the consent
of each Lender directly affected thereby shall be
required with respect to certain customary issues
and (b) the consent of 100% of the Lenders shall
be required with respect to certain customary
issues. The Credit Documentation will contain
customary tranche voting provisions.
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<PAGE>
Assignments and
Participations: The Lenders shall be permitted to assign and sell
participations in their Credit Facilities to
affiliates or one or more banks, financial
institutions or other entities that are eligible
assignees, subject, in the case of assignments
(other than to another Lender or to an affiliate
of the assigning Lender), to the consent of the
Administrative Agent and Company (which consent
in each case shall not be unreasonably withheld
and, in the case of Company, shall not be
required during a default or event of default)
and to the payment by the assigning Lender to the
Administrative Agent of a $3,500 transfer fee. In
the case of partial assignments, the minimum
assignment amount shall be $5,000,000 (unless, in
each case, an assigning Lender's aggregate
interest is less than $5,000,000, in which case
the full amount remaining may be assigned) and,
after giving effect thereto, the assigning Lender
shall have commitments and Loans aggregating at
least $5,000,000. Upon such assignment, such
affiliate entity shall become a Lender for all
purposes of the loan documentation. Participants
shall have the same benefits as the Lenders with
respect to yield protection and increased cost
provisions. Voting rights of participants shall
be limited to certain customary issues. Pledges
of Loans in accordance with applicable law shall
be permitted without restriction.
Yield Protection: The Credit Documentation shall contain customary
provisions (a) protecting the Lenders against
loss of yield resulting from changes in reserve,
tax, capital adequacy, funding losses,
illegality, changes to existing regulations and
other requirements of law and from the imposition
of withholding or other taxes (collectively,
"increased costs'') and (b) indemnifying the
Lenders for "breakage costs'' incurred in
connection with, among other things, prepayment
of a Eurodollar Loan (as defined in Annex I) on a
day other than the last day of an interest period
with respect thereto.
Expenses and Borrowers shall pay (a) all reasonable out-of-
Indemnification: pocket expenses of the Administrative Agent
associated with the syndication of the Credit
Facilities and the preparation, execution,
delivery and administration of the Credit
Documentation and any amendment or waiver with
respect thereto and all other aspects of the
Transaction (including the reasonable fees and
disbursements and other charges of counsel) and
(b) all out-of-pocket expenses of the
Administrative Agent and the Lenders in
connection with the enforcement of the Credit
Documentation (including the fees and
disbursements and other charges of counsel).
Borrowers shall indemnify, pay and hold harmless
the Administrative Agent, the Arranger and the
Lenders (and their respective directors,
officers, employees and agents) against any loss,
liability, cost or expense in respect of any
aspect of the Transaction, 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).
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<PAGE>
Governing Law and Forum: State of New York.
Counsel to the
Administrative Agent: Mayer, Brown & Platt.
This Term Sheet is intended as an outline only and does not purport to
summarize all the conditions, covenants, representations, warranties and other
provisions which would be contained in the definitive credit documentation.
21
<PAGE>
ANNEX I
to EXHIBIT A
INTEREST AND CERTAIN FEES
Interest Rate Options: Borrowers may elect that all or a portion of the
Loans borrowed by it bear interest at a rate per
annum equal to (a) the Alternate Base Rate plus
the Applicable Margin with respect thereto or
(b) the Eurodollar Rate plus the Applicable
Margin with respect thereto. For purposes hereof:
"Alternate Base Rate'' means the higher of (i)
the rate of interest established by Bank as its
base or prime rate in effect at its principal
office in New York City (the "Prime Rate'') and
(ii) the federal funds effective rate from time
to time plus .50%;
"Eurodollar Rate'' means the rate (grossed-up for
maximum statutory reserve requirements for
eurocurrency liabilities) at which eurocurrency
deposits in U.S. dollars for one, two, three or
six months, or if available to all banks, nine or
twelve months (as selected by Borrowers) are
offered by Bank in the London interbank
eurocurrency market; provided that (i) the U.S.
Tender Offer Loan may not be converted/continued
as a Eurodollar Loan having an interest period of
more than three months and (ii) the U.K.
Acquisition Loan may not be converted/continued
as a Eurodollar Loan having an interest period of
more than one month.
Applicable Margin: The Applicable Margin with respect to (a) the
U.S. Tender Offer Facility shall be initially (i)
300 basis points (until 2 months after the Tender
Offer Closing Date), such rate to increase by 25
basis points if not repaid within 2 months of the
U.S. Tender Offer Closing Date and shall increase
by another 25 basis points thereafter until
repaid with respect to Loans bearing interest
based on the Eurodollar Rate ("Eurodollar
Loans'') and (ii) 200 basis points (until 2
months after the Tender Offer Closing Date), such
rate to increase by 25 basis points if not repaid
within 2 months after the U.S. Tender Offer
Closing Date and to increase by another 25 basis
points thereafter until repaid with respect to
Loans bearing interest based on the Alternate
Base Rate ("Base Rate Loans'');
(b) the U.K. Acquisition Facility shall be
initially (i) 375 basis points, such rate to
increase by 100 basis points for each month such
facility is outstanding until repaid with respect
to Loans bearing interest based on the Eurodollar
Rate ("Eurodollar Loans") and (ii) 275 basis
points, such rate to increase by 100 basis points
for each month such facility is outstanding with
respect to Loans bearing interest based on the
Alternate Base Rate ("Base Rate Loans");
(c) the Applicable Margin with respect to the
Revolving Credit Facility (including the Loan
Note Guarantee Subfacility), the
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<PAGE>
Eighteen Month Facility and the Term A Facility
shall initially be (i) 250-275 basis points with
respect to Eurodollar Loans and (ii) 150-175
basis points with respect to Base Rate Loans and
the Term B Facility shall be 275-300 basis points
with respect to Eurodollar Loans and 175-200 with
respect to Base Rate Loans. Reductions in the
Applicable Margin with respect to the Revolving
Facility, the Eighteen Month Facility, the Term A
Facility and, to some extent, the Term B Facility
shall be available in a manner to be determined
and based on the Debt/EBITDA Ratio (to be
defined).
Interest Payment Dates: In the case of Base Rate Loans, in arrears on the
last business day of each calendar quarter.
In the case of Eurodollar Loans, on the last day
of each relevant interest period and, in the case
of any interest period longer than three months,
on each successive date three months after the
first day of such interest period.
Commitment Fees: Borrowers shall pay to the Administrative Agent,
for the ratable benefit of the Lenders, a
commitment fee on the average daily unused
portion of the Credit Facilities, payable
quarterly in arrears on the last business day of
each calendar quarter, and calculated (a) during
the first 180 days of the Credit Facilities, at
40 basis points per annum and (b) thereafter,
reductions thereon calculated based on the
Debt/EBITDA Ratio (to be determined).
Letter of Credit and Loan
Note Guarantee Fees: Borrowers shall pay to the Administrative Agent,
for the ratable benefit of the Lenders, a letter
of credit fee on the aggregate amount available
under outstanding Letters of Credit, and a
commission on the aggregate amount guaranteed
pursuant to the Loan Note Guarantee Subfacility,
in each case payable in arrears on the last
business day of each calendar quarter, and
calculated at a per annum rate equal to the
Applicable Margin under the Revolving Credit
Facility with respect to Eurodollar Loans from
time to time in effect. Borrowers shall also pay
to the Letter of Credit Issuer, for its own
account, a letter of credit fronting fee on the
aggregate amount available under each Letter of
Credit issued, payable in arrears on the last
business day of each calendar quarter, and
calculated at a per annum rate to be determined.
Default Rate: At any time when Borrowers are in default in the
payment of any amount due under the Credit
Facilities or any other event of default shall
have occurred and be continuing, the principal of
all Loans shall bear interest at 2% above the
rate otherwise applicable thereto. Overdue
interest, fees and other amounts shall bear
interest at the rate applicable to Base Rate
Loans plus the applicable margin plus 2%.
Rate and Fee Basis: All per annum rates shall be calculated on the
basis of a year of 360 days (or 365/366 days, in
the case of Base Rate Loans the interest rate
payable on which is then based on the Prime Rate)
for actual days elapsed.
23
