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Exhibit (b)(1)
December 14, 2000
Confidential
------------
Mr. James Bazet
President/CEO
Cobra Electronics Corporation
6500 West Cortland Street
Chicago, Illinois 60707
Re: $85 Million Secured Financing Proposal
--------------------------------------
Dear Mr. Bazet:
General Electric Capital Corporation ("GE Capital"), LaSalle Bank National
Association, ("LaSalle"), and BT Commercial Corporation (BTCC) are pleased to
express our collective interest in providing up to $85.0 million of Credit
Facilities (the "Financing"). The Financing will be utilized to support: (i)
Cobra Electronics Corporation's ("Cobra") proposed acquisition of 100% of the
capital stock of Lowrance Electronics, Inc. ("Lowrance"); (ii) repayment in full
of certain indebtedness of Lowrance and Cobra; and (iii) the ongoing working
capital of Cobra and Lowrance (collectively the "Transaction").
The Financing will consist of: an $85MM Senior Secured Credit Facility ("the
Senior Facility") consisting of $65MM Senior Secured Revolving Credit Facility
with a borrowing base ("the Revolver") and a $20MM Senior Secured Term Loan
("the Term Loan").
Please understand that this letter does not constitute a commitment or
undertaking to provide financing. Such a commitment would be subject to, but not
limited to, final due diligence, formal credit approval, Cobra's procurement of
subordinated debt acceptable to Agents, and final documentation.
SUMMARY OF PROPOSED TERMS
-------------------------
BORROWERS Cobra Electronics Corporation and Lowrance
--------- Electronics, Inc.
AGENTS LaSalle as Administrative Agent, GE Capital
------ as Collateral Agent, and BTCC as Syndication
Agent (collectively, the "Agents").
LENDERS LaSalle, GE Capital, BTCC, and other lenders
------- acceptable to the Agents.
SENIOR FACILITY AMOUNT: Up to $85 million.
----------------------
REVOLVING CREDIT FACILITY
-------------------------
AMOUNT Up to $65.0 million (including a Documentary
------ Letter of Credit Subfacility of up to $25.0
million). Documentary Letters of Credit
would be issued by LaSalle, on terms
acceptable to Agents, and would be
guaranteed or otherwise backed by all
Lenders.
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TERM The lesser of 5 years or 6 months prior to
---- the first principal payment required under a
subordinated debt agreement.
AVAILABILITY The sum of up to 75% of Borrower'S eligible
------------ accounts receivable, up to 60% of Borrower's
eligible inventory valued at the lower of
cost (FIFO) or market, and up to 50% of
Borrower's eligible finished goods inventory
purchased utilizing Documentary Letters of
Credit less reserves. Eligible inventory
would exclude goods located in Mexico and
Australia. Different advance rates on
accounts receivable may be considered
following completion of a field exam.
The Agents would retain the right from time
to time to establish advance rates,
determine standards of eligibility, and
reserve against availability. The face
amount of all letters of credit under the
Documentary Letter of Credit Subfacility
would be reserved in full against
availability.
TERM LOAN
---------
AMOUNT Up to $20.0 million.
------
TERM The lesser of 5 years or 6 months prior to
---- the first principal payment required under a
subordinated debt agreement.
AUTHORIZATION Quarterly amortization as follows:
-------------
Quarters Quarterly Payment
-------- -----------------
1-4 $750,000
5-8 $750,000
9-12 $1,000,000
13-16 $1,250,000
17-20 $1,250,000
If the Revolving Credit Facility were
terminated, the Term Loan would immediately
be due and payable in full.
GENERAL TERMS
-------------
USE OF PROCEEDS Financing of the Transaction.
---------------
INTEREST At Borrower's option, either (i) absent a
-------- default, 1, 2, or 3-month reserve-adjusted
LIBOR plus the Applicable LIBOR Margin(s) or
(ii) floating at the Index Rate (higher of
Prime or 50 basis points over Fed Funds)
plus the Applicable Index Margin.
Interest would be payable monthly in arrears
(except LIBOR) and calculated on the basis
of a 360-day year and actual days elapsed.
LIBOR mechanics and breakage fees will be
contained in the definitive loan
documentation.
APPLICABLE MARGINS The following Applicable Margins would apply
------------------ so long as any loan remains outstanding:
Applicable Index Margin 0.875%
Applicable LIBOR Margin 3.250%
Applicable Documentary L/C Margin 1.625%
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Performance-based pricing grid to be
negotiated (to become effective on first
anniversary of closing date).
FEES The Closing Fee will equal 2.00% of the
---- Amount. The Closing Fee would be payable in
two installments. One-half would be due and
payable upon signing of a Commitment Letter.
The remaining one-half would be due and
payable on the Closing Date.
Applicable Documentary Letter of Credit Fee
will equal the Applicable Documentary L/C
Margin (calculated on the basis of a 360-day
year and actual days elapsed) on the face
amount of the letters of credit, payable
monthly in arrears, plus any charges
assessed by the issuing bank.
Unused Facility Fee of 0.50% (calculated on
the basis of a 360-day year and actual days
elapsed) on the average unused daily balance
of the Revolver, payable monthly in arrears.
Annual Agents' Fee of $50,000 per annum,
payable annually in advance on the closing
date and on each anniversary thereof.
DEFAULT RATES Default interest and letter of credit fees
------------- at 2.0% above the rate otherwise applicable.
VOLUNTARY PREPAYMENTS Prepayment premium, payable in the event
--------------------- that Borrower voluntarily defaults or
terminates the Revolving Credit Facility or
prepays the Term Loan prior to the second
anniversary of the Closing Date, in an
amount equal to the committed amount of the
Revolving Credit Facility and/or the amount
being prepaid on the Term Loan, as
appropriate, multiplied by 1.5% if during
the first year following the closing date
and 0.5% if during the second year following
the closing date.
SECURITY Fully perfected first priority security
-------- interest in all existing and after-acquired
assets of Borrowers and of its subsidiaries,
if any, (including any insurance or other
proceeds). All collateral would be free and
clear of other liens, claims and
encumbrances. In addition, a pledge of all
of the issued and outstanding capital stock
of Borrowers' subsidiaries. Each Borrower
would guarantee the other. Also,
cross-default/cross-collateralization
provisions would be required.
MANDATORY PREPAYMENTS Customary mandatory prepayment upon
--------------------- disposition of assets, upon sale of equity
or issuance of debt, and for 65% of annual
excess cash flow (to be defined).
SYNDICATION: Agents may initiate discussion with
----------- potential lenders regarding their
participation in this Financing. Agents will
not require syndication of the Transaction
prior to closing.
Borrowers acknowledge and agree that Agents
will syndicate the Senior Facility prior to
or after closing based on the pricing,
structure, terms and amount referenced
herein. If, on or prior to the time of
syndication, the Agents determine that they
will not be able to sell down the
transaction to Agents' desired hold levels,
then the Agents reserve the right, after
consultation with the Borrowers, to adjust
the Applicable Margin by up to 0.75% in
order to effect a successful syndication.
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The Agents will syndicate the transaction
with the assistance of Borrowers and
Borrowers' management. Such assistance will
include; but not be limited to: (i) prompt
assistance in the preparation of an
Information Memorandum and verification of
the accuracy and completeness of the
information contained therein; (ii)
preparation of other materials and
projections by Borrowers' and its advisors
taking into account the proposed
Transaction; and (iii) participation of
Borrowers' senior management in meetings and
conference calls with potential lenders and
rating agencies, if applicable, at such
times and places as the Agents may
reasonably request.
The Agents reserve the right to provide to
industry trade organization information
necessary and customary for inclusion in
league table measurements.
OTHER TERMS AND CONDITIONS (All to be acceptable to the Agents)
--------------------------
. Cobra's procurement of at least $15 million of subordinated debt with
terms and conditions that are satisfactory to Agents.
. Satisfactory completion of all business, environmental and legal due
diligence (including compliance with federal margin regulations),
environmental audits, appraisals and field exam.
. Corporate structure, capital structure, other debt instruments,
material contracts, and governing documents of Borrowers and its
affiliates, and tax effects resulting from Transaction to be
acceptable.
. Acquisition structures and terms to be otherwise acceptable to Agent.
. Total Funded Senior Debt (including Capital Leases) at closing not to
exceed 2.75x trailing twelve month EBITDA for Cobra and Lowrance.
. Minimum excess collateral availability at closing of $8 million.
. Transaction to close no later than January 31, 2001.
. Acceptable final documentation.
. Financial covenants to be determined.
. Cash Management System to be acceptable to the Agents.
. Lender syndication/assignment rights.
. As of the closing date, there will have been: (i) since Borrowers, last
audited financial statements, no material adverse change, individually
or in the aggregate, in the business, financial or other condition of
any Borrower or the Borrowers taken as a whole, the industry in which
any Borrower operates, or the collateral which will be subject to the
security interest granted to the Agents or in the prospects or
projections of any Borrower or the Borrowers taken as a whole, (ii) no
litigation commenced which, if successful, would have a material
adverse impact on any Borrower or the Borrowers taken as a whole, its
or their business or ability to repay the loans, or which would
challenge the transactions under consideration, (iii) since Borrowers'
last audited financial statements, no material increase in the
liabilities, liquidated or contingent, of any Borrower or the Borrowers
taken as a whole; and (iv) since the date hereof, no change in loan
syndication, financial or capital market conditions generally that in
Agents' judgment would materially impair syndication of the financing.
. Governing law: Illinois
The preceding summary of proposed terms and conditions is not intended to be
all-inclusive. Any terms and conditions that are not specifically addressed
above would be subject to future negotiations. Moreover, by signing this letter,
all parties acknowledge that: (i) this letter is not a binding commitment on the
part of any person to provide or arrange for financing on the terms and
conditions set forth herein or otherwise; (ii) any such commitment on the part
of the Agents would be in a separate written instrument signed by the Agents
following satisfactory completion of the Agents' due diligence, internal review
and approval process, including approval by the Agents' senior management (which
approvals have not yet been sought or obtained); (iii) this letter supersedes
any and all discussions and understandings, written or oral, between or among
the Agents and any other person as to the subject matter hereof; and (iv) the
Agents may, at any level of its approval process, decline any further
consideration of the Financing and terminate its approval process.
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Except as required by law, neither this letter nor its contents will be
disclosed publicly or privately except to those individuals who are your
officers, employees or advisors who have a need to know as a result of being
involved in the Financing and then only on the condition that such matters may
not be further disclosed. No one shall, except as required by law, use the name
of, or refer to, the Agents, or any of its affiliates in any correspondence,
discussions, advertisement or disclosure made in connection with the Financing
without the prior consent of the Agents.
Regardless of whether the Financing is approved or closes, Borrower agrees to
(i) pay to the Agents all out-of-pocket expenses (including all reasonable
legal, environmental, and other consultant costs and fees incurred in the
preparation of this letter, evaluation of and documenting of the Financing, and
also including a field examination fee of $650 per diem plus actual out-of-
pocket expenses in connection with the conduct of the Agents' field audit), and
(ii) indemnify and hold the Agents, their affiliates, and the directors,
officers, employees, and representatives of any of them, harmless from and
against all claims, expenses (including, but not limited to, attorneys' fees),
damages, and liabilities of any kind which may be incurred by, or asserted
against, any such person in connection with, or arising out of, this letter, any
financing related thereto, and any investigation, litigation, or proceeding
related to any such matters. Under no circumstances shall the Agents or any of
their affiliates be liable for any punitive, exemplary, consequential or
indirect damages that may be alleged to result from this letter, or the
Financing or any other financing.
So that we may begin our due diligence and field audit, please sign and return
this letter, along with your underwriting deposit of $75,000 before December 20,
2000. The Agents will charge the underwriting deposit for fees and expenses to
be reimbursed as outlined above. If the Agents should provide a commitment and
close the Financing, your remaining underwriting deposit (net of fees and
expenses) would be applied toward remaining Closing Fees due at closing. If the
Agents should not provide a commitment substantially on these terms or otherwise
acceptable to you (for any reason other than your acceptance of financing from
another lender or your termination of the Agents' efforts hereunder), then the
balance of the underwriting deposit (net of fees and expenses) shall be
returned. In all other circumstances, the Agents will retain the remaining
underwriting deposit.
Sincerely,
GE CAPITAL COMMERCIAL LASALLE BANK NATIONAL ASSOCIATION
FINANCE
/s/ Richard R. Rodgers /s/ Steven M. Marks
---------------------- -------------------
Richard R. Rodgers Steven M. Marks
Senior Vice President First Vice President
BT COMMERCIAL CORPORATION COBRA ELECTRONICS CORPORATION
/s/ Anthony F. DeMonte /s/ James R. Bazet
---------------------- ------------------
Anthony F. DeMonte James R. Bazet
Director President and Chief Executive Officer
