UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 3)
National Gypsum Company
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
636317109
(CUSIP Number)
Paul J. Polking, NationsBank Corporation,
NationsBank Corporate Center, Charlotte, NC 28255 (704) 386-2400
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
January 31, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [ ] .
Check the following box if a fee is being paid with the statement [ ] .
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five
percent of the class of securities described in Item 1; and (2) has
filed no amendment subsequent thereto reporting beneficial ownership of
five percent or less of such class.) (See Rule 13d-7.)
This document contains 49 pages.
The exhibit index begins on page 6.
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SCHEDULE 13D
CUSIP NO. 636317109
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
NATIONSBANK CORPORATION
2 CHECK THE APPROPRIATE BOX IF
A MEMBER OF A GROUP (a) [check mark]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS ( )
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NC
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7 SOLE VOTING POWER
8,799
8 SHARED VOTING POWER
0
9 SOLE DISPOSITIVE POWER
6,646
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,799
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [check mark]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
less than 0.1%
14 TYPE OF REPORTING PERSON
CO
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PRELIMINARY STATEMENT
This Amendment No. 3 (this "Amendment") amends and supplements
the Statement on Schedule 13D filed with the Securities and Exchange
Commission on November 23, 1994, as amended (the "Statement"), with
respect to the shares of Common Stock, $.01 par value per share (the
"Common Stock"), of National Gypsum Company, a Delaware corporation (the
"Issuer"), by NationsBank Corporation (the "Reporting Person").
Capitalized terms used herein without definition have the same meanings
as those ascribed to them in the Statement. Information contained
herein with respect to persons other than the Reporting Person has been
obtained from public filings under the Securities Exchange Act of 1934,
as amended, or has been provided to the Reporting Person by the relevant
party. The Reporting Person has not independently verified and assumes
no responsibility for the accuracy or completeness of such information.
As reported in the Statement, the Reporting Person may be deemed a
member of a group (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) with Delcor, Inc., a
Delaware corporation ("Delcor"), and First Union Corporation with
respect to ownership of Common Stock. Delcor and Golden Eagle
Industries, Inc., acting jointly, and First Union Corporation have each
filed separate statements on Schedule 13D. The Reporting Person
anticipates that any future amendment to this Statement may be included
in a joint statement with other members of such group, which joint
statement would not be eligible for electronic filing under Regulation
S-T. Accordingly, the Reporting Person expects that this Amendment
constitutes the Reporting Person's final amendment to be filed
electronically under Regulation S-T.
Item 4. Purpose of Transaction.
On January 31, 1995, the Reporting Person and its banking
affiliate, NationsBank, N.A. (Carolinas), issued a commitment letter to
Delcor, Inc., a Delaware corporation ("Delcor"), to provide equity and
debt financing to the Issuer to partially fund Delcor's proposal to the
Board of Directors of the Issuer that the Issuer effect a
recapitalization. A copy of such commitment letter (the
"Recapitalization Financing Commitment") is filed as Exhibit 9 hereto,
which is incorporated by reference herein.
The terms of Delcor's recapitalization proposal are set forth in
a letter from Delcor addressed to the Board of Directors of the Issuer,
a copy of which is attached hereto as Exhibit 10 (the "Recapitalization
Proposal"). The Recapitalization Proposal is incorporated by reference
herein.
Under the Recapitalization Proposal, 75 percent of the shares of
Common Stock of the Issuer other than shares held by Delcor and 784,999
shares held by First Union Corporation would be redeemed by the Issuer
pro rata for cash at a per share price of $46 (the "Transaction Price").
In addition, under the Recapitalization Proposal, Delcor would purchase
from the Issuer for cash additional shares of Common Stock at the
Transaction Price, such that upon completion of the redemption and
additional investment by Delcor, Delcor would hold approximately 54.5
percent of the then outstanding common shares on a fully diluted basis.
The Reporting Person would acquire from the Issuer for approximately
$36.1 million in cash
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784,999 shares of a new class of common stock ("Class B Common Stock"),
which would have the same rights as Common Stock except for limited voting
privileges, at the $46 per share Transaction Price. First Union
Corporation would exchange its existing 784,999 shares of Common Stock
for 784,999 shares of Class B Common Stock. The Reporting Person and
First Union Corporation would each acquire from the Issuer for $50 million
in cash shares of a new $100 million issue of redeemable preferred stock
of the Issuer (the "Redeemable Preferred Stock") that would pay dividends
at a rate of 9 percent per annum, carry no warrants, and have an eight-year
maturity. The Redeemable Preferred Stock would be callable by the Issuer,
at any time, with no premium, would have limited voting privileges and would
vote together as a class with Common Stock.
NationsBank, N.A. (Carolinas) has provided Delcor with a
commitment to provide the Issuer with a $162.5 million, five-year
reducing revolving credit facility to supply a portion of the remaining
funds required to effect the recapitalization and meet future working
capital needs.
The Recapitalization Financing Commitment sets forth the
Reporting Person's commitment to acquire from the Issuer shares of Class
B Common Stock and Redeemable Preferred Stock and the commitment of
NationsBank N.A., (Carolinas) to provide the reducing revolving credit
facility on the terms described above. The Reporting Person intends to
use working capital to provide funds under the Recapitalization
Financing Commitment.
On January 31, 1995, First Union Corporation and First Union
National Bank of North Carolina also issued to Delcor a commitment (the
"First Union Recapitalization Commitment") for First Union Corporation
to purchase from the Issuer shares of Class B Common Stock and
Redeemable Preferred Stock as described above and for First Union
National Bank of North Carolina to provide the Issuer with a $162.5
million, five-year reducing revolving credit facility. A copy of the
First Union Recapitalization Commitment is filed as Exhibit 11 hereto,
which is incorporated herein by reference.
On January 31, 1995, Delcor accepted the Recapitalization
Financing Commitment and the First Union Recapitalization Commitment.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
The information set forth in Item 4 of this Amendment is
incorporated herein by reference.
Item 7. Material to be Filed as Exhibits.
The Recapitalization Financing Commitment is filed as Exhibit 9
hereto. The Recapitalization Proposal is filed as Exhibit 10 hereto.
The First Union Recapitalization Commitment is filed as Exhibit 11
hereto.
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Signatures.
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this Amendment is true,
complete and correct.
Dated: February 1, 1995
NATIONSBANK CORPORATION
By: /s/ Paul J. Polking
Paul J. Polking, Executive Vice
President and General Counsel
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT TITLE NUMBERED PAGE
1* Certain information regarding the directors
and executive officers of NationsBank Corporation
2* Commitment letter of NationsBank Corporation
and NationsBank of North Carolina dated
November 15, 1994 addressed to Delcor, Inc.
3* Letter dated November 15, 1994 from Delcor, Inc.
to the Board of Directors of National Gypsum Company
setting forth the terms of a proposed merger
between a company to be formed by Delcor, Inc.
and National Gypsum Company
4* Commitment letter of First Union Corporation and
First Union National Bank of North Carolina, N.A.
dated November 15, 1994 addressed to Delcor, Inc.
5* Certain information regarding Delcor, Inc.
6* Certain information regarding First Union Corporation
7* Letter dated December 12, 1994 from National
Gypsum Company to Delcor, Inc.
8* Press release dated December 13, 1994 issued
by Delcor, Inc.
9 Commitment letter of NationsBank Corporation 8
and NationsBank, N.A. (Carolinas) dated
January 31, 1995 addressed to Delcor, Inc.
10 Letter dated January 31, 1995 from Delcor, Inc. 26
to the Board of Directors of National Gypsum Company
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SEQUENTIALLY
EXHIBIT TITLE NUMBERED PAGE
11 Commitment letter of First Union Corporation and 32
First Union National Bank of North Carolina dated
January 31, 1995 addressed to Delcor, Inc.
_________________________
* Previously filed
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EXHIBIT 9
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NationsBank Corporation
NationsBank Corporate Center
Charlotte, NC 28255
NationsBank
CONFIDENTIAL
January 31, 1995
Delcor, Inc.
1110 East Morehead Street
Charlotte, NC 28204
Attention: Mr. W. D. Cornwell, Jr.
President
Gentlemen:
NationsBank, N.A. (Carolinas) and NationsBank Corporation or an
affiliate thereof (collectively, "NationsBank") are pleased to
confirm to Delcor, Inc. ("Delcor"), their commitment to provide to
National Gypsum Company (the "Company"), on the terms, for the purposes
and subject to the conditions set forth below and in the summary of
certain terms attached hereto (the "Term Sheets") the following:
(i) a senior debt facility (the "Senior Debt Facility") in an
aggregate amount of up to $162,500,000, (ii) a subscription to purchase
from the Company Cumulative Mandatorily Redeemable Preferred Stock
(the "Preferred Stock") in an aggregate amount of $50,000,000 and
(iii) the purchase of 784,999 shares of Class B Common Stock of the
Company for a cash purchase price per share equal to the
Transaction Price (as defined below) (the "Common Equity"). As
NationsBank understands the proposed transaction (the "Transaction"),
Delcor will enter into a reclassification agreement (the
"Transaction Agreement") with the Company that will provide for the
redemption of approximately 75% of the outstanding Common Stock of the
Company held by persons other than NationsBank, Delcor (and its
affiliates) and First Union National Bank of North Carolina and its
affiliates (collectively, "First Union"). The redemption price per
share will not exceed the amount discussed between NationsBank and
Delcor (the "Transaction Price"). The Senior Debt Facility, the
Preferred Stock proceeds and the Common Equity (collectively, the
"NationsBank Financing") are being provided to enable the Company
to (i) complete the Transaction, (ii) provide for the ongoing
working capital and capital spending needs of the Company, and (iii) pay
certain fees and expenses related to the Transaction. If the
Transaction is restructured as a dividend, a cash-out merger, or
otherwise, this commitment letter and the Term Sheets shall be modified
to reflect the revised structure.
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This Commitment Letter replaces and supersedes the Commitment Letter
between NationsBank and Delcor, dated November 15, 1994, except
with respect to the indemnification, contribution and expense
reimbursement provisions thereof, which remain in full force and effect.
NationsBank's commitment is to provide 50% of a $325,000,000 Senior Debt
Facility that will be co- agented by NationsBank and First Union.
First Union will commit to provide 50% of the Senior Debt Facility
and will also (i) purchase $50,000,000 of Preferred Stock and (ii)
contribute 784,999 of common stock of the Company in exchange for
784,999 shares of Class B Common Stock of the Company.
Our commitment to provide the NationsBank Financing will be funded
simultaneously with the completion of the Transaction and is subject to
the conditions set forth herein and in the attached Term Sheets,
including the right to assign or transfer all or part of this
commitment for the NationsBank Financing to any of our affiliated
corporations or banks and to any third parties. Our commitment to
provide the NationsBank Financing will terminate on September 30,
1995 if the Transaction shall not have become effective on or prior to
such date.
You agree that this Commitment Letter is for your confidential use only
and will not be disclosed by you to any person other than your
accountants, attorneys and other advisors and the Company and such
of their respective officers, directors, agents, accountants, attorneys
and other advisors as need to be provided therewith, and only then
in connection with the Transaction and on a confidential basis,
except that you may make public disclosure of the existence and amount
of NationsBank's commitment and undertaking hereunder, you may file
a copy of the Commitment Letter in any public record in which it is
required by law to be filed, and you may make such other public
disclosure of the terms and conditions hereof as you are required by
law, in the reasonable opinion of your counsel, to make.
Delcor agrees to indemnify each of NationsBank and its affiliates and
their respective directors, officers, employees, agents and
controlling persons (each, an "Indemnified Party") from and against
any and all losses, claims (whether valid or not), damages and
liabilities, joint or several, to which such Indemnified Party may
become subject, related to or arising out of the Transaction and
will reimburse each Indemnified Party for all expenses (including
reasonable attorneys' fees and expenses) as they are incurred in
connection with the investigation of, preparation for or defense of
any pending or threatened claim or any action or proceeding arising
therefrom. Notwithstanding the foregoing, the obligation to
indemnify any Indemnified Party hereunder shall not apply in
respect of any loss, claim, damage or liability to the extent that a
court of competent jurisdiction shall have determined by final
judgment that such loss, claim, damage or liability resulted from such
Indemnified Party's willful malfeasance, gross negligence or bad
faith. In the event that the foregoing indemnity is unavailable or
insufficient to hold an Indemnified Party harmless, then Delcor
will contribute to amounts paid or payable by such Indemnified Party in
respect of such Indemnified Party's losses, claims, damages or liabilities
<PAGE>
in such proportions as appropriately reflect the relative benefits
received by and fault of Delcor and such Indemnified Party in
connection with the matters as to which such losses, claims,
damages or liabilities relate and other equitable considerations.
If any action, proceeding, or investigation is commenced, as to which
any Indemnified Party proposes to demand such indemnification, it
shall notify Delcor with reasonable promptness; provided, however,
that any failure by such Indemnified Party to notify Delcor shall not
relieve Delcor from its obligations hereunder except to the extent
Delcor is prejudiced thereby. Delcor shall be entitled to assume
the defense of any such action, proceeding, or investigation, including
the employment of counsel and the payment of all fees and expenses.
The Indemnified Party shall have the right to employ separate
counsel in connection with any such action, proceeding, or
investigation and to participate in the defense thereof, but the fees
and expenses of such counsel shall be paid by the Indemnified
Party, unless (a) Delcor has failed to assume the defense and
employ counsel as provided herein, (b) Delcor has agreed in writing to
pay such fees and expenses of separate counsel, or (c) an action,
proceeding, or investigation has been commenced against the Indemnified
Party and Delcor and representation of both Delcor and the
Indemnified Party by the same counsel would be inappropriate
because of actual or potential conflicts of interest between the
parties (in the case of NationsBank, the existence of any such actual or
potential conflict of interest to be determined by NationsBank,
taking into account, among other things, any relevant regulatory
concerns). In the case of any circumstance described in clauses (a),
(b), or (c) of the immediately preceding sentence, Delcor shall be
responsible for the reasonable fees and expenses of such separate
counsel; provided, however, that Delcor shall not in any event be
required to pay the fees and expenses of more than one separate
counsel for all Indemnified Parties. Delcor shall be liable only for
settlement of any claim against an Indemnified Party made with
Delcor's written consent.
Delcor agrees to pay to us the fees for the Senior Debt Facility
outlined in the fee letter and supplemental fee letter, each dated
the date hereof (the "Fee Letters"). Delcor also agrees to
reimburse us for all of our out-of-pocket expenses (including the
reasonable fees and disbursements of our counsel) in connection
with the Transaction and the NationsBank Financing, described
herein.
The provisions of the three immediately preceding paragraphs shall
survive any termination of this letter.
Delcor acknowledges that NationsBank has advised Delcor that the
services to be provided hereunder and the amount of fees and the
obligation to reimburse expenses are in no way conditioned upon Delcor's
obtaining from NationsBank or any affiliate of NationsBank any
other service or any loan or other financial product.
<PAGE>
If you are in agreement with the foregoing, please sign and return the
enclosed copy of this letter and the Fee Letters to NationsBank no
later than 5:00 p.m. Eastern Standard Time, on or before January
31, 1995. This commitment shall terminate at such time unless a signed
copy of this letter and the Fee Letters have been delivered to us.
Very Truly Yours,
NATIONSBANK CORPORATION
By: Edward J. Brown, III
Edward J. Brown, III
President, Corporate Bank
NATIONSBANK, N.A. (CAROLINAS)
By: Edward J. Brown, III
Edward J. Brown, III
President, Corporate Bank
Agreed to and accepted this
31st day of January, 1995
DELCOR, INC.
By: W. D. Cornwell, Jr.
W. D. Cornwell, Jr.
President
<PAGE>
NATIONAL GYPSUM COMPANY
Summary of Certain Terms
Senior Debt Facility
Borrower: National Gypsum Company (the "Company").
Facility: A five-year Reducing Revolving Credit Facility (the
"Revolver" or the "Senior Debt Facility").
Commitment: $325,000,000, subject to the mandatory commitment
reductions outlined below (the "Commitment")
Maturity Date: The later of June 30, 2000 or the date five years after
the Closing Date.
Agents: NationsBank, N.A. (Carolinas) ("NationsBank") and First
Union National Bank of North Carolina ("First Union")
(collectively, the "Agents").
Administrative Agent: NationsBank
Syndication Agent: First Union
Lenders: NationsBank and First Union, and a group of other
financial institutions reasonably acceptable to the
Agents and the Company (the "Lenders").
Use of Proceeds: To consummate the Transaction described in the Commitment
Letter, to pay certain fees and expenses related to the
Transaction and to provide for the Company's ongoing
working capital and capital spending requirements.
Interest Rates: The interest rates on the Revolver will be a function of
the Company's Total Funded Debt to Operating Cash Flow
("Leverage Ratio") as determined quarterly on a
rolling four
<PAGE>
quarters basis. Operating Cash Flow will equal the
Company's earnings before interest, taxes, depreciation
and amortization ("EBITDA"). The Company will have
the option of borrowing at a spread over the Base Rate
(defined as the higher of the Administrative Agent's
Prime Rate, the Three Month CD Rate plus .50%, and the
Federal Funds Rate plus .50%) or the Adjusted
London Interbank Offered Rate ("LIBOR"). The applicable
rates will be based on the following table:
Leverage Spread Over Spread Over
Ratio Base LIBOR
(plus/minus sign) 2.0x 1.25% 2.75%
1.50x - 1.99x 0.75% 2.25%
1.00x - 1.49x 0.25% 1.75%
0.50x - .99x 0.00% 1.25%
< .50x 0.00% 0.75%
The interest rates on the Revolver will increase by
two (2) percentage points per annum upon the occurrence
and during the continuance of any payment default under
the Loan Agreement.
The Loan Agreement shall include the Agents' standard
protective provisions for such matters as increased
costs, funding losses, illegality and withholding taxes.
Interest Payments: At the end of each applicable Interest Period or
quarterly, if earlier, calculated on an actual 360 day
basis for both Base Rate and LIBOR Loans.
Interest Periods: LIBOR interest periods: 30, 60, or 90 days, subject to
availability.
Interest Rate
Protection: Within 90 days following the closing, the Company
must obtain reasonably acceptable interest rate
protection through interest rate swaps, caps or other
instruments reasonably satisfactory to the
Agents, against increases in interest rates for a
minimum of $100,000,000 or such lesser amount as the
Agents may agree, for a period of at least two years.
In the event the Company obtains Interest Rate
Protection from any Lender, then such Lender may
secure the Company's obligations thereunder on a
pari-passu basis with the Senior Debt Facility.
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Facility Fee: 1/2 of 1% per annum, on the unutilized portion of the
Revolver Commitment, payable quarterly in arrears.
Security: A perfected first priority security interest in all of
the Company's assets, including the pledge of the stock
of all the Company's subsidiaries.
Mandatory Reductions: The Revolver Commitment shall be reduced by $40,000,000
on each anniversary of the Closing Date. The maximum
available amount under the Revolver during any year
is as follows:
Revolver
Year Commitment
1 $325,000,000
2 $285,000,000
3 $245,000,000
4 $205,000,000
5 $165,000,000
Any outstanding amounts under the Revolver on the
Maturity Date shall be payable in full.
In addition to the scheduled reductions, the Revolver
Commitment will be reduced on an annual basis in an
amount equal to 50% of the Company's Excess Cash Flow
(defined as net income plus depreciation, amortization
and all other non-cash charges, adjusted for changes
in working capital, minus capital expenditures,
principal payments and permitted dividends) for
such period, beginning with the period ending December
31, 1996.
The Revolver Commitment will also be reduced by the
amount equal to the net cash proceeds in excess of
$5,000,000 from the sale of any of the Company's
assets outside the normal course of business. In
addition, the Revolver will be payable in full
immediately upon any change of control which results in
Delcor, Inc. or its affiliates owning less than 51% of
the voting Common Stock of the Company.
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Mandatory
Prepayments: The Company will be required to prepay the
Revolver from time to time as necessary to insure
that the outstanding balance on the
Revolver does not exceed the Revolver Commitment.
Voluntary
Prepayments: The Company may reduce the amount outstanding
under the Revolver at any time and thereafter reborrow.
In addition, the Company may, at its option, upon five
business days' notice to the Agents, permanently reduce
the unutilized portion of the Revolver in part
(in principal amounts of at least $1,000,000 or,
if greater, an integral multiple thereof) or in whole.
Conditions Precedent
to Closing: The funding of the Revolver will be subject to
satisfaction of customary conditions precedent for
similar financings and for this
transaction in particular, including but not limited to
each of the following:
(i) All documentation relating to the Revolver shall have
been completed and reviewed to the Agents' and their
counsels' satisfaction;
(ii) Delcor and the Company shall have entered into a
definitive agreement (the "Transaction Agreement"),
on terms acceptable to the Agents in their sole
discretion, and the Transaction contemplated
thereby shall be consummated simultaneously with
the funding of the Revolver;
(iii) The Agents shall have received an environmental
survey (or audit if so requested), acceptable in
form to the Agents and prepared by the Company
(or an environmental assessment firm acceptable
to the Agents) with respect to the Company's fixed
assets;
(iv) The Company shall have received a commitment for a
$162,500,000 Senior Debt Facility from First Union
on the same terms and conditions as outlined herein;
(v) The Company shall have received a minimum of
$100,000,000 in cash proceeds from the issuance of
Cumulative Mandatorily Redeemable Preferred Stock on
terms and conditions reasonably acceptable to the
Agents;
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(vi) The Company shall have received $150,000,000 in cash
proceeds from the issuance of voting Common Stock to
Delcor, Inc. on terms and conditions reasonably
acceptable to the Agents;
(vii) The Company shall have received cash proceeds from
the issuance of 784,999 shares of Class B Common
Stock to NationsBank, in an amount equal to the
Transaction Price per share, on terms and conditions
reasonably acceptable to the Agents;
(viii) The Company shall have issued 784,999 shares
of Class B Common Stock to First Union in exchange
for 784,999 shares of the Company's voting Common
Stock;
(ix) All governmental, regulatory, shareholder and third
party consents and approvals, if any, necessary to
effect the Transaction and related financing shall
have been obtained and remain in effect;
(x) No material adverse change shall have occurred in the
business, assets, financial condition, prospects, or
results of operations of the Company and its
subsidiaries, taken as a whole, and, except as
specifically disclosed in the most recent form 10-Q
and any subsequent form 8-K filed by the Company
prior to the date hereof with the Securities and
Exchange Commission, there shall exist no condition,
event, or occurrence that, individually or in the
aggregate, could reasonably be expected to result in
a material adverse change in the business, assets,
financial condition, prospects, or results of
operations of the Company and its subsidiaries,
taken as a whole;
(xi) The Rights Agreement dated November 23, 1994,
between the Company and Wachovia Bank of North
Carolina, N.A., shall have been terminated or
appropriately amended, in form and substance
satisfactory to the Agents, so that the consummation
of the Transaction will not cause the rights issued
thereunder to become exercisable.
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(xii) All of the Company's existing senior indebtedness
shall be repaid in full at closing;
(xiii) There shall not be any pending proceeding
requesting an injunction or a restraining order
with respect to the Transaction or the NationsBank
Financing or challenging the validity or
enforceability of the Transaction or the
NationsBank Financing;
(xiv) If requested, the Agents shall have received
appraisals in satisfactory form on certain of the
Company's fixed assets prepared by an independent
valuation firm acceptable to the Agents; and
(xv) The Agents shall have received such other documents,
opinions, certificates and agreements in connection
with the Transaction and the Senior Debt Facility,
all in form and substance satisfactory to the Agents
as they shall reasonably request.
Representations
and Warranties: The Loan Agreement will include representations and
warranties customarily found in the Agents'loan
agreements for similar financings and any additional
representations and warranties appropriate in the
context of the proposed Transaction, including
that the Company has made all requisite filings with the
Securities and Exchange Commission and that such filings
contained no material misstatements or omissions as of
the date of filing.
Covenants: The Loan Agreement will include covenants customarily
found in the Agents' loan agreements for similar
financings and any additional covenants appropriate in
the context of the proposed Transaction. Such covenants
shall in any event include:
(1) Limitations on Liens;
(2) Limitations on Cash Dividends, Distributions and
Stock Repurchases;
(3) Limitations on Additional Indebtedness;
(4) Limitations on Transactions with Shareholders and
Affiliates;
<PAGE>
(5) Limitations on Capital Expenditures and Cash
Acquisitions; and
(6) Certain other covenants, including financial
covenants (such as fixed charge and interest
coverage ratio
tests, leverage tests, and minimum current ratio
tests) acceptable to the Agents.
Permitted Dividends: So long as no Event of Default has occurred and is
continuing, the Company will be permitted to pay cash
dividends on the Preferred Stock and Common Stock in
amounts of up to 50% of the Company's net income
calculated prior to giving effect to the dividend for
such period (the "Permitted Dividends") as long as (i)
the Company has at least $25,000,000 of cash and/or
availability under the Revolver and (ii) the Company's
ratio of Total Funded Debt to Operating Cash Flow on a
trailing four quarters basis is less than 2.0x. Permitted
Dividends may be paid on a quarterly basis no sooner
than 15 days after receipt by the Lenders of the
Company's quarterly financial statements confirming
compliance with the above conditions. Cash dividends
shall not be permitted if after giving effect to such
payment, the Company would be in default of the Senior
Debt Facility or the conditions outlined above.
Permitted
Indebtedness: So long as no Event of Default has occurred and
is continuing, the Company will be permitted to incur
additional indebtedness (the "Permitted Indebtedness")
as long as (i) the sum of all Permitted Indebtedness and
the Commitment is equal to or less than $425,000,000;
(ii) the Company's ratio of Total Debt (including the
unutilized portion of the Revolver) to Operating Cash
Flow on a trailing four quarters basis is less than
3.0x; and (iii) the terms and conditions of the Permitted
Indebtedness are reasonably satisfactory to the Agents.
Events of Default: Those customarily found in the Agents' loan agreements for
similar financings and any additional events of default
appropriate in the context of the proposed Transaction.
Syndication: Following the signing of a definitive Transaction
Agreement between Delcor and the Company, the Company
shall use its best efforts to assist the Agents in
syndicating the Senior Debt Facility. The initial
syndication shall be a coordinated process
<PAGE>
under which both Agents shall reduce their commitments
on a pro-rata basis until such time as they reach their
desired hold level or mutually agree to terminate the
joint syndication process.
Assignments
and Participation: After completion of the initial syndication process, any
Lender may participate or assign its interest in the
Senior Debt Facility in minimum amounts of at least
$5,000,000 subject to the approval of the Company and
the Agents, which shall not be unreasonably withheld.
In addition, at any time, any Lender may transfer all or
part of its commitment under the Senior Debt Facility to
an affiliate.
Miscellaneous: (1) North Carolina state law to govern;
(2) All terms and conditions contained in the Agreements
to be reasonably satisfactory to the Agents and to
their counsel. The Company shall reimburse the
Agents for all reasonable out-of pocket expenses
including, but not limited to, the reasonable fees
and disbursements of their counsel in connection
with the preparation and execution of the Agreements
and the reasonable fees and expenses of any third
party consultants retained to assist the Agents
in analyzing any environmental, asbestos or solvency
related issues, in each case whether or not the
transactions herein contemplated shall be consummated
or the Senior Debt Facility shall be executed or
closed;
(3) Usual provisions regarding survival of Agreements,
waiver and delay, extensions of maturity,
modifications of agreements, severability,
counterparts and enforcements, headings, definition
of accounting terms in accordance with GAAP, waiver
of jury trial; and
(4) The Loan Agreement shall contain voting requirements
that shall allow 66 2/3% in principal amount to
approve certain waivers, modifications and amendments
subject to customary unanimity requirements.
<PAGE>
Cumulative Mandatorily Redeemable Preferred Stock
Issuer: National Gypsum Company (the "Company").
Facility: Cumulative Mandatorily Redeemable Preferred Stock (the
"Preferred Stock").
Amount: $50,000,000 (the "Purchase Price").
Shares Issued: 50,000.
Price Per Share: $1,000 (the "Purchase Price Per Share").
Purchaser: NationsBank Corporation or an affiliate thereof
("NationsBank").
Use of Proceeds: To facilitate the consummation of the Transaction as
described in the Commitment Letter.
Redemption Date: 8 years from closing.
Dividend Rate: 9.0%.
Dividend Payments: Quarterly; to be paid in cash, subject to the terms of the
Senior Debt Facility.
Call Protection: None.
Voting Rights: Non-voting, unless required to comply with the Company's
bankruptcy order, in which case the Preferred Stock will
have minimal voting rights (voting together with common
shareholders as a single class).
Conditions
Precedent: The purchase of the Preferred Stock will be subject to
the execution of a satisfactory Preferred Stock Agreement,
and any necessary related documents; as well as the
satisfaction of conditions precedent as outlined in the
Senior Debt Facility, which are hereby incorporated
by reference, and any other conditions
<PAGE>
deemed appropriate by the Purchaser for similar financings
and for this transaction in particular.
Protective
Provisions: The Company shall not, without first obtaining consent
or approval of the holders of at least two-thirds of the
Preferred Stock, do any of the following:
(i) Create any senior stock having preference or priority
over the Preferred Stock as to dividends or upon
redemption, liquidation, winding up or dissolution;
(ii) Adversely amend or alter any preferences, rights or
powers of the Preferred Stock;
(iii) Pay other than Permitted Dividends, provided, however,
that once all dividends have been paid on the Preferred
Stock in cash, the Company may pay cash dividends on
the Common Stock in an annual amount not to exceed
(i) 2.5% multiplied by (ii) an amount equal to (x)
the Transaction Price Per Share multiplied by (y) the
total Shares of voting and Class B Common Stock
outstanding; and
(iv) Except as contemplated by the Transaction Agreement,
redeem or repurchase any junior stock, warrants
or other parity stock.
Certain Events: The following shall constitute an Event:
(i) Failure to declare and pay quarterly dividends on the
Preferred Stock in full;
(ii) Failure to redeem or pay the Redemption Price in full
when required;
(iii) Certain events of bankruptcy, receivership or similar
proceedings; and
(iv) Failure to observe any Protective Provisions.
Rights Upon
an Event: Upon and during the continuance of an Event, the
Purchaser may elect one representative to the
Board of Directors of the Company.
<PAGE>
If Purchaser determines, in its sole discretion, that the
exercise of this right would subject Purchaser to any
divestiture requirement under the Bank Holding Company
Act, this right shall be void.
Change in Control/
Sale of Assets: In the event there occurs a Change of Control (an
event which results in Delcor, Inc. or its affiliates
owning less than 51% of the voting Common Stock of the
Company) or sale of substantially all of the Company's
assets, any holder of Preferred Stock may require the
Company to redeem all of the shares of Preferred Stock
held by such holder at a price equal to the Purchase Price
per share plus all Accrued Dividends thereon to the date
of redemption.
Transfer Rights: Beginning eighteen months after the consummation of the
Transaction, any holder of the Preferred Stock may sell or
transfer in whole or in part, any shares of Preferred Stock
held by such holder subject to (i) the Company's consent,
which shall not be unreasonably withheld and (ii) the
Company's first right of refusal.
Attendance Rights: Following the Transaction, the Company will permit a
representative of the Purchaser to attend all meetings of
the Company's Board of Directors or committees.
Reimbursement
of Expenses: The Purchaser shall be reimbursed for reasonable
out-of-pocket expenses (including fees and disbursements
for counsel) incurred in connection with the issuance of
the Preferred Stock.
Information
Requirements: The Company will provide the Purchaser with: (i) annual
financial statements audited by a nationally recognized
"Big Six" independent accounting firm, (ii) monthly
internal financial statements, (iii) an annual budget for
the next fiscal year prior to the end of the previous
fiscal year, and (iv) any other information as reasonably
requested by such Purchaser.
Representations
and
Warranties: Those customarily found in purchase agreements for similar
financings and any additional representations and warranties
appropriate in the context of the proposed financing.
<PAGE>
Class B Common Stock
Issuer: National Gypsum Company (the "Company").
Facility: Class B Common Stock (the "Class B Common Stock").
Purchase Price: $36,109,954, assuming the Transaction Price Per Share
shown below.
Shares Issued: 784,999
Transaction
Price Per Share: $46 (the "Transaction Price Per Share").
Purchaser: NationsBank Corporation or an affiliate thereof
("NationsBank").
Use of Proceeds: To facilitate the consummation of the Transaction as
described in the Commitment Letter.
Dividend Rights: To the extent cash dividends on Common Stock are
permitted by the Senior Debt Facility and the Preferred
Stock, each holder of voting Common Stock and Class B
Common Stock shall share ratably in any such dividends.
Voting Rights: Non-voting, unless required to comply with the Company's
bankruptcy order, in which case the Class B Common Stock
will have minimal voting rights (voting together with the
common shareholders as a single class).
Transfer Rights: Beginning eighteen months after consummation of the
Transaction, any holder of the Class B Common Stock may
sell or transfer, in whole or in part, any Class B Common
Stock held by such holder subject to (i) the Company's
consent, which shall not be unreasonably withheld, and
(ii) the Company's first right of refusal. If necessary to
facilitate the sale of the Class B Common Stock, the
Company will amend its charter provisions to make the
Class B Common Stock exchangeable into voting Common Stock
of the Company. Any such right to have the Company's
charter amended shall be subject to Federal Reserve
guidelines.
<PAGE>
Conditions
Precedent: The purchase of the Class B Common Stock will be subject
to the execution of a satisfactory Class B Common Stock
Purchase Agreement, and any necessary related documents;
as well as the satisfaction of conditions precedent as
outlined in the Senior Debt Facility, which are hereby
incorporated by reference, and any other conditions deemed
appropriate by the Purchaser for similar financings and
for this transaction in particular.
Attendance Rights: Following the Transaction, and provided that the
Preferred Stock has been redeemed in full, the Company
will permit a representative of the Purchaser to attend
all meetings of the Company's Board of Directors or
committees.
Other Rights: In addition to the above rights, the Class B Common Stock
will provide for:
(i) Customary anti-dilution provisions;
(ii) Piggyback rights on any public or private sale of the
Company's equity securities; and
(iii)Two demand registration rights beginning January
1, 1999.
Reimbursement of
Expenses: The Purchaser shall be reimbursed for reasonable
out-of-pocket expenses (including fees and disbursements
for counsel) incurred in connection with the issuance of
the Class B Common Stock.
Information
Requirements: The Company will provide the Purchaser with: (i) annual
financial statements audited by a nationally recognized
"Big Six" independent accounting firm, (ii) monthly
internal financial statements, (iii) an annual budget for
the next fiscal year prior to the end of the previous
fiscal year, and (iv) any other information as reasonably
requested by such Purchaser.
Representations
and Warranties: Those customarily found in purchase agreements for
similar financings and any additional representations
and warranties appropriate in the context of the
proposed financing.
EXHIBIT 10
<PAGE>
DELCOR, INC.
WILMINGTON, DELAWARE
January 31, 1995
Board of Directors
National Gypsum Company
2001 Rexford Road
Charlotte, North Carolina 28211
Dear Directors:
We are writing to propose a transaction that we believe
maximizes value for all stockholders of National Gypsum Company
(the "Company"). We propose that the Company effect a
recapitalization that would enable stockholders to have 75% of
their common stock redeemed for cash at $46 per share. This price
reflects a 40% premium over the stock price prevailing when we made
our initial merger proposal to the Company. Our proposed plan
would also permit stockholders to retain a substantial ongoing
equity interest in the Company equal to approximately 42% of their
current fully diluted equity ownership. The Company would remain
a publicly traded company on the NASDAQ National Market System.
Pursuant to the plan, Delcor would forgo the cash redemption
payment provided to other stockholders and invest $150 million to
acquire newly issued common shares of the Company at the same $46
price being paid for redeemed shares. This would increase Delcor's
ownership interest to slightly more than 50% of the outstanding
common shares (on a fully diluted basis). By providing for an
increase in Delcor's equity ownership, our proposed plan will allow
other stockholders to obtain capital gain tax treatment in
connection with the redemption of their shares.
The Delcor equity investment, together with the additional
equity investments by First Union Corporation and NationsBank
Corporation described below, would provide a solid equity base to
support the continued stability and growth of the Company. In
particular, we believe this equity base would provide the Company
with the financial strength and flexibility it needs to pursue
prudent capital projects and acquisition opportunities, to
withstand the cyclicality inherent in the gypsum wallboard
business, and to address uncertainties related to the NGC
Settlement Trust and its ability to resolve potential future
asbestos liability claims.
We believe the recapitalization will dramatically increase the
Company's reported earnings and cash flow per share. Based on
research analysts' estimates for the Company's earnings per share
in 1995, our proposed transaction would result in an increase of
more than 30% in pro forma earnings per share. Moreover, although
Delcor has no present intention to seek an extraordinary
<PAGE>
transaction at any time following the recapitalization (such as a
cash merger or tender offer to increase its ownership to 100%),
Delcor does want the Company to selectively consider open market
repurchases to further boost earnings and cash flow per share and
enhance long-term stockholder value.
Fundamentally, we believe the delivery of significant near-
term cash value to stockholders, the prudent use of financial
leverage, and sensible repurchases of stock create an exceptional
framework for maximizing short-term and long-term value for all of
the Company's stockholders. Our proposal incorporates each of
these important elements.
A summary description of our recapitalization plan is outlined
below:
1) The plan would provide for a reclassification and
redemption of shares to be effected through certain
amendments to the Company's certificate of incorporation
and certain exchanges and purchases of stock. (Such
reclassification, redemption, and new investments are
referred to collectively as the "recapitalization.") The
plan would be voted upon by stockholders and must be
approved by the holders of two thirds of the outstanding
shares other than those now held by Delcor, First Union
Corporation, and their affiliates. (Stockholders other
than Delcor and First Union Corporation, with respect to
the 784,999 shares of common stock held by First Union
Corporation described below, are referred to as the
"public stockholders.")
2) Pursuant to the plan, the Company would redeem 75% of the
outstanding common stock held by public stockholders for
cash at a redemption price equal to $46 per share (the
"Transaction Price"). The remaining 25% of the stock
held by public stockholders would remain outstanding and
provide public stockholders with a percentage equity
interest in the Company equal to approximately 42% of
their fully diluted ownership interest prior to the
recapitalization (assuming outstanding warrants are
exercised and participate pro rata in the redemption).
The recapitalization would be effected through a multi-
step reclassification, so that each share of common stock
held by public stockholders would effectively be
converted into $34.50 of cash plus 0.25 shares of the
Company's common stock.
3) Outstanding warrants could be exercised (and, therefore,
participate in the redemption) or remain outstanding as
each warrantholder elects. Although Delcor would
<PAGE>
encourage the holders of management stock options to
retain (and not exercise) them, such options could be
exercised (and, therefore, participate in the redemption)
or remain outstanding as each management optionholder
elects.
4) Our proposed transaction is designed to be treated as a
redemption for federal income tax purposes.
Specifically, Delcor's increased equity ownership and the
related reduction in the ownership interests of public
stockholders should allow the transaction to satisfy the
requirements of Section 302(b) of the Internal Revenue
Code and enable the redemption to qualify for capital
gains treatment.
5) Under the plan, Delcor would retain its existing
3,872,235 shares of National Gypsum common stock and
invest $150 million in cash to purchase 3,260,870 shares
of newly issued common stock at the $46 per share
Transaction Price.
6) First Union Corporation would exchange its existing
784,999 shares of National Gypsum common stock for a new
class of common stock (Class B common), which would have
the same rights as the Company's current common stock
except for limited voting privileges.
7) NationsBank Corporation would invest approximately $36.1
million in cash to purchase 784,999 shares of the new
class of Class B common stock at the $46 per share
Transaction Price.
8) First Union Corporation and NationsBank Corporation would
each invest $50 million in cash to purchase a new $100
million issue of National Gypsum redeemable preferred
stock. The preferred stock would pay dividends at a rate
of 9% per annum, would carry no warrants, and would have
an eight-year maturity. The issue would be callable at
any time, with no premium, by the Company and have
limited voting privileges to vote together with the
common stock.
9) Bank affiliates of First Union Corporation and
NationsBank Corporation have provided commitment letters
for a $325 million, five-year reducing revolving credit
facility, which would supply the remaining funds required
to effect the recapitalization and to meet future working
capital needs.
<PAGE>
10) Neither our proposal, nor the debt and equity commitments
furnished by First Union Corporation and NationsBank
Corporation and their affiliates, would contain the
special condition that matters relating to the possible
financial impact of the NGC Settlement Trust's recent
motions in the bankruptcy court be resolved to our
satisfaction. The proposed agreement to effect the
recapitalization would, however, contain customary
conditions such as obtaining necessary regulatory
approvals and third-party consents; absence of judicial
orders or judgments prohibiting the recapitalization;
absence of material adverse changes; conduct of business
in the ordinary course until closing; termination or an
appropriate amendment of the recently adopted rights
agreement; and approval by the Board of Directors and
adoption by the Company's stockholders of a plan of
reclassification and related matters in accordance with
Delaware law.
11) Assuming all outstanding warrants are exercised for
common stock prior to the recapitalization, the
transaction would reduce fully diluted shares outstanding
(exclusive of management stock options) from 22,234,000
to 13,097,294. Delcor would own 7,133,105 shares of
common stock (or 54.5% of outstanding common shares).
Public stockholders would continue to own 4,394,191
shares of common stock (or 33.6% of outstanding common
shares). First Union Corporation and NationsBank each
would own 784,999 Class B common shares (or 6.0% each of
outstanding common shares). The total voting power of
each of First Union Corporation and NationsBank
Corporation, including both Class B common and preferred
shares, would be less than 5.0%.
12) Under our proposal, all current directors of the Company
would continue as directors or be nominated for re-
election in conjunction with the recapitalization. In
addition, the size of the Board would be expanded so that
Delcor would be permitted to designate a majority of the
directors to be nominated. After the recapitalization,
the Board would include at least three independent
directors (not affiliated with Delcor) and at least one
management director; no merger or similar business
combination involving Delcor or an affiliate of Delcor
would be permitted without the approval of a majority of
the independent directors; and approval of a majority of
independent directors would be required for any
acquisition of shares that would result in ownership by
Delcor and its affiliates of more than 79.9% of the
Company's voting stock.
<PAGE>
13) Like our initial proposal, this proposal does not depend
on sales of any Company assets, plant closings, employee
layoffs, or any termination of or change in retirement
benefits. Moreover, we hope all members of existing
management will continue with the Company and we are
prepared to discuss incentive compensation arrangements
with them at the appropriate time.
The Special Committee's letter to Delcor dated December 12,
1994, identified two basic issues with respect to Delcor's initial
proposal: (1) that the proposed cash price of $43.50 per share was,
in the view of the Special Committee, inadequate; and (2) that the
original proposal was too conditional. We believe we have
responded fully to both of these points by increasing our price,
proposing a plan that would enhance both short-term and long-term
realization of stockholder value, and eliminating the condition
that matters relating to the financial impact of the NGC Settlement
Trust's recent motions in the bankruptcy court be resolved to our
satisfaction.
We are convinced that our proposal is in the best interests of
the Company's stockholders, management, employees and others
interested in its success. For these reasons, we believe it would
be mutually desirable for all interested parties if you would allow
us the opportunity to review all information available to
management and to negotiate with you a definitive agreement that
embodies the terms of our proposal. We are prepared to enter into
a definitive agreement promptly.
As required by law, we will file tomorrow with the Securities
and Exchange Commission an amendment to our current Schedule 13D to
report the proposal made in this letter. A copy of this letter
will be attached as an exhibit to that amendment.
We look forward to meeting with you or your representatives to
discuss this proposal at the earliest practicable time.
Very truly yours,
DELCOR, INC.
W. D. Cornwell, Jr.
W. D. Cornwell, Jr.
President
<PAGE>
EXHIBIT 11
<PAGE>
First Union Corporation
Charlotte, North Carolina 28288
704 374-6565
CONFIDENTIAL
January 31, 1995
Delcor, Inc.
1110 East Morehead Street
Charlotte, NC 28204
Attention: Mr. W. D. Cornwell, Jr.
President
Gentlemen:
First Union National Bank of North Carolina and First Union Corporation
or an affiliate thereof (collectively, "First Union") are pleased
to confirm to Delcor, Inc. ("Delcor"), their commitment to provide
to National Gypsum Company (the "Company"), on the terms, for the
purposes and subject to the conditions set forth below and in the
summary of certain terms attached hereto (the "Term Sheets") the
following: (i) a senior debt facility (the "Senior Debt
Facility") in an aggregate amount of up to $162,500,000, (ii) a
subscription to purchase from the Company Cumulative Mandatorily
Redeemable Preferred Stock (the "Preferred Stock") in an aggregate
amount of $50,000,000 and (iii) a subscription to purchase 784,999
shares of Class B Common Stock of the Company in exchange for
784,999 shares of the Company's voting Common Stock (the "Rollover
Equity"). As First Union understands the proposed transaction (the
"Transaction"), Delcor will enter into a reclassification agreement
(the "Transaction Agreement") with the Company that will provide for
the redemption of approximately 75% of the outstanding Common Stock
of the Company held by persons other than First Union, Delcor (and
its affiliates) and NationsBank, N.A. (Carolinas) and its
affiliates (collectively, "NationsBank"). The redemption price per
share will not exceed the amount discussed between First Union and
Delcor (the "Transaction Price"). The Senior Debt Facility, the
Preferred Stock proceeds and the Rollover Equity (collectively, the
"First Union Financing") are being provided to enable the Company
to (i) complete the Transaction, (ii) provide for the ongoing
working capital and capital spending needs of the Company, and (iii) pay
certain fees and expenses related to the Transaction. If the
Transaction is restructured as a dividend, a cash-out merger, or
otherwise, this commitment letter and the Term Sheets shall be modified
to reflect the revised structure.
<PAGE>
This Commitment Letter replaces and supersedes the Commitment Letter
between First Union and Delcor, dated November 15, 1994, except
with respect to the indemnification, contribution and expense
reimbursement provisions thereof, which remain in full force and effect.
First Union's commitment is to provide 50% of a $325,000,000 Senior Debt
Facility that will be co- agented by First Union and NationsBank.
NationsBank will commit to provide 50% of the Senior Debt Facility
and will also purchase (i) $50,000,000 of Preferred Stock and (ii)
784,999 shares of Class B Common Stock of the Company for an amount of
cash per share equal to the Transaction Price.
Our commitment to provide the First Union Financing will be funded
simultaneously with the completion of the Transaction and is subject to
the conditions set forth herein and in the attached Term Sheets,
including the right to assign or transfer all or part of this
commitment for the First Union Financing to any of our affiliated
corporations or banks and to any third parties. Our commitment to
provide the First Union Financing will terminate on September 30,
1995 if the Transaction shall not have become effective on or prior to
such date.
You agree that this Commitment Letter is for your confidential use only
and will not be disclosed by you to any person other than your
accountants, attorneys and other advisors and the Company and such
of their respective officers, directors, agents, accountants, attorneys
and other advisors as need to be provided therewith, and only then
in connection with the Transaction and on a confidential basis,
except that you may make public disclosure of the existence and amount
of First Union's commitment and undertaking hereunder, you may file
a copy of the Commitment Letter in any public record in which it is
required by law to be filed, and you may make such other public
disclosure of the terms and conditions hereof as you are required by
law, in the reasonable opinion of your counsel, to make.
Delcor agrees to indemnify each of First Union and its affiliates and
their respective directors, officers, employees, agents and
controlling persons (each, an "Indemnified Party") from and against
any and all losses, claims (whether valid or not), damages and
liabilities, joint or several, to which such Indemnified Party may
become subject, related to or arising out of the Transaction and
will reimburse each Indemnified Party for all expenses (including
reasonable attorneys' fees and expenses) as they are incurred in
connection with the investigation of, preparation for or defense of
any pending or threatened claim or any action or proceeding arising
therefrom. Notwithstanding the foregoing, the obligation to
indemnify any Indemnified Party hereunder shall not apply in
respect of any loss, claim, damage or liability to the extent that a
court of competent jurisdiction shall have determined by final
judgment that such loss, claim, damage or liability resulted from such
Indemnified Party's willful malfeasance, gross negligence or bad
faith. In the event that the foregoing indemnity is unavailable or
insufficient to hold an Indemnified Party harmless, then Delcor
will contribute to amounts paid or payable by such Indemnified Party in
respect of such Indemnified Party's losses, claims, damages or liabilities
<PAGE>
in such proportions as appropriately reflect the
relative benefits received by and fault of Delcor and such Indemnified
Party in connection with the matters as to which such losses,
claims, damages or liabilities relate and other equitable
considerations.
If any action, proceeding, or investigation is commenced, as to which
any Indemnified Party proposes to demand such indemnification, it
shall notify Delcor with reasonable promptness; provided, however,
that any failure by such Indemnified Party to notify Delcor shall not
relieve Delcor from its obligations hereunder except to the extent
Delcor is prejudiced thereby. Delcor shall be entitled to assume
the defense of any such action, proceeding, or investigation, including
the employment of counsel and the payment of all fees and expenses.
The Indemnified Party shall have the right to employ separate
counsel in connection with any such action, proceeding, or
investigation and to participate in the defense thereof, but the fees
and expenses of such counsel shall be paid by the Indemnified
Party, unless (a) Delcor has failed to assume the defense and
employ counsel as provided herein, (b) Delcor has agreed in writing to
pay such fees and expenses of separate counsel, or (c) an action,
proceeding, or investigation has been commenced against the Indemnified
Party and Delcor and representation of both Delcor and the
Indemnified Party by the same counsel would be inappropriate
because of actual or potential conflicts of interest between the
parties (in the case of First Union, the existence of any such actual or
potential conflict of interest to be determined by First Union,
taking into account, among other things, any relevant regulatory
concerns). In the case of any circumstance described in clauses (a),
(b), or (c) of the immediately preceding sentence, Delcor shall be
responsible for the reasonable fees and expenses of such separate
counsel; provided, however, that Delcor shall not in any event be
required to pay the fees and expenses of more than one separate
counsel for all Indemnified Parties. Delcor shall be liable only for
settlement of any claim against an Indemnified Party made with
Delcor's written consent.
Delcor agrees to pay to us the fees for the Senior Debt Facility
outlined in the fee letter dated the date hereof (the "Fee
Letter"). Delcor also agrees to reimburse us for all of our
out-of-pocket expenses (including the reasonable fees and disbursements
of our counsel) in connection with the Transaction and the First
Union Financing, described herein.
The provisions of the three immediately preceding paragraphs shall
survive any termination of this letter.
Delcor acknowledges that First Union has advised Delcor that the
services to be provided hereunder and the amount of fees and the
obligation to reimburse expenses are in no way conditioned upon Delcor's
obtaining from First Union or any affiliate of First Union any
other service or any loan or other financial product.
<PAGE>
If you are in agreement with the foregoing, please sign and return the
enclosed copy of this letter and the Fee Letter to First Union no
later than 5:00 p.m. Eastern Standard Time, on or before January
31, 1995. This commitment shall terminate at such time unless a signed
copy of this letter and the Fee Letter have been delivered to us.
Very Truly Yours,
FIRST UNION CORPORATION
By: Daniel W. Mathis
Daniel W. Mathis
Executive Vice President
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: Mark B. Felker
Mark B. Felker
Vice President
Agreed to and accepted this
31st day of January, 1995
DELCOR, INC.
By: W. D. Cornwell, Jr.
W. D. Cornwell, Jr.
President
<PAGE>
NATIONAL GYPSUM COMPANY
Summary of Certain Terms
Senior Debt Facility
Borrower: National Gypsum Company (the "Company").
Facility: A five-year Reducing Revolving Credit Facility (the
"Revolver" or the "Senior Debt Facility").
Commitment: $325,000,000, subject to the mandatory commitment
reductions outlined below (the "Commitment")
Maturity Date: The later of June 30, 2000 or the date five years after
the Closing Date.
Agents: First Union National Bank of North Carolina ("First
Union") and NationsBank, N.A. (Carolinas) ("NationsBank")
(collectively, the "Agents").
Administrative Agent: NationsBank
Syndication Agent: First Union
Lenders: First Union and NationsBank, and a group of other
financial institutions reasonably acceptable to the
Agents and the Company (the "Lenders").
Use of Proceeds: To consummate the Transaction described in the Commitment
Letter, to pay certain fees and expenses related to the
Transaction and to provide for the Company's ongoing
working capital and capital spending requirements.
Interest Rates: The interest rates on the Revolver will be a function of
the Company's Total Funded Debt to Operating Cash Flow
("Leverage Ratio") as determined quarterly on a rolling
four
<PAGE>
quarters basis. Operating Cash Flow will equal the
Company's earnings before interest, taxes, depreciation
and amortization ("EBITDA"). The Company will have
the option of borrowing at a spread over the Base Rate
(defined as the higher of the Administrative Agent's
Prime Rate, the Three Month CD Rate
plus .50%, and the Federal Funds Rate plus .50%) or the
Adjusted London Interbank Offered Rate ("LIBOR"). The
applicable rates will be based on the following table:
Leverage Spread Over Spread Over
Ratio Base LIBOR
> 2.0x 1.25% 2.75%
-
1.50x - 1.99x 0.75% 2.25%
1.00x - 1.49x 0.25% 1.75%
0.50x - .99x 0.00% 1.25%
< .50x 0.00% 0.75%
The interest rates on the Revolver will increase by
two (2) percentage points per annum upon the occurrence
and during the continuance of any payment default under
the Loan Agreement.
The Loan Agreement shall include the Agents' standard
protective provisions for such matters as increased
costs, funding losses, illegality and withholding taxes.
Interest Payments: At the end of each applicable Interest Period or
quarterly, if earlier, calculated on an actual 360 day
basis for both Base Rate and LIBOR Loans.
Interest Periods: LIBOR interest periods: 30, 60, or 90 days, subject to
availability.
Interest Rate
Protection: Within 90 days following the closing, the Company
must obtain reasonably acceptable interest rate
protection through interest rate swaps, caps or other
instruments reasonably satisfactory to the
Agents, against increases in interest rates for a
minimum of $100,000,000 or such lesser amount as the
Agents may agree, for a period of at least two years.
In the event the Company obtains Interest Rate
Protection from any Lender, then such Lender may
secure the Company's obligations thereunder on a
pari-passu basis with the Senior Debt Facility.
<PAGE>
Facility Fee: 1/2 of 1% per annum, on the unutilized portion of the
Revolver Commitment, payable quarterly in arrears.
Security: A perfected first priority security interest in all of
the Company's assets, including the pledge of the
stock of all the Company's subsidiaries.
Mandatory Reductions: The Revolver Commitment shall be reduced by $40,000,000
on each anniversary of the Closing Date. The maximum
available amount under the Revolver during any year
is as follows:
Revolver
Year Commitment
1 $325,000,000
2 $285,000,000
3 $245,000,000
4 $205,000,000
5 $165,000,000
Any outstanding amounts under the Revolver on the Maturity
Date shall be payable in full.
In addition to the scheduled reductions, the Revolver
Commitment will be reduced on an annual basis in an
amount equal to 50% of the Company's Excess Cash Flow
(defined as net income plus depreciation, amortization
and all other non-cash charges, adjusted for changes
in working capital, minus capital expenditures,
principal payments and permitted dividends) for
such period, beginning with the period ending December
31, 1996.
The Revolver Commitment will also be reduced by the amount
equal to the net cash proceeds in excess of $5,000,000
from the sale of any of the Company's assets outside the
normal course of business. In addition, the Revolver
will be payable in full immediately upon any change of
control which results in Delcor, Inc. or its affiliates
owning less than 51% of the voting Common
Stock of the Company.
<PAGE>
Mandatory
Prepayments: The Company will be required to prepay the
Revolver from time to time as necessary to insure
that the outstanding balance on the
Revolver does not exceed the Revolver Commitment.
Voluntary
Prepayments: The Company may reduce the amount outstanding
under the Revolver at any time and thereafter
reborrow. In addition, the Company may, at its option,
upon five business days' notice to the
Agents, permanently reduce the unutilized portion of the
Revolver in part (in principal amounts of at least
$1,000,000 or, if greater, an integral multiple thereof)
or in whole.
Conditions Precedent
to Closing: The funding of the Revolver will be subject to
satisfaction of customary conditions precedent for
similar financings and for this
transaction in particular, including but not limited to
each of the following:
(i) All documentation relating to the Revolver shall have
been completed and reviewed to the Agents' and their
counsels' satisfaction;
(ii) Delcor and the Company shall have entered into a
definitive agreement (the "Transaction Agreement"),
on terms acceptable to the Agents in their sole
discretion, and the Transaction contemplated thereby
shall be consummated simultaneously with the
funding of the Revolver;
(iii) The Agents shall have received an environmental
survey (or audit if so requested), acceptable in
form to the Agents and prepared by the Company
(or an environmental assessment firm acceptable to
the Agents) with respect to the Company's fixed
assets;
(iv) The Company shall have received a commitment for a
$162,500,000 Senior Debt Facility from NationsBank on
the same terms and conditions as outlined herein;
(v) The Company shall have received a minimum of
$100,000,000 in cash proceeds from the issuance of
Cumulative Mandatorily Redeemable Preferred Stock on
terms and conditions reasonably acceptable to the
Agents;
<PAGE>
(vi) The Company shall have received $150,000,000 in cash
proceeds from the issuance of voting Common Stock to
Delcor, Inc. on terms and conditions reasonably
acceptable to the Agents;
(vii) The Company shall have received cash proceeds
from the issuance of 784,999 shares of Class B
Common Stock to NationsBank, in an amount equal
to the Transaction Price per share, on terms and
conditions reasonably acceptable to the Agents;
(viii) The Company shall have issued 784,999 shares of
Class B Common Stock to First Union in exchange for
784,999 shares of the Company's voting Common Stock;
(ix) All governmental, regulatory, shareholder and third
party consents and approvals, if any, necessary to
effect the Transaction and related financing shall
have been obtained and remain in effect;
(x) No material adverse change shall have occurred in the
business, assets, financial condition, prospects, or
results of operations of the Company and its
subsidiaries, taken as a whole, and, except as
specifically disclosed in the most recent form 10-Q
and any subsequent form 8-K filed
by the Company prior to the date hereof with the
Securities and Exchange Commission, there shall
exist no condition, event, or occurrence that,
individually or in the aggregate, could reasonably
be expected to result in a material adverse change
in the business, assets, financial condition,
prospects, or results of operations of the
Company and its subsidiaries, taken as a whole;
(xi) The Rights Agreement dated November 23, 1994,
between the Company and Wachovia Bank of North
Carolina, N.A., shall have been terminated or
appropriately amended, in form and substance
satisfactory to the Agents, so that the
consummation of the Transaction will not cause
the rights issued thereunder to become exercisable.
<PAGE>
(xii) All of the Company's existing senior
indebtedness shall be repaid in full at closing;
(xiii) There shall not be any pending proceeding
requesting an injunction or a restraining order
with respect to the Transaction or the First Union
Financing or challenging the validity or
enforceability of the Transaction or the
First Union Financing;
(xiv) If requested, the Agents shall have received
appraisals in satisfactory form on certain of the
Company's fixed assets prepared by an independent
valuation firm acceptable to the Agents; and
(xv) The Agents shall have received such other
documents, opinions, certificates and agreements
in connection with the Transaction and the Senior
Debt Facility, all in form and substance
satisfactory to the Agents as they shall reasonably
request.
Representations
and Warranties: The Loan Agreement will include representations and
warranties customarily found in the Agents' loan
agreements for similar financings and any additional
representations and warranties appropriate in the context
of the proposed Transaction, including that the Company
has made all requisite filings with the Securities
and Exchange Commission and that such filings contained
no material misstatements or omissions as of the date of
filing.
Covenants: The Loan Agreement will include covenants customarily
found in the Agents' loan agreements for similar
financings and any additional covenants appropriate in
the context of the proposed Transaction. Such covenants
shall in any event include:
(1) Limitations on Liens;
(2) Limitations on Cash Dividends, Distributions and
Stock Repurchases;
(3) Limitations on Additional Indebtedness;
(4) Limitations on Transactions with Shareholders and
Affiliates;
<PAGE>
(5) Limitations on Capital Expenditures and Cash
Acquisitions; and
(6) Certain other covenants, including financial
covenants (such as fixed charge and interest
coverage ratio tests,
leverage tests, and minimum current ratio tests)
acceptable to the Agents.
Permitted Dividends: So long as no Event of Default has occurred and is
continuing, the Company will be permitted to pay cash
dividends on the Preferred Stock and Common Stock in
amounts of up to 50% of the Company's net income
calculated prior to giving effect to the
dividend for such period (the "Permitted Dividends") as
long as (i) the Company has at least $25,000,000 of
cash and/or availability under the Revolver and (ii)
the Company's ratio of Total Funded Debt to Operating
Cash Flow on a trailing four quarters basis is
less than 2.0x. Permitted Dividends may be paid on a
quarterly basis no sooner than 15 days after receipt by
the Lenders of the Company's quarterly financial
statements confirming compliance with the above
conditions. Cash dividends shall not be permitted
if after giving effect to such payment, the Company
would be in default of the Senior Debt Facility or the
conditions outlined above.
Permitted Indebtedness: So long as no Event of Default has occurred and
is continuing, the
Company will be permitted to incur additional
indebtedness (the
"Permitted Indebtedness") as long as (i) the sum
of all Permitted
Indebtedness and the Commitment is equal to or
less than
$425,000,000; (ii) the Company's ratio of Total
Debt (including
the unutilized portion of the Revolver) to
Operating Cash Flow on
a trailing four quarters basis is less than 3.0x;
and (iii) the terms
and conditions of the Permitted Indebtedness are
reasonably
satisfactory to the Agents.
Events of Default: Those customarily found in the Agents' loan agreements for
similar financings and any additional events of default
appropriate in the context of the proposed Transaction.
Syndication: Following the signing of a definitive Transaction
Agreement between Delcor and the Company, the Company
shall use its best efforts to assist the Agents in
syndicating the Senior Debt Facility.
The initial syndication shall be a coordinated process
<PAGE>
under which
both Agents shall reduce their commitments on a pro-rata
basis
until such time as they reach their desired hold level or
mutually
agree to terminate the joint syndication process.
Assignments
and Participation: After completion of the initial syndication process, any
Lender
may participate or assign its interest in the Senior Debt
Facility in
minimum amounts of at least $5,000,000 subject to the
approval
of the Company and the Agents, which shall not be
unreasonably
withheld. In addition, at any time, any Lender may
transfer all or
part of its commitment under the Senior Debt Facility to
an affiliate.
Miscellaneous: (1) North Carolina state law to govern;
(2) All terms and conditions contained in the Agreements
to be reasonably satisfactory to the Agents and to
their counsel. The Company shall reimburse the
Agents for all
reasonable out-of pocket expenses including, but not
limited to, the reasonable fees and disbursements of
their
counsel in connection with the preparation and
execution
of the Agreements and the reasonable fees and
expenses of any third party consultants retained
to assist the Agents in analyzing any environmental,
asbestos or solvency related issues, in each case
whether or not the transactions
herein contemplated shall be consummated or the
Senior
Debt Facility shall be executed or closed;
(3) Usual provisions regarding survival of Agreements,
waiver and delay, extensions of maturity,
modifications of
agreements, severability, counterparts and
enforcements, headings, definition of accounting
terms in accordance with GAAP, waiver of jury trial;
and
(4) The Loan Agreement shall contain voting requirements
that shall allow 66 2/3% in principal amount to
approve certain waivers, modifications and
amendments subject to
customary unanimity requirements.
<PAGE>
Cumulative Mandatorily Redeemable Preferred Stock
Issuer: National Gypsum Company (the "Company").
Facility: Cumulative Mandatorily Redeemable Preferred Stock (the
"Preferred Stock").
Amount: $50,000,000 (the "Purchase Price").
Shares Issued: 50,000.
Price Per Share: $1,000 (the "Purchase Price Per Share").
Purchaser: First Union Corporation or an affiliate thereof
("First Union").
Use of Proceeds: To facilitate the consummation of the Transaction as
described in the Commitment Letter.
Redemption Date: 8 years from closing.
Dividend Rate: 9.0%.
Dividend Payments: Quarterly; to be paid in cash, subject to the terms
of the Senior Debt Facility.
Call Protection: None.
Voting Rights: Non-voting, unless required to comply with the
Company's bankruptcy order, in which case the
Preferred Stock will have minimal voting rights
(voting together with common shareholders as
a single class).
Conditions
Precedent: The purchase of the Preferred Stock will be subject to
the execution
of a satisfactory Preferred Stock Agreement, and any
necessary
related documents; as well as the satisfaction of
conditions precedent
as outlined in the Senior Debt Facility, which are
hereby incorporated
by reference, and any other conditions
<PAGE>
deemed appropriate by the Purchaser for similar
financings and for this transaction in particular.
Protective
Provisions: The Company shall not, without first obtaining consent
or approval of
the holders of at least two-thirds of the Preferred
Stock, do any of the following:
(i) Create any senior stock having preference or priority
over the Preferred Stock as to dividends or upon
redemption, liquidation, winding up or dissolution;
(ii) Adversely amend or alter any preferences, rights or
powers of the Preferred Stock;
(iii) Pay other than Permitted Dividends, provided,
however, that once all dividends have been paid on
the Preferred Stock in cash, the Company may pay
cash dividends on the Common Stock in an annual
amount not to exceed (i) 2.5% multiplied
by (ii) an amount equal to (x) the Transaction
Price Per Share multiplied by (y) the total Shares
of voting and Class B
Common Stock outstanding; and
(iv) Except as contemplated by the Transaction Agreement,
redeem or repurchase any junior stock, warrants or
other parity stock.
Certain Events: The following shall constitute an Event:
(i) Failure to declare and pay quarterly dividends on the
Preferred Stock in full;
(ii) Failure to redeem or pay the Redemption Price in full
when required;
(iii) Certain events of bankruptcy, receivership or
similar proceedings; and
(iv) Failure to observe any Protective Provisions.
Rights Upon
an Event: Upon and during the continuance of an Event, the Purchaser
may elect one representative to the Board of Directors of
the Company.
<PAGE>
If Purchaser determines, in its sole discretion, that the
exercise of this
right would subject Purchaser to any divestiture
requirement under the
Bank Holding Company Act, this right shall be void.
Change in Control/
Sale of Assets: In the event there occurs a Change of Control (an
event which results in Delcor, Inc. or its affiliates
owning less than 51% of the voting
Common Stock of the Company) or sale of substantially
all of the
Company's assets, any holder of Preferred Stock may
require the
Company to redeem all of the shares of Preferred Stock
held by such
holder at a price equal to the Purchase Price per
share plus all
Accrued Dividends thereon to the date of redemption.
Transfer Rights: Beginning eighteen months after the consummation of the
Transaction, any holder of the Preferred Stock may
sell or transfer in
whole or in part, any shares of Preferred Stock held
by such holder
subject to (i) the Company's consent, which shall not
be unreasonably
withheld and (ii) the Company's first right of refusal.
Attendance Rights: Following the Transaction, the Company will permit a
representative
of the Purchaser to attend all meetings of the
Company's Board of Directors or committees.
Reimbursement
of Expenses: The Purchaser shall be reimbursed for reasonable
out-of-pocket
expenses (including fees and disbursements for
counsel) incurred in
connection with the issuance of the Preferred Stock.
Information
Requirements: The Company will provide the Purchaser with: (i) annual
financial
statements audited by a nationally recognized "Big Six"
independent
accounting firm, (ii) monthly internal financial
statements, (iii) an
annual budget for the next fiscal year prior to the end of
the previous
fiscal year, and (iv) any other information as reasonably
requested by such Purchaser.
Representations
and
Warranties: Those customarily found in purchase agreements for
similar financings
and any additional representations and warranties
appropriate in the
context of the proposed financing.
<PAGE>
Class B Common Stock
Issuer: National Gypsum Company (the "Company").
Facility: Class B Common Stock (the "Class B Common Stock").
Purchase Price: $36,109,954, assuming the Transaction Price Per Share
shown below.
Shares Issued: 784,999
Transaction
Price Per Share: $46 (the "Transaction Price Per Share").
Purchaser: First Union Corporation or an affiliate thereof
("First Union").
Use of Proceeds: To facilitate the consummation of the Transaction as
described in the Commitment Letter.
Dividend Rights: To the extent cash dividends on Common Stock are
permitted by the
Senior Debt Facility and the Preferred Stock, each
holder of voting
Common Stock and Class B Common Stock shall share
ratably in any such dividends.
Voting Rights: Non-voting, unless required to comply with the Company's
bankruptcy order, in which case the Class B Common Stock
will have
minimal voting rights (voting together with the common
shareholders as a single class).
Transfer Rights: Beginning eighteen months after consummation of the
Transaction,
any holder of the Class B Common Stock may sell or
transfer, in
whole or in part, any Class B Common Stock held by
such holder
subject to (i) the Company's consent, which shall not
be unreasonably
withheld, and (ii) the Company's first right of
refusal. If necessary to
facilitate the sale of the Class B Common Stock, the
Company will
amend its charter provisions to make the Class B
Common Stock
exchangeable into voting Common Stock of the Company.
Any such
right to have the Company's charter amended shall be
subject to Federal Reserve guidelines.
<PAGE>
Conditions Precedent: The purchase of the Class B Common Stock will be
subject to the
execution of a satisfactory Class B Common Stock
Purchase Agreement, and any necessary related documents;
as well as the
satisfaction of conditions precedent as outlined in
the Senior Debt
Facility, which are hereby incorporated by reference,
and any other
conditions deemed appropriate by the Purchaser for
similar financings
and for this transaction in particular.
Attendance Rights: Following the Transaction, and provided that the
Preferred Stock has
been redeemed in full, the Company will permit a
representative of the
Purchaser to attend all meetings of the Company's
Board of Directors or committees.
Other Rights: In addition to the above rights, the Class B Common Stock
will provide for:
(i) Customary anti-dilution provisions;
(ii) Piggyback rights on any public or private sale of the
Company's equity securities; and
(iii) Two demand registration rights beginning January
1, 1999.
Reimbursement
of Expenses: The Purchaser shall be reimbursed for reasonable
out-of-pocket
expenses (including fees and disbursements for
counsel) incurred in
connection with the issuance of the Class B Common
Stock.
Information
Requirements: The Company will provide the Purchaser with: (i) annual
financial statements audited by a nationally recognized
"Big Six" independent
accounting firm, (ii) monthly internal financial
statements, (iii) an
annual budget for the next fiscal year prior to the end
of the previous fiscal year, and (iv) any other
information as reasonably requested by
such Purchaser.
Representations
and Warranties: Those customarily found in purchase agreements for
similar financings
and any additional representations and warranties
appropriate in the
context of the proposed financing.
