<PAGE> 1
EXHIBIT (b)(1)
[FLEET LOGO]
100 Federal Street
Boston, MA 02110
November 3, 2000
Pasta Acquisition Corp.
c/o Harold O. Rosser
Bruckmann, Rosser, Sherrill & Co., L.L.C.
126 E. 56th Street
New York, New York 10022
Re: Commitment Letter
Ladies and Gentlemen:
We are pleased to confirm the commitment of Fleet National Bank
("Fleet"), subject to the terms and conditions set forth in this letter and
in the Outline referred to below, to provide financing to Pasta Acquisition
Corp. ("Pasta") in connection with the proposed acquisition by Pasta (the
"Acquisition") of 100% of the equity interests of Il Fornaio America Corp.
(the "Target Company"), such financing to be in an aggregate amount of up
to $50,000,000 (the "Senior Financing"). Pasta which will merge with the
the Target Company and all present and future direct and indirect
subsidiaries shall be joint and several borrowers (collectively, the
"Borrower") in connection with the Senior Financing. The Senior Financing
will be secured by a pledge of 100% of the capital stock of the Borrower
and by all assets of the Borrower. Fleet will act as administrative agent
(in such capacity, the "Administrative Agent") for itself and any other
lending institutions which may become party to the Senior Financing
(collectively with Fleet, the "Lenders") with respect to the Senior
Financing, and Fleet Securities, Inc. ("FSI") will act as the arranger (in
such capacity, the "Arranger") for the Lenders with respect to the Senior
Financing. The proceeds of the Senior Financing, along with $15,000,000 of
subordinated debt in the form of subordinated notes and warrants to be
issued on terms reasonably satisfactory to the Lenders (the "Subordinated
Debt") and at least $40,000,000 in PIK preferred and/or common equity
securities to be issued by Pasta, shall be used to provide funds for the
Acquisition, to pay related transaction fees and expenses, for the
acquisition and/or construction of new operating facilities, for operating
facility upgrades, for the issuance of standby letters of credit and for
working capital and general corporate purposes. Fleet will provide the full
amount of the Senior Financing, but intends to syndicate the Senior
Financing before the closing.
Based on our discussions and on the financial statements, projections
and other information and documents previously furnished to us, we are
enclosing herewith an outline of terms (the "Outline") which sets forth the
principal terms on which Fleet would be willing to provide the proposed
Senior Financing to the Borrower (this letter, together with the Outline,
is referred to as the "Commitment Letter"), and FSI is willing to act as
the Arranger hereunder.
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Pasta Acquisition Corp.
November 3, 2000
Page 2
Although the Outline sets forth the principal terms of the Senior
Financing, you should understand that the Administrative Agent and the
Arranger reserve the right to propose terms in addition to these terms
which will not substantially change or alter the terms of this commitment
and the enclosed Outline. Moreover, the Outline does not purport to include
all of the representations, warranties, covenants, defaults, definitions
and other terms which will be contained in the definitive documents for the
transaction, all of which must be reasonably satisfactory in form and
substance to us and our counsel and to the Borrower and its counsel prior
to proceeding with the proposed Senior Financing.
Our willingness to proceed with the proposed financing is conditioned
on the satisfaction of all the conditions precedent set forth in the
Outline, there being no material misstatements in or omissions from the
materials which previously have been or are being furnished to us for our
review, taken as a whole, and there being in our reasonable judgment no
material adverse change in the assets, business or financial condition of
the Borrower or in the ability of the Borrower to perform their respective
obligations described in the Outline. In addition, the proposed Senior
Financing is subject to the condition that no material adverse changes in
governmental regulation or policy affecting us or the Borrower and no
material changes or disruptions in the syndication, financial or capital
markets that could reasonably be expected to materially impair the
syndication of the Senior Financing occur prior to the closing. The
commitments of Fleet and FSI hereunder are further subject to our
satisfaction, consistent with this Commitment Letter, with the
capitalization of the Borrower and the Target Company and the terms of the
Subordinated Debt to be issued in connection with the Acquisition. As you
are aware, our commitments hereunder are being issued at a time when the
definitive purchase agreement for the Acquisition has not been finalized.
By your signature below, you agree to assist and cooperate with the
Arranger in its syndication efforts, including, but not limited to,
promptly preparing and providing materials and information reasonably
deemed necessary by the Arranger to successfully complete and otherwise
facilitate the syndication of the facility described herein. In the event
that such syndication cannot be achieved in a manner satisfactory to Fleet
and FSI under the structure described in the Outline, you agree to
cooperate with Fleet and FSI in developing a mutually acceptable
alternative structure as setforth in the Outline that will permit a
satisfactory syndication of the Financing. Without limiting the foregoing,
you hereby agree (a) that the Arranger shall have the exclusive right to
syndicate the Senior Financing contemplated by this Commitment Letter and
manage all aspects of the syndication (including, without limitation, in
consultation with the Borrower, decisions as to the selection of
institutions to be approached and when they will be approached, when their
commitments will be accepted, which institutions will participate, the
allocations of the commitments among the syndicate lenders and any titles
to be given to any lender participating in the Senior Financing) and that
you will assist the Arranger in contacting and soliciting potential
co-lenders and will provide to the Arranger, at its reasonable request,
financial and organizational information as well as financial projections
needed for syndication purposes; (b) that the Arranger shall be expressly
permitted to distribute any
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Pasta Acquisition Corp.
November 3, 2000
Page 3
and all documents and information relating to the transactions contemplated
hereby and received from you to any potential lender, participant or
assignee, on a confidential basis and subject to your authorization and
reasonable confidentiality agreements requested by you; (c) to make
available the relevant management personnel related to the Senior Financing
or operations of the Borrower and its subsidiaries for meetings with
potential syndicate members upon reasonable notification and at reasonable
times to be mutually agreed; (d) to permit the Arranger to publicize, to
the extent permitted under applicable securities laws, information in
respect of the Senior Financing (including the Administrative Agent's and
the Arranger's roles in the structuring and Senior Financing thereof)
subject to your prior reasonable approval of the form and content thereof;
and (e) that prior to or after the execution of the definitive
documentation for the Senior Financing, Fleet reserves the right to
syndicate all or any portion of its commitment hereunder to one or more
financial institutions after consultation with the Borrower and the
Arranger, and, upon the acceptance by Fleet of a written commitment of any
lender to provide a portion of the Senior Financing, Fleet shall be
released from a portion of its commitment hereunder in an aggregate amount
equal to the commitment of such lender. Without limitation of the
foregoing, you agree to negotiate in good faith with Fleet and FSI
regarding any changes in the definitive loan documents that may be
requested by prospective Lenders. You further agree that, prior to and
during the syndication of the facilities, you will not permit any offering,
placement or arrangement of any competing issues of debt securities or
commercial bank facilities of the Borrower or any of its subsidiaries
(other than the agreed upon Subordinated Debt).
By your signature below, you agree to pay all reasonable out-of-pocket
costs and expenses incurred by Fleet and FSI in connection with this
Commitment Letter, the transactions contemplated hereby, the preparation
and negotiation of all loan documentation, the syndication of the loans and
Fleet's and FSI's due diligence in connection with the transactions
contemplated hereby (the "Expenses") (including, without limitation, travel
expenses; attorneys' fees, expenses and disbursements; asset evaluation
expenses; syndication expenses; and other charges and disbursements and any
other reasonable out-of-pocket costs and expenses) whether or not such
transactions are consummated.
Further, in consideration of the commitment contained herein, you agree
to pay the fees described in the fee letter enclosed herewith (the "Fee
Letter") on the dates and in the amounts referred to in the Fee Letter.
By your signature below, you further agree to indemnify and hold
harmless Fleet, the Administrative Agent and the Arranger and their
respective officers, directors, employees, affiliates, agents and
controlling persons from and against any and all losses, claims, damages
and liabilities to which any such person may become subject arising out of,
or in connection with, this Commitment Letter, the transactions
contemplated hereby (including, without limitation, all due diligence and
syndication activities) or any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any of such
indemnified persons is a party thereto, and to reimburse each of such
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Pasta Acquisition Corp.
November 3, 2000
Page 4
indemnified persons, from time to time upon their demand, for any
reasonable legal or other expenses incurred in connection with
investigating or defending any of the foregoing, whether or not the
transactions contemplated hereby are consummated, provided that the
foregoing indemnity will not, as to any indemnified person, apply to
losses, claims, damages, liabilities or related expenses to the extent that
they arise from the bad faith, willful misconduct or gross negligence of
such indemnified person.
You agree that this Commitment Letter and the related Fee Letter are
for your confidential use only and that, except as required by law, they
will not be disclosed by you to any person (including any lender bidding
for the Senior Financing contemplated by this Commitment Letter) without
our consent, other than to your employees, officers, directors,
accountants, attorneys, and other advisors and those of the Borrower, and
to the Target Company, and its advisors, and then in each case only in
connection with the transactions contemplated hereby and on a confidential
basis.
We agree to keep any information delivered or made available by you to
us confidential from anyone other than our employees, officers, attorneys
and other advisors who are or are expected to become engaged in evaluating,
approving, structuring or administering the Senior Financing or rendering
legal advice in connection therewith, provided that nothing herein shall
prevent us from disclosing such information (a) on a confidential basis to
potential Lenders, and participants in and assignees of the Senior
Financing, (b) upon the order of any court or administrative agency or upon
the request of any administrative agency or authority, (c) upon the request
or demand of any regulatory agency or authority, (d) to the extent that
such information has been publicly disclosed other than as a result of a
disclosure by us, or (e) otherwise as required by law.
This letter is issued with the specific understanding that, except as
specifically set forth in the preceding paragraphs, it is not intended to
give rise to any legal liability on the part of either you, Fleet or FSI
(or any other party claiming an interest) and that the proposal set forth
herein shall be considered withdrawn if for any reason you fail to return
to Fleet by 5:00 P.M. (EST) on November 10, 2000 (the "Expiration Date"),
to the attention of Mr. Thomas P. Tansi (i) the enclosed copy of this
letter signed by you, and (ii) the Fee Letter signed by you. Further, the
commitment set forth herein shall expire on April 13, 2001 if the closing
has not occurred on or before such date, unless such expiry date has been
extended pursuant to the terms of the Outline or otherwise.
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Pasta Acquisition Corp.
November 3, 2000
Page 5
If the foregoing is in accordance with your understanding, please
accept this letter by signing where indicated in the space below and return
it to us together with the signed Fee Letter on or prior to the Expiration
Date. This letter supersedes all of our prior letters and communications to
you, including, without limitation, the Commitment Letter, dated as of
October 13, 2000, regarding the subject matter of this letter.
Very truly yours,
FLEET NATIONAL BANK
By: /s/ THOMAS P. TANSI
-----------------------------
Name:
Title:
FLEET SECURITIES, INC.
By: /s/ JONATHAN MULLEN
-----------------------------
Name: Jonathan Mullen
Title: Vice President
Accepted and Agreed to this
_______ day of November __, 2000
PASTA ACQUISITION CORP.
By: /s/ HAROLD O. ROSSER
-----------------------------
Name:
Title:
<PAGE> 6
PASTA ACQUISITION CORP.
Summary Terms and Conditions
November 2, 2000
THE CONTENT OF THIS OUTLINE OF TERMS AND CONDITIONS IS CONFIDENTIAL, FOR THE
EXCLUSIVE USE OF THE BORROWER AND MAY NOT BE DISCLOSED IN WHOLE OR IN PART TO
ANY OTHER PARTY WITHOUT THE PRIOR WRITTEN PERMISSION OF FLEET NATIONAL BANK
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Borrower(s): Pasta Acquisition Corp. ("Acq. Corp."), a new
corporation formed by affiliates of Bruckmann,
Rosser, Sherrill ("BRSS") which will merge with Il
Fornaio America Corp. (the "Target") and all
present and future direct and indirect subsidiaries
(the "Borrower").
Administrative
Agent: Fleet National Bank ("Fleet" or the "Administrative
Agent").
Lead Arranger: Fleet Securities, Inc. ("FRS" or the "Arranger").
Lenders: The Administrative Agent will underwrite the Credit
Facilities and the Arranger will syndicate the
Credit Facilities to other financial institutions
to be identified by the Administrative Agent and
the Arranger in consultation with the Borrower.
Credit Facilities: $50,000,000 in total aggregate amount, comprised
of:
a) $15,000,000 Revolving Credit Facility (the
"Revolver");
b) $35,000,000 Term Loan (the "Term Loan")
Use of Proceeds: At Closing, the Term Loan and up to $3,000,000 of
the Revolver will be used to acquire the equity
interest of the Target and to effect the merger of
the Target with Acq. Corp. (such acquisition and
merger, the "Transaction") and to pay fees and
expenses associated with the Transaction.
Thereafter, the Revolver will be available for the
acquisition and/or construction of new operating
facilities, for operating facility upgrades, for
the issuance of standby letters of credit
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[FLEET LOGO]
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Pasta Acquisition Corp. Page 2
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and for working capital and other general corporate
purposes.
Closing Date: Such date as may be agreed between the
Administrative Agent and the Borrower, but no later
than March 13, 2001.
I. REVOLVER
Amount: $15,000,000 Revolver with a Letter of Credit
sublimit of $5,000,000 for stand-by Letters of
Credit.
L/C Issuing Bank: Fleet National Bank.
Availability: Advances under the Revolver may be borrowed, repaid
and reborrowed and Letters of Credit may be issued
until Maturity. Letters of Credit shall be treated
as usage for purposes of determining availability
under the $15,000,000 Revolver.
Maturity: Six (6) years from the Closing Date.
II. TERM LOAN
Amount: $35,000,000
Maturity: Six (6) years from the Closing Date.
Amortization: Term Loan shall be payable in quarterly
installments, commencing June 30, 2001, in
accordance with the schedule shown in Exhibit I
attached.
GENERAL PROVISIONS
Commitment Fee: A fee on the unused portion of the Revolver payable
quarterly in arrears at a rate per annum of 0.75%
after the Closing Date.
Interest Rates: For the Revolver and the Term Loan, interest rates
shall be Fleet's Base Rate or Eurodollar Rate plus,
in each case, the Applicable Margin. Base Rate will
be defined as the higher of the Prime Rate
announced by Fleet from time to time or the Federal
Funds Rate plus 1/2%. Eurodollar loans will be
available for 1, 2, 3 or 6 month periods. Customary
provisions regarding breakage costs, reserves,
taxes,
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Pasta Acquisition Corp. Page 3
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illegality, etc. shall apply. The credit agreement
will restrict the number of Eurodollar loans, which
may be outstanding at any one time.
Applicable Margin: In accordance with Exhibit II attached.
Default Pricing: Applicable Margin over the Base Rate plus 2%.
Letter of Credit Fee: A per annum fee equal to the Applicable Eurodollar
Margin, payable on the face amount of each
outstanding letter of credit quarterly in arrears.
Fees to be shared by the Lenders on a pro rata
basis. Letters of credit issued under the Revolver
shall count as utilization for all purposes,
including the commitment fee calculation. An
additional 1/8% per annum shall be paid to Fleet as
the Issuing Bank as a fronting fee, in addition to
customary administrative fees.
Other Fees: As set forth in the Fee Letter.
Yield Protection: Customary yield protection provisions regarding
capital adequacy, reserves, taxes, regulatory
changes, etc.
Optional
Prepayments: Optional prepayments shall be permitted at any time
(subject to breakage costs if paid prior to any
Eurodollar interest rate period, if applicable) in
minimum amounts of $100,000. Optional prepayments
shall be applied to the remaining scheduled
principal payments on the Term Loan in inverse
order of maturity until repaid in full.
Mandatory
Prepayments: A. 100% of net proceeds from asset sales in excess
of $500,000 per annum, equity issuance, certain
permitted new debt issuance, tax refunds and
insurance claims not reinvested within 270 days.
Net proceeds will be applied first to required
principal repayments of the Term Loan in inverse
order of maturity and then to permanent reductions
of the Revolver until fully repaid.
B. The percentage specified below of Excess
Operating Cash Flow (as defined below) as follows:
(i) 75% of Excess Operating Cash Flow when Senior
Leverage Ratio is greater than 2.25x for the fiscal
year and the
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Pasta Acquisition Corp. Page 4
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next succeeding fiscal quarter; (ii) 50% of Excess
Operating Cash Flow when Senior Leverage Ratio is
greater than 2.00x for the fiscal year and the next
succeeding fiscal quarter; and (ii) 0% of Excess
Operating Cash Flow when Senior Leverage Ratio is
less than or equal to 2.00x for such fiscal year
and the next succeeding fiscal quarter. Excess
Operating Cash Flow repayments will be payable 120
days after the end of each fiscal year, beginning
with the fiscal year ending December 31, 2001 and
applied first (on a pro rata basis) to required
principal repayments of the Term Loan in the
inverse order of maturity. Any then remaining
Excess Operating Cash Flow shall be applied to
reduce then outstanding borrowings under the
Revolver until fully repaid.
Excess Operating Cash Flow shall be defined as
pretax income, plus depreciation and amortization,
minus the sum of (a) capital expenditures, and the
amount of permitted acquisitions in excess of the
amount financed by other permitted indebtedness,
(b) cash income taxes, (c) required principal
payments and prepayments, (d) any voluntary Term
Loan prepayments during such period, and (e)
plus/minus changes in working capital.
Collateral: The Revolver and the Term Loan will share a common
collateral pool consisting of (a) a first perfected
pledge of and security interest in one hundred
percent (100%) of the capital stock of the Borrower
and (b) a first perfected security interest in all
assets of the Borrower, including but not limited
to accounts and notes receivable, inventory,
equipment, owned real property, all licenses, stock
of subsidiaries and intangible assets (including
patents, trademarks, copyrights etc.), subject to
permitted encumbrances set forth in the credit
agreement. The Borrower will enter into and cause
the financial institutions with which the Borrower
maintains depository accounts to enter into agency
agreements with the Administrative Agent in order
to grant to the Administrative Agent a perfected
security interest in such depository accounts and
any deposits therein, provided, that so long as no
Event of Default is continuing, the
Borrower will have free access to such accounts.
The Borrower will provide customary real estate
collateral support, such as title insurance,
environmental studies, surveys, zoning compliance,
etc. The Borrower will use their reasonable best
efforts to obtain landlord waivers and consents
from all lessors of leased property and will assist
the Administrative Agent in seeking to obtain
leasehold mortgages (and lessor consents thereto)
on leased real property to the
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Pasta Acquisition Corp. Page 5
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extent requested by the Administrative Agent based
upon its due diligence.
Representations
and Warranties: Usual and customary for facilities of this type,
including but not limited to, organization,
authority, enforceability, financial statements,
compliance with law and other instruments,
governmental approvals, material contracts,
environmental matters, absence of material adverse
change, absence of material litigation, absence of
default or unmatured default, no conflict with
material agreements, payment of taxes and certain
business-specific matters.
Financial
Covenants: Usual and customary for facilities of this type.
Consolidated Financial Covenants will be measured
quarterly on a rolling four-quarter basis and
include, without limitation, the following (see
Exhibit III for definitions):
1. Maximum Consolidated Leverage Ratio: The ratio
of Consolidated Funded Indebtedness to Consolidated
EBITDA (the "Leverage Ratio") for each period of
four consecutive quarters shall not exceed at any
date of measurement during the periods set forth
below, the ratio set forth opposite the applicable
period set forth in the table below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing through 3/31/01 4.00x
Thereafter TBD
</TABLE>
2. Maximum Consolidated Senior Leverage Ratio: The
ratio of Consolidated Senior Funded Indebtedness to
Consolidated EBITDA (the "Senior Leverage Ratio")
for each period of four consecutive quarters shall
not exceed at any date of measurement during the
periods set forth below, the ratio set forth
opposite the applicable period set forth in the
table below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing through 3/31/01 3.00x
</TABLE>
Pasta Acquisition Corp. Page 6
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<TABLE>
<S> <C>
Thereafter TBD
</TABLE>
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Pasta Acquisition Corp. Page 7
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3. Consolidated Cash Flow Ratio: The ratio of
Consolidated Cash Flow to Consolidated Financial
Obligations for any period of four consecutive
fiscal quarters shall not be less than the amounts
set forth below in such table opposite such date:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing through 3/31/01 1.20x
Thereafter TBD
</TABLE>
4. Consolidated EBITDAR/Interest and Rental
Expense: The ratio of Consolidated EBITDAR to
consolidated interest charges plus rental expense
for any period of four consecutive fiscal quarters
shall not be less than the amounts set forth below
in such table opposite such date:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing through _______ TBD
</TABLE>
5. Minimum EBITDA. The Borrower and its
subsidiaries shall not permit Consolidated EBITDA
for each period consisting of twelve consecutive
fiscal months commencing with the twelve month
period ending immediately prior to the Closing Date
and continuing through [________] to be less than
[$TBD].
6. Consolidated Capital Expenditures: The Borrower
and its subsidiaries shall not permit annual Growth
Capital Expenditures to exceed [$TBD], and in any
event, no Growth Capital Expenditures shall be
permitted if the Senior Leverage Ratio is within
twenty-five basis points of the current covenant
level. Seventy-five percent of the unused portion
of the Growth Capital Expenditure basket for any
year (calculated without reference to any carry
over amounts from prior years) may be carried over
to the basket for the next fiscal year.
Financial Reports: Financial information to include audited annual and
unaudited monthly and quarterly consolidated
financial statements and unaudited monthly,
quarterly and annual
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Pasta Acquisition Corp. Page 8
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store-by-store financial statements, including no
default certificate and calculations demonstrating
compliance with all covenants.
Other Covenants: Usual and customary for facilities of this type,
including but not limited to, restrictions on other
indebtedness (with exceptions to be agreed upon)
including subordinated indebtedness and purchase
money equipment financing, guarantees, other
liabilities, an agreed-upon maximum percentage of
unprofitable units (excluding units that have been
in operation for less than six months), liens,
acquisitions, investments, dividends and other
distributions, mergers, sales of assets, sale and
leaseback transactions, limits on subsidiary
distributions, voluntary payments of other funded
debt, derivative contracts, affiliate transactions,
negative pledges, in each case subject to
agreed-upon exceptions and standard affirmative
covenants, regarding payment of claims and taxes,
records and accounts, notices, inspection rights,
bank accounts, conduct of business, compliance with
laws and contracts, maintenance of insurance,
maintenance of office, ERISA and environmental
compliance, further assurances, etc. Additional
covenants may be proposed based upon the results of
the Administrative Agent's due diligence.
The Borrower will be required to maintain interest
rate hedging agreements in such amounts and with
such terms as are acceptable to the Administrative
Agent.
Events of Default: Usual and customary for facilities of this type,
including but not limited to, failure to pay any
interest, principal or other amounts when due,
failure to comply with covenants, inaccurate or
false representations or warranties, cross
defaults, change of control, judgment defaults,
ERISA, bankruptcy and insolvency.
Closing Conditions: Closing shall be conditioned upon the satisfaction
of the following conditions precedent and other
conditions customary to transactions of this type
or reasonably required by the Administrative Agent:
1. Evidence that the Borrower has received
$40,000,000 of PIK preferred and/or common
equity (with such allocation among new cash
equity and rollover equity as previously
disclosed to the Agent) and $15,000,000 of
subordinated debt from a party reasonably
acceptable
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to the Agent, all on terms and conditions
reasonably acceptable to the Agent.
2. The Administrative Agent's reasonable
satisfaction with the terms and conditions
of the subordinated debt and equity.
3. Receipt of the Transaction documents in form
and substance reasonably satisfactory to the
Administrative Agent and receipt of evidence
reasonably satisfactory to the
Administrative Agent that simultaneously
with the closing of the Credit Facilities,
the Transaction shall have been completed in
all material respects in accordance with the
terms of such Transaction documents. If
within fifteen business days of delivery to
the Administrative Agent of a certified copy
of the stock purchase agreement signed in
connection with the Transaction, together
with any schedules and exhibits thereto, and
certified by the Borrower to be a true,
complete and accurate copy thereof, the
Administrative Agent fails to notify the
Borrower that such stock purchase agreement
is unsatisfactory to the Administrative
Agent, the form of stock purchase agreement
as so delivered shall be deemed to be
satisfactory to the Administrative Agent.
All subsequent amendments, modifications,
side letters and similar agreements relating
to the Transaction or such stock purchase
agreement must be delivered to the
Administrative Agent and such amendments,
modifications, side letters or other similar
agreements, and the stock purchase agreement
as amended or modified thereby, must be in
form and substance reasonably satisfactory
to the Agent.
4. No material adverse change in the assets or
business of the Borrower or the Target as
represented in the Target's December 31,
1999 audited financial statements or the
Target's most recent audited financial
statements, the financial condition of the
Borrower or the Target as represented in the
consolidated financial statements relating
to them for the fiscal period ending June
30, 2000, the management or prospects of the
Borrower or the Target, or in the ability of
any of the Borrower or the Target to perform
their respective obligations described in
the Outline or to complete the Transaction;
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Pasta Acquisition Corp. Page 10
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in addition, no material adverse changes in
governmental regulation or policy affecting
Fleet, FRS or the Borrower or the Target and
no material changes or disruptions in the
syndication, financial or capital markets
that could materially impair the syndication
of the Credit Facilities prior to closing.
5. The negotiation, execution and delivery of
documentation, reasonably satisfactory to
the Administrative Agent and the Borrower
and their respective counsel (each of which
documents shall be in full force and effect
on the closing date), containing
representations and warranties, conditions,
covenants, events of default,
indemnifications, and increased cost and
capital requirement provisions customary in
bank financing documents in transactions of
this type, including, without limitation,
the covenants described above.
6. Receipt by the Administrative Agent of, and
satisfaction with, (a) a day one pro forma
balance sheet and sources and uses of funds,
showing the effects of the Transaction and
compliance with Financial Covenants, (b)
audited financial statements of the Target
for the preceding three years, (c) material
reserve reviews, (d) environmental review
reports, and (e) other terms and conditions
of the Credit Facilities outlined herein.
7. The existing debt (with exceptions to be
agreed upon for existing capitalized lease
liabilities) contemplated to be repaid in
connection with the Transaction shall have
been repaid in full, all credit facilities
with respect thereto shall be terminated and
all liens in connection therewith shall have
been released.
8. All filings and other actions required to
create and perfect a first priority security
interest in all collateral of the Borrower
shall have been duly made or taken, and all
such collateral shall be free and clear of
other liens (subject to limited exceptions
to be negotiated).
9. The Administrative Agent shall have received
the results of a recent lien search in each
of the jurisdictions where assets of any of
the Borrower or the Target are located, and
such search shall reveal no liens on any of
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the assets of the Borrower or the Target
except for liens approved by the
Administrative Agent.
10. The Administrative Agent shall have
completed and be reasonably satisfied in all
respects with its confirmatory legal due
diligence investigation of the Borrower and
the Target. The Administrative Agent shall
use its best efforts to complete its legal
due diligence with respect to environmental
matters, leases, litigation, employee
benefit plans and employment matters
expeditiously.
Syndication Matters: Fleet will act as the exclusive Administrative
Agent for the Credit Facilities and FRS will act as
the exclusive arranger, adviser and syndication
manager for the Credit Facilities and, in such
capacities, each of Fleet and FRS will perform the
duties and exercise the authority customarily
associated with such roles.
FRS will manage all aspects of the syndication,
including the selection of Lenders, the
determination of when FRS will approach potential
Lenders and the final allocations among the
Lenders. The Borrower, the Target and BRSS agree to
assist FRS actively in achieving a timely
syndication that is reasonably satisfactory to FRS,
such assistance to include, among other things, (a)
direct contact during the syndication between the
Borrower's and the Target's senior officers,
representatives and advisors, on the one hand, and
prospective Lenders, on the other hand at such
times and places as FRS may reasonably request, (b)
providing to FRS all financial and other
information with respect to the Borrower, the
Target and the transactions contemplated that FRS
may reasonably request, including but not limited
to financial projections relating to the foregoing,
and (c) assistance in the preparation of a
confidential information memorandum and other
marketing materials to be used in connection with
the syndication.
The Borrower agrees that, prior to and during the
syndication of the Credit Facilities, the Borrower
and BRSS will not permit any offering, placement or
arrangement of any competing issues of debt
securities or commercial bank facilities of the
Borrower.
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Fleet and FRS shall be entitled to change the
structure, terms, pricing, term and/or amounts of
any portion of the Credit Facilities if Fleet and
FRS determine that the change is advisable in order
to ensure a successful syndication of the Credit
Facilities or an optimal credit structure for the
Credit Facilities.
Expenses: The Borrower will pay all reasonable fees and
expenses incurred by the Administrative Agent and
Arranger in connection with the preparation and
execution of the facilities. These will include,
without limitation, legal, syndication, collateral
examination, appraisal, environmental survey,
recording and filing fees and other direct
out-of-pocket expenses.
Assignments and
Participations: Lenders will be permitted to grant participations
or assignments of their loans and commitments. Any
Lender will be permitted to assign a portion of the
Credit Facilities (on a non pro-rata basis) to
another lending institution in minimum amounts of
$5,000,000, subject to consent of the Borrower (so
long as no Default exists) and Administrative
Agent, which consent will not be unreasonably
withheld.
Voting Rights: Lenders holding 66 2/3% of all of the outstanding
commitments under the Revolver and the Term Loan
for all amendments and waivers, provided that the
following shall require 100% of the Lenders: (1)
increase in commitments; (2) decreases in interest
rates; (3) postponement of scheduled amortization
or final maturity; (4) release of all or
substantially all of the collateral; and (5)
changes in the percentage voting rights. Voting
rights provisions are subject to adjustment by the
Administrative Agent to address concerns of
potential Lenders in the syndication process.
Indemnification: The Borrower shall indemnify the Administrative
Agent and the Lenders against all losses,
liabilities, claims, damages or expenses relating
to their loans, the loan documents, the Borrower's
use of loan proceeds or the commitments, including
but not limited to attorneys and other professional
fees and settlement costs.
Governing Law: The Commonwealth of Massachusetts.
Agent's Counsel: Bingham Dana LLP
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EXHIBIT I
Amortization
<TABLE>
<CAPTION>
TERM LOAN
QUARTER AMORTIZATION
------- ------------
<S> <C>
6/30/01 $750,000
9/30/01 $750,000
12/31/01 $750,000
3/31/02 $750,000
6/30/02 $1,250,000
9/30/02 $1,250,000
12/31/02 $1,250,000
3/31/03 $1,250,000
6/30/03 $1,500,000
9/30/03 $1,500,000
12/31/03 $1,500,000
3/31/04 $1,500,000
6/30/04 $1,750,000
9/30/04 $1,750,000
12/31/04 $1,750,000
3/31/05 $1,750,000
6/30/05 $1,750,000
9/30/05 $1,750,000
12/31/05 $1,750,000
3/31/06 $1,750,000
6/30/06 $1,750,000
9/30/06 $1,750,000
12/31/06 $1,750,000
Maturity $1,750,000
TOTAL $35,000,000
</TABLE>
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EXHIBIT II
Applicable Margin
<TABLE>
<CAPTION>
LEVEL I LEVEL II LEVEL III LEVEL IV
------- -------- --------- --------
<S> <C> <C> <C> <C>
LEVERAGE RATIO 2.0X 2.5X 3.0X =3.0X
Base Rate Margin 1.50% 1.75% 2.00% 2.25%
Eurodollar Margin 3.00% 3.25% 3.50% 3.75%
</TABLE>
PRICING WILL BE LOCKED AT LEVEL IV UNTIL RECEIPT OF THE COMPLIANCE
CERTIFICATE FOR THE PERIOD ENDED 6/30/01.
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EXHIBIT III
Definitions
Capital
Expenditures: Amounts expended or financed for capital assets and
restaurant pre-opening costs.
Consolidated Cash Flow: For any period, the sum of (a) the Consolidated
Pre-tax Income of the Borrower and its subsidiaries
for such period, minus (b) cash income taxes during
such period, plus (c) the aggregate amount of
consolidated restaurant pre-opening costs and
consolidated depreciation and amortization charges
made in calculating Consolidated Pre-tax Income for
such period, plus (d) the Consolidated Interest
Charges of the Borrower and its subsidiaries for
such period, plus (e) public company expenses
certified by the chief financial officer of the
Borrower in amounts and at times acceptable to the
Administrative Agent, plus (f) pro forma add backs
certified by the chief financial officer of the
Borrower in amounts and at times acceptable to the
Agent and not to exceed $1,610,000 in the aggregate,
minus (g) the greater of (x) the aggregate amount of
Maintenance Capital Expenditures during such period,
or (y) $1,500,000, (h) plus/minus changes in working
capital.
Consolidated
EBITDAR: For any period, the sum of (a) the Consolidated
Pre-tax Income of the Borrower and its subsidiaries
for such period, plus (b) the Consolidated Interest
Charges and Rental Expense of the Borrower and its
subsidiaries for such period, plus (c) consolidated
restaurant pre-opening costs and consolidated
depreciation and amortization expenses of the
Borrower and its subsidiaries for such period, plus
(d) public company expenses certified by the chief
financial officer of the Borrower in amounts and at
times acceptable to the Administrative Agent, plus
(e) pro forma add backs certified by the chief
financial officer of the Borrower in amounts and at
times acceptable to the Agent and not to exceed
$1,610,000 in the aggregate.
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Consolidated
EBITDA: For any period, the sum of (a) the Consolidated
Pre-tax Income of the Borrower and its subsidiaries
for such period, plus (b) the Consolidated Interest
Charges of the Borrower and its subsidiaries for
such period, plus (c) consolidated restaurant
pre-opening costs and consolidated depreciation and
amortization expenses of the Borrower and its
subsidiaries for such period, plus (e) public
company expenses certified by the chief financial
officer of the Borrower in amounts and at times
acceptable to the Administrative Agent, plus (f) pro
forma add backs certified by the chief financial
officer of the Borrower in amounts and at times
acceptable to the Agent and not to exceed $1,610,000
in the aggregate.
Consolidated
Financial
Obligations: For any period, the sum of all scheduled payments
(including without limitation, principal, interest
and commitment fees) on Indebtedness of the Borrower
and its subsidiaries, including capital leases,
which came due during such period.
Consolidated
Funded
Indebtedness: At any time, the sum of (a) the aggregate amount of
Indebtedness of the Borrower and its subsidiaries,
on a consolidated basis, relating to the borrowing
of money or the obtaining of credit or in respect of
capitalized leases, plus (without duplication) (b)
all Indebtedness guaranteed by the Borrower or any
of its subsidiaries.
Consolidated
Senior Funded
Indebtedness: At any time, the sum of (a) Consolidated Funded
Indebtedness, less permitted subordinated debt as
determined by the Administrative Agent and Arranger.
Consolidated
Net Income: The consolidated net income of the Borrower and its
subsidiaries for any period determined in accordance
with generally accepted accounting principles
consistently applied.
Growth Capital
Expenditures: Capital Expenditures (including restaurant
pre-opening costs) for existing concept growth in
the Borrower's projections in amounts reasonably
acceptable to the Administrative Agent.
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Indebtedness: All obligations, contingent or otherwise, that in
accordance with generally accepted accounting
principles should be classified on the obligor's
balance sheet as liabilities, or to which reference
should be made by footnotes.
Maintenance Capital
Expenditures: All Capital Expenditures other than those
constituting Growth Capital Expenditures.
