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EXHIBIT 99(b)(1)
CONFORMED COPY
August 1, 2000
Riverside Company LLC
c/o Heartland Industrial Partners, L.P.
320 Park Avenue
33rd Floor
New York, NY 10022
Attention: David A. Stockman
Project Tailor
$1,300,000,000 Senior Secured Credit Facilities
$175,000,000 Receivables Purchase Facility
Commitment Letter
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase") and Chase Securities
Inc. ("CSI") that you intend to consummate the Recapitalization and the other
Transactions (such terms and each other capitalized term used but not defined
herein having the meaning given to them in the Term Sheets (as defined below)).
In connection therewith, (a) the Borrower will obtain senior secured credit
facilities (the "Senior Facilities") in an aggregate principal amount of
$1,300,000,000 and (b) one or more newly formed, wholly owned,
bankruptcy-remote, special-purpose subsidiaries or trusts of the Borrower
(collectively, the "Receivables Subsidiary") will obtain an off-balance- sheet
receivables purchase facility (the "Receivables Facility" and, together with the
Senior Facilities, the "Facilities") in an aggregate amount of $175,000,000.
In connection with the Transactions, Chase is pleased to advise you of (a)
its commitment to provide the entire principal amount of the Senior Facilities,
upon the terms and subject to the conditions set forth or referred to in this
Commitment Letter and in the Summary of Principal Terms and Conditions attached
hereto as Exhibit A (the "Senior Facilities Term Sheet"), and (b) its commitment
to purchase (in the event a commercial paper conduit does not purchase) the
entire amount of the participation interests to be sold under the Receivables
Facility, upon the terms and subject to the conditions set forth in this
Commitment Letter and in the Summary of Principal Terms and Conditions attached
hereto as Exhibit B (the "Receivables Facility Term Sheet" and, together with
the Senior Facilities Term Sheet, the "Term Sheets") to the extent such terms
and conditions are applicable to purchases by an APA Bank.
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You hereby appoint CSI to act, and CSI hereby agrees to act, as sole and
exclusive advisor, lead arranger and sole book manager for each of the
Facilities on the terms and subject to the conditions set forth or referred to
in this Commitment Letter and in the Term Sheets. You also hereby appoint Chase
to act, and Chase hereby agrees to act, as sole and exclusive administrative
agent and collateral agent for the Facilities on the terms and subject to the
conditions set forth or referred to in this Commitment Letter and in the Term
Sheets. Chase and CSI understand that you propose to appoint other agents and
co-agents and award other titles in connection with the Facilities, but you
agree that no additional agents, co-agents, arrangers, co-arrangers, managers or
co-managers will be appointed and no other titles will be awarded in connection
with the Facilities without the prior approval of Chase and CSI.
Chase reserves the right, prior to or after the execution of definitive
documentation for the Facilities, to syndicate all or a portion of its
commitments hereunder to one or more financial institutions, reasonably
acceptable to Chase and you, that will become parties to such definitive
documentation pursuant to syndications to be managed by CSI in consultation with
you (the financial institutions becoming parties to such definitive
documentation being collectively referred to as the "Lenders"). Upon the
acceptance of the commitment of any Lender reasonably satisfactory to you to
provide a portion of any of the Facilities, Chase shall be released from a
portion of its commitment with respect to such Facility in an amount equal to
such commitment of such Lender (it being understood and agreed that you will not
unreasonably withhold your consent when presented with any proposed acceptance
by Chase of commitments of other Lenders). You understand that the Senior
Facilities and the Receivables Facility will be separately syndicated and that
CSI may commence syndication efforts promptly, and you agree actively to assist
CSI in completing timely and orderly syndications satisfactory to CSI. Such
assistance shall include (a) your using commercially reasonable efforts to
ensure that the syndication efforts benefit materially from the existing lending
relationships of you, Heartland Industrial Partners, L.P. ("Heartland"), the
Company and the Borrower, (b) direct contact during the syndication between
senior management, representatives and advisors of you, Heartland, the Company
and the Borrower, on the one hand, and the proposed Lenders, on the other hand,
(c) assistance (including the use of commercially reasonable efforts to cause
Heartland, the Company and the Borrower and your and their respective affiliates
and advisors to assist) in the preparation of Confidential Information Memoranda
for the Facilities and other marketing materials to be used in connection with
the syndications and (d) the hosting, with CSI, of one or more meetings (to be
held at times to be agreed upon between Chase, CSI and you) of prospective
Lenders.
It is understood and agreed that CSI will, in consultation with you, manage
all aspects of the syndications, including selection of Lenders reasonably
acceptable to Chase and you, determination of when CSI will approach potential
Lenders and the time of acceptance of the Lenders' commitments, any naming
rights and the final allocations of the commitments among the Lenders. It is
also understood and agreed that the amount and distribution of fees
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among the Lenders will be at CSI's discretion, after consultation with you. To
assist CSI in its syndication efforts, you agree promptly to prepare and provide
to CSI and Chase (and to use commercially reasonable efforts to cause Heartland,
the Company and the Borrower to provide) all information with respect to the
Company and its subsidiaries, the Transactions and the other transactions
contemplated hereby, including a business plan in form satisfactory to Chase and
all other financial information and projections (the "Projections"), as CSI or
Chase may reasonably request in connection with the structuring, arrangement and
syndication of the Facilities. You hereby represent and covenant that (a) all
information other than the Projections (the "Information") that has been or will
be made available to Chase or CSI by or on behalf of you, the Company or its
subsidiaries or any of your or their authorized representatives, when taken as a
whole, will be complete and correct in all material respects (after giving
effect to all written updates thereto delivered to Chase or CSI prior to the
closing of the Facilities) and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements are made and (b) the Projections that
have been or will be made available to Chase or CSI by or on behalf of you, the
Company or its subsidiaries or any of your or their authorized representatives
have been or will be prepared in good faith based upon assumptions believed by
you to be reasonable at the time made and at the time the related Projections
are made available to Chase or CSI. You agree to supplement the Information and
Projections from time to time until the closing of the Facilities so that the
representations and covenants in the preceding sentence remain correct. In
arranging the Facilities, including the syndications of the Facilities, Chase
and CSI will be entitled to use and rely primarily on the Information and the
Projections without responsibility for independent verification thereof.
As consideration for Chase's commitments hereunder and CSI's agreement to
structure, arrange and syndicate the Facilities and to provide advisory services
in connection therewith, you agree to pay (or to cause the Company or the
Borrower to pay) to Chase the fees as set forth in the Term Sheets and in the
Fee Letter dated the date hereof and delivered herewith with respect to the
Facilities (the "Fee Letter"). Once paid, such fees shall not be refundable
under any circumstances.
Chase's commitments hereunder and CSI's agreement to perform the services
described herein are subject to (a) Chase's not having discovered or otherwise
become aware of information not previously disclosed to Chase that Chase
believes to be inconsistent, in a manner that is material and adverse, with its
understanding, based on information provided to Chase prior to the date hereof,
of the business, operations, properties, assets, financial condition, contingent
liabilities and material agreements of the Company and its subsidiaries, taken
as a whole, (b) there not having occurred any material adverse change in the
business, operations, properties, assets, financial condition, contingent
liabilities or material agreements of the Company and its subsidiaries, taken as
a whole, since December 31, 1999 (it being understood
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that any change in the business, operations, properties, assets, financial
condition, contingent liabilities or material agreements of the Company and its
subsidiaries resulting from the Asset Dropdown will not constitute a material
adverse change specified in this clause (b)), (c) there not having occurred and
being continuing a material disruption of or material adverse change in
financial, banking or capital market conditions that, in Chase's reasonable
judgment, could materially impair the syndication of any of the Facilities, (d)
Chase's satisfaction that, prior to and during the syndication of the
Facilities, there shall be no competing issues of debt securities or commercial
bank or other credit facilities of the Company and its subsidiaries being
offered, placed or arranged, (e) the negotiation, execution and delivery of
definitive documentation with respect to the Facilities reasonably satisfactory
to Chase and its counsel, (f) CSI's having been afforded a period of not less
than 60 days following the date hereof to syndicate the Facilities, (g) your
agreement that, in connection with any syndication of any credit facility for,
or offering or placing of debt securities of, any entity sponsored or controlled
by you or any of your affiliates, you will coordinate such syndication or
offering with CSI in order to ensure that such syndication or offering does not
disrupt or otherwise interfere with the orderly syndication of the Facilities
and (i) the other conditions set forth in the Term Sheets. Those matters that
are not covered by or made clear under the provisions hereof and of the Term
Sheets are subject to the approval and agreement of Chase, CSI and you.
By executing this Commitment Letter, you agree (a) to indemnify and hold
harmless CSI, Chase and their respective officers, directors, employees,
affiliates, agents and controlling persons from and against any and all losses,
claims, damages, liabilities and expenses, joint or several, to which any such
persons may become subject arising out of or in connection with this Commitment
Letter, the Fee Letter, the Term Sheets, the Transactions, the Facilities or any
related document or transaction or any claim, litigation, investigation or
proceeding relating to any of the foregoing, regardless of whether any of such
indemnified parties is a party thereto, and to reimburse each of such
indemnified parties upon demand for any reasonable legal or other expenses
incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any indemnified party,
apply to losses, claims, damages, liabilities or related expenses to the extent
they are found in a final judgment of a court to have resulted from the willful
misconduct or gross negligence of such indemnified party, and (b) to reimburse
CSI and Chase from time to time, upon presentation of a summary statement, for
(i) all reasonable out-of-pocket expenses (including but not limited to
reasonable expenses of Chase's due diligence investigation, consultants' fees,
syndication expenses, travel expenses and reasonable fees, disbursements and
other charges of counsel) and (ii) internally allocated charges and expenses
related to Chase's initial and ongoing examination of the assets underlying the
Receivables Facility, in each case incurred in connection with the Facilities
and the preparation of this Commitment Letter, the Term Sheets, the Fee Letter,
the definitive and all other documentation for the Facilities and any security
arrangements in connection therewith. No indemnified person shall be liable for
any damages arising from the use by others of information or other materials
obtained through electronic,
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telecommunications or other information transmission systems or for any special,
indirect, consequential or punitive damages in connection with its activities
related to the Facilities.
You acknowledge that Chase, CSI and their affiliates may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. Neither
Chase, CSI nor any of their affiliates will use confidential information
obtained from you by virtue of the transactions contemplated by this Commitment
Letter or its other relationships with you in connection with the performance by
Chase, CSI or any of their affiliates of services for other companies, and
neither Chase, CSI nor any of their affiliates will furnish any such information
to other companies. You also acknowledge that neither Chase, CSI nor any of
their affiliates has any obligation to use in connection with the transactions
contemplated by this Commitment Letter, or to furnish to you, the Company or its
subsidiaries confidential information obtained by Chase or CSI or any of their
affiliates from other companies.
This Commitment Letter and Chase's commitments hereunder shall not be
assignable by you without the prior written consent of Chase, and any attempted
assignment without such consent shall be void; provided, however, that this
Commitment Letter, Chase's commitments hereunder and the Fee Letter may be
assigned by you to the Company or the Borrower pursuant to an instrument in
writing reasonably satisfactory to Chase, so long as you remain liable for all
your obligations hereunder and thereunder. This Commitment Letter may not be
amended or any provision hereof waived or modified except by an instrument in
writing signed by Chase, CSI and you. This Commitment Letter may be executed in
any number of counterparts, each of which shall be an original and all of which,
when taken together, shall constitute one agreement. Delivery of an executed
counterpart of a signature page of this Commitment Letter by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Commitment Letter. This Commitment Letter is intended to be solely for
the benefit of the parties hereto and is not intended to confer any benefits
upon, or create any rights in favor of, any person other than the parties
hereto. This Commitment Letter shall be governed by, and construed in accordance
with, the laws of the State of New York.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheets or the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person without the prior approval of Chase except (a) to your affiliates
and Heartland's limited partners, together with your and their respective
officers, agents and advisors, in each case who are directly involved in the
consideration of this matter, (b) as may be compelled in a judicial or
administrative proceeding or as otherwise required by law (in which case you
agree to inform us promptly thereof) and (c) after your acceptance of the terms
of this Commitment Letter and of the Fee Letter, you may disclose the existence
of this Commitment Letter and a summary of the principal
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terms and conditions of Chase's commitments hereunder in any public filings to
be made in connection with the Company's solicitation of proxies from its
stockholders for purposes of obtaining the approval of such stockholders for the
Transactions, provided that any such disclosure that is in writing shall be
subject to Chase's prior review and approval (such approval not to be
unreasonably withheld), and provided further that you may disclose this
Commitment Letter and the Term Sheets, and their terms and substance, and the
fifth paragraph of the Fee Letter (but not the remainder of the Fee Letter or
the remainder of its terms and substance), on a confidential and need-to-know
basis, to MCorp and the Company and their respective officers, employees,
attorneys, accountants and advisors and to prospective Investors.
Please indicate your acceptance of the terms hereof by signing in the
appropriate space below and returning to Chase the enclosed duplicate originals
(or facsimiles) of this Commitment Letter not later than 5:00 p.m., New York
City time, on August 3, 2000. Chase's commitments under this Commitment Letter
will expire at such time in the event that Chase has not received such executed
duplicate originals (or facsimiles) in accordance with the immediately preceding
sentence. In the event that the initial borrowing under the Senior Facilities
does not occur on or before December 20, 2000, then this Commitment Letter and
Chase's commitments hereunder shall automatically terminate unless Chase and CSI
shall, in their discretion, agree to an extension. The compensation,
reimbursement, indemnification and confidentiality provisions contained herein,
in the Fee Letter and in any related documentation shall remain in full force
and effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or Chase's commitments hereunder.
Chase and CSI are pleased to have been given the opportunity to assist you
in connection with the financing for the Transactions.
Very truly yours,
THE CHASE MANHATTAN BANK,
By: /s/ Deborah J. Davey
-------------------------
Name: Deborah J. Davey
Title: Managing Director
CHASE SECURITIES INC.,
By: /s/ Nga Tran-Pedretti
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Name: Nga Tran-Pedretti
Title: Vice President
Accepted and agreed to as of the date first above written:
RIVERSIDE COMPANY LLC,
By: /s/ Daniel P. Tredwell
-------------------------
Name: Daniel P. Tredwell
Title: Senior Managing Director
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CONFIDENTIAL
August 1, 2000
EXHIBIT A
Project Tailor
$1,300,000,000 Senior Secured Credit Facilities
Summary of Principal Terms and Conditions
Borrower: A newly formed Delaware corporation (the "Borrower")
that will be a wholly owned subsidiary of a Delaware
corporation identified to The Chase Manhattan Bank
("Chase") as "Tailor" (the "Company").
Recapitalization: Pursuant to or in connection with the Recapitalization
Agreement (the "Recapitalization Agreement") to be
entered into between the Company and Riverside Company
LLC, a newly formed Delaware limited liability company
("Merger Subsidiary") all the outstanding equity
interests of which will be owned by Heartland
Industrial Partners, L.P. ("Heartland"), certain of its
affiliates (including investors in Heartland) and
certain other investors reasonably satisfactory to
Chase (collectively, the "Investors"), (a) the
Investors will contribute (the "Equity Contribution")
an aggregate amount of not less than $433,200,000 in
cash to Merger Subsidiary as common equity, (b) the
Company will sell (the "Specified Asset Sales"), and
will receive not less than $123,800,000 in cash
proceeds (the "Specified Asset Sale Proceeds") from the
sale of, its existing equity investments in certain
entities set forth on Annex IV hereto, (c)(i) the
Company will sell its equity investment (the "Saturn
Sale") in Saturn Electronics and Engineering Inc.
("Saturn") and (ii) pending the completion of the
Saturn Sale, the equity investment in Saturn will be
held by a newly formed, special purpose wholly owned
subsidiary of the Company (the "Saturn Subsidiary"),
(d) as soon as reasonably practicable and in any event
within six months after the Closing Date (as defined
below), the Company will contribute to the Borrower
(the "Asset Dropdown") all or a substantial majority of
the Company's remaining assets (other than any Cash (as
defined below)) and certain other assets to be agreed
upon by the Borrower and Chase, (e) in connection with
the Merger, new restricted stock awards (including
phantom restricted stock awards) of the Company having
the terms set forth in the Recapitalization Agreement
will be substituted for certain existing restricted
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stock awards (including phantom restricted stock
awards) of the Company, and pursuant to the terms of
such new restricted stock awards the Company will
become obligated to make deferred cash payments or
common stock issuances in an aggregate amount not to
exceed $54,400,000 (the "Restricted Stock Award") over
a three-year period (including the accretion thereof)
following the Closing Date, (f) Merger Subsidiary will
merge with and into the Company (the "Merger"), with
the Company being the surviving corporation in the
Merger, and (g) pursuant to the Merger, (i) the
pre-Merger common stockholders (and holders of options
to acquire common stock) of the Company will receive
(A) on the Closing Date, in the aggregate $609,200,000
in cash (the "Merger Consideration") (and all such
options will be extinguished) and (B) following the
Saturn Sale, an amount based upon the net proceeds from
the disposition of Saturn and determined in accordance
with and pursuant to the Recapitalization Agreement
(the "Saturn Proceeds Distribution"), (ii) the Company
will issue on the Closing Date $36,100,000 in
liquidation preference of its preferred stock (the
"Preferred Stock") to a corporation identified to Chase
as "Mcorp" ("MCorp"), (iii) the Investors will receive
on the Closing Date not less than 75% of the post-
Merger common stock of the Company, of which Heartland
will beneficially own not less than a percentage to be
agreed upon, and (iv) MCorp and certain other
shareholders of the Company will receive on the Closing
Date the remainder of the post-Merger common stock of
the Company (collectively, the "Rollover Equity"). The
Merger is intended to be structured as a
recapitalization for accounting purposes, and the
foregoing transactions are collectively referred to
herein as the "Recapitalization".
In addition, in connection with the Recapitalization,
(a) immediately after the Asset Dropdown, the Borrower
will become a co-obligor (together with the Company)
under the Indenture dated as of November 1, 1986 (as in
effect on the date hereof, the "Existing Indenture"),
relating to the $305,000,000 in aggregate face amount
of 4 1/2% Convertible Subordinated Debentures due
December 15, 2003 (the "Debenture Maturity Date"),
issued by the Company (the "Convertible Subordinated
Debentures"), (b) following the Merger, the Convertible
Subordinated Debentures will remain outstanding and
will be convertible at any time
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on and after the Closing Date (as defined below), at
the option of the holders of such Convertible
Subordinated Debentures (the "Debenture Holders"), into
the amount of cash that the Debenture Holders would
have received pursuant to the Merger if the Convertible
Subordinated Debentures had been converted into common
stock of the Company immediately prior to the Merger
(as provided in Section 3.06 of the Existing Indenture,
the "Conversion Right"), and (c) immediately prior to
or concurrent with the Merger, MCorp will enter into an
agreement (the "Shareholder Subordinated Loan
Agreement"), in the form attached as an exhibit to the
Recapitalization Agreement, pursuant to which MCorp
will agree to make senior subordinated, unsecured,
unguaranteed loans (the "Shareholder Subordinated
Loans") to the Company in an aggregate principal amount
of not less than $100,000,000 on the terms set forth in
the Shareholder Subordinated Loan Agreement.
In connection with the Recapitalization, (a) the
Borrower will obtain the senior secured credit
facilities (the "Senior Facilities") described below
under the caption "Senior Facilities" on the date on
which the Recapitalization is consummated (the "Closing
Date"), (b) one or more newly formed, wholly owned,
bankruptcy-remote, special-purpose subsidiaries or
trusts of the Borrower (collectively, the "Receivables
Subsidiary") will obtain an off-balance-sheet
receivables purchase facility (the "Receivables
Facility") in an aggregate amount of $175,000,000, of
which at least $120,000,000 is expected to be funded on
the Closing Date (the "Receivables Facility Proceeds"),
(c) the Company and each of its subsidiaries will repay
in full all their existing indebtedness other than (i)
the Convertible Subordinated Debentures, (ii)
$21,500,000 in aggregate face amount of Industrial
Revenue Bonds (the "Industrial Revenue Bonds") and
(iii) other limited indebtedness to be agreed upon
(such repaid indebtedness, the "Repaid Indebtedness"),
and all documentation evidencing such Repaid
Indebtedness and any related guarantee or collateral
documents will be terminated, (d) immediately prior to
the consummation of the Recapitalization on the Closing
Date, the Company will hold cash (the "Cash") from
various sources in an amount of not less than
$3,700,000 and (e) costs and expenses (the "Transaction
Costs") incurred in connection with the Transactions
will be paid. The transactions
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described in this paragraph and the immediately
preceding paragraph, together with the Recapitalization
and the other transactions contemplated hereby, are
collectively referred to herein as the "Transactions".
Agent: Chase will act as sole and exclusive administrative
agent and collateral agent (collectively, the "Agent")
for a syndicate of financial institutions reasonably
satisfactory to Chase and the Borrower (the "Lenders"),
and will perform the duties customarily associated with
such roles.
Advisor, Arranger
and Book Manager: Chase Securities Inc. ("CSI") will act as sole and
exclusive advisor, lead arranger and sole book manager
for the Senior Facilities (the "Arranger"), will perform
the duties customarily associated with such roles and
will manage the syndication of the Senior Facilities.
Senior Facilities: (A) Two Senior Secured Term Loan Facilities in an
aggregate principal amount of up to $1,000,000,000
(the "Term Loan Facilities"), consisting of (a) a
Tranche A Term Loan Facility in an aggregate
principal amount of $550,000,000 (the "Tranche A
Facility") to be made available to the Borrower on
the Closing Date and (b) a Tranche B Term Loan
Facility in an aggregate principal amount of
$450,000,000 (the "Tranche B Facility") to be made
available to the Borrower on the Closing Date. (B)
A Senior Secured Revolving Credit Facility in an
aggregate principal amount of up to $300,000,000
(the "Revolving Facility"). Up to an amount to be
agreed upon of the Revolving Facility will be
available in the form of letters of credit.
Purpose: (A) The net proceeds of the Term Loan Facilities and
the Receivables Facility Proceeds (together with
(x) a de minimus amount under the Revolving
Facility as specified on Annex III and (y) the
amount of the Receivables Short-Fall Borrowing,
if any, and the Advanced Accessories Borrowing (in
each case as defined below), if any) will be
transferred by the Borrower to the Company on the
Closing Date by means of dividend or intercompany
advance and used by the Company on the Closing
Date, together with the Specified Asset Sale
Proceeds, the proceeds from the Equity Contribution
and any Cash, solely (a) to pay the Merger
Consideration, (b) to repay all principal,
interest, fees and other amounts outstanding under
the Repaid Indebtedness and (c)
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to pay the Transaction Costs (provided that the
Company and the Borrower shall be permitted to pay
certain Transaction Costs to be agreed upon after
the Closing Date). The estimated sources and uses
of the funds necessary to consummate the
Transactions and the other transactions
contemplated hereby are set forth on Annex II
hereto.
(B) The proceeds of loans under the Revolving Facility
will be used by the Borrower for general corporate
purposes and, subject to the provisions set forth
under the caption "Availability" below, to finance
Permitted Acquisitions (to be defined). In
addition, in the event that (a) the Borrower shall
have received less than $120,000,000 in Receivables
Facility Proceeds on the Closing Date, the Borrower
will be permitted to borrow under the Revolving
Facility on the Closing Date up to an amount (the
"Receivables Short-Fall Borrowing") equal to the
lesser of (i) $20,000,000 and (ii) the amount by
which $120,000,000 exceeds the amount of the
Receivables Facility Proceeds on the Closing Date
and (b) the Company's equity investments in
Advanced Accessories is not sold (the "Advanced
Accessories Sale") as part of the Specified Asset
Sales by the Closing Date, the Borrower will be
permitted to borrow under the Revolving Facility on
the Closing Date up to an amount (the "Advanced
Accessories Borrowing") equal to the lesser of (i)
$9,000,000 and (ii) the amount by which
$123,800,000 exceeds the actual Specified Asset
Sale Proceeds (it being understood that to the
extent the Advanced Accessories Sale does not occur
prior to the Closing Date, such sale shall not be a
Specified Asset Sale, the proceeds from such sale
shall not be Specified Asset Sale Proceeds and the
minimum amount of such Asset Sale Proceeds shall be
$116,000,000).
(C) Letters of credit will be used by the Borrower on
and after the Closing Date for general corporate
purposes.
Availability: (A) The full amount of the Term Loan Facilities must
be drawn in a single drawing on the Closing Date.
Amounts borrowed under the Term Loan Facilities
that are repaid or prepaid may not be reborrowed.
(B) Loans under the Revolving Facility will be
available on and after the Closing Date and at any
time prior to the final maturity of the Revolving
Facility, in minimum principal amounts to be agreed
upon. Except as approved by the Agent
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following consultation with the Borrower, no loans
will be made under the Revolving Facility on the
Closing Date (other than (x) a de minimus amount as
specified in Annex III and (y) in connection with
any Receivables Short-Fall Borrowing or any
Advanced Accessories Borrowing). Amounts repaid
under the Revolving Facility may be reborrowed.
The Borrower will be permitted to use up to $50,000,000
under the Revolving Facility to finance Permitted
Acquisitions; provided, however, that in the event that
on any date (a) the Borrower has received net proceeds
in an aggregate amount equal to or greater than
$205,000,000 from one or more issuances of Subordinated
Indebtedness (as defined below) or equity securities
(or one or more capital contributions), (b) the
Borrower has caused the entire amount of such net
proceeds to be held on such date in an Agent's account
(as described below under the caption "Additional
Permitted Indebtedness") or applied to redeem, convert
or repurchase Convertible Subordinated Debentures and
(c) the aggregate face amount of all Convertible
Subordinated Debentures outstanding on such date (plus
any accrued interest thereon) is equal to or less than
the sum of (i) the aggregate amount of Shareholder
Subordinated Loans that may be borrowed on such date by
the Company under the Shareholder Subordinated Loan
Agreement and (ii) the aggregate amount held on such
date in the Agent's account as contemplated by clause
(b) above, the Borrower may use up to $75,000,000 (in
lieu of $50,000,000) under the Revolving Facility to
finance Permitted Acquisitions. Each Permitted
Acquisition will be subject to the conditions that (A)
such Permitted Acquisition must be in the same or
similar lines of business as those of the Borrower and
must not be preceded by or effected pursuant to a
hostile offer, (B) at the time of each such Permitted
Acquisition, the Company shall be in pro forma covenant
compliance, (C) at the time of each such Permitted
Acquisition, no default or event of default under the
Credit Agreement shall have occurred and be continuing
and (D) each such Permitted Acquisition shall comply
with other limitations to be agreed upon (including
limitations on contingent and other liabilities
assumed). Upon any borrowing under the Revolving
Facility to finance a Permitted Acquisition, the amount
that the Borrower may use under the Revolving Facility
to finance Permitted Acquisitions will be automatically
reduced by the amount of such borrowing (without regard
to any subsequent repayment of such amount).
<PAGE> 13
8
The Revolving Facility will provide for up to
$75,000,000 in loans and letters of credit to be made
available (a) to the Borrower and certain of its
foreign subsidiaries to be agreed upon by the Borrower
and the Agent and (b) in US Dollars and in certain
other freely available major foreign currencies to be
agreed upon by the Borrower and the Agent, in each case
subject to limits, collateral requirements and
procedural requirements to be agreed upon.
Incremental Facility: One or more senior secured term loan facilities
(collectively, the "Incremental Facilities") in an
aggregate amount of up to $250,000,000 (the loans
thereunder, the "Incremental Loans") will be made
available to the Borrower under the Credit Agreement,
pursuant to which the Borrower may solicit any Lender
and/or any other financial institution reasonably
satisfactory to the Agent to provide additional or new
commitments. No Lender shall be committed to provide
any Incremental Loans until it expressly agrees to
provide such a commitment. The Incremental Facilities
will be governed by the Credit Agreement, and will be
subject to the provisions thereof relating to the Term
Loan Facilities, including mandatory prepayments, with
modifications to be agreed upon.
The ability for the Borrower to make solicitations
under the Incremental Facilities shall be available
from the Closing Date until the Tranche B Maturity Date
(as defined below).
Interest rates, maturity and amortization under the
Incremental Facilities shall be agreed upon at the time
the applicable lenders provide their commitment to make
Incremental Loans, provided that (a) if the interest
rate spreads applicable to any Incremental Facility are
greater than 0.25% per annum in excess of the
then-existing interest rate spreads applicable to the
Tranche B Facility, the interest rate spreads
applicable to the Tranche B Facility will be
automatically increased so that the interest rate
spreads applicable to the Incremental Facility are no
greater than 0.25% per annum in excess of the interest
rate spreads applicable to the Tranche B Facility, (b)
the final maturity of the Incremental Loans shall be at
least 91 days after the Tranche B Maturity Date and (c)
prior to the Tranche B Maturity Date, amortization of
the Incremental Loans shall be nominal and upon a
schedule and in amounts to be agreed upon. Amounts
borrowed under the Incremental Facility that are repaid
or prepaid may not be reborrowed.
<PAGE> 14
9
The proceeds of the Incremental Loans shall be used
solely to finance Permitted Acquisitions.
To the extent that the Borrower incurs any Specified
Permitted Unsecured Debt (as defined below), the
then-unused availability under the Incremental
Facilities will be reduced on a dollar-for-dollar
basis.
Restricted Cash,
Revolving Facility
and/or Receivables
Facility Blockage: As of and following each date set forth in the table
below, the Borrower will maintain restricted cash
(held in an Agent's account on terms reasonably
acceptable to the Agent) and/or availability under the
Revolving Facility and/or through the Receivables
Facility (such restricted cash and/or availability,
collectively, the "Available Funds") in an aggregate
amount equal to the amount set forth opposite such date
in the table below:
<TABLE>
<CAPTION>
Availability
Date Requirement
---- -----------
<S> <C>
Closing Date $70,000,000
September 30, 2002 $100,000,000
December 31, 2002 $125,000,000
March 31, 2003 $150,000,000
June 30, 2003 $175,000,000
September 30, 2003 $205,000,000
December 15, 2003 (maturity) $205,000,000
</TABLE>
It is understood and agreed that (a) each amount set
forth in the table above as being applicable at any
date shall be reduced on a dollar-for-dollar basis with
respect to such date by (i) the net proceeds of any
issuance of Subordinated Indebtedness or equity
securities (or the net proceeds of any capital
contribution) received by the Borrower and held on such
date in an Agent's account (as described below under
the caption "Additional Permitted Indebtedness") and
(ii) the face value of any Convertible Subordinated
Debentures redeemed, converted or repurchased on or
prior to such date using Available Funds to the extent
permitted by clause (i) of the first proviso to this
paragraph and (b) once Available Funds have been
reserved in accordance with the foregoing requirement
and for so long as any of the Convertible Subordinated
Debentures are outstanding, the Borrower shall not use
such Available Funds for any purpose other than the
redemption or repurchase of the Convertible
Subordinated Debentures, either at maturity on the
Debenture Maturity Date or pursuant to clause
<PAGE> 15
10
(i) of the first proviso to this paragraph, provided
that (i) notwithstanding the foregoing, the Borrower
shall be entitled to use Available Funds (including
borrowings under the Revolving Facility) in an amount
not to exceed $10,000,000 outstanding at any time to
(A) redeem Convertible Subordinated Debentures pursuant
to the exercise of any Conversion Right or pursuant to
the optional redemption provisions of the Convertible
Subordinated Debentures or (B) make purchases of
Convertible Subordinated Debentures (whether in the
form of open-market purchases or pursuant to a debt
tender offer) at a price no greater than the face
amount of any Convertible Subordinated Debentures so
purchased (plus any accrued interest thereon) (the
"Permitted Debenture Purchases"), provided that any
Available Funds used for the purposes set forth in
clauses (A) and (B) above shall be immediately (or
shall have been) repaid or replaced with an equivalent
amount of any Shareholder Subordinated Loans, (ii) none
of the Available Funds shall be used to redeem or
repurchase any Convertible Subordinated Debentures
unless and until the proceeds of any Subordinated
Indebtedness, any equity issuance (or capital
contribution) and any Shareholder Subordinated Loans
have been applied to make such redemption or repurchase
and (iii) the Borrower shall no longer be obligated to
maintain any Available Funds once the Convertible
Subordinated Debentures have been irrevocably repaid or
repurchased in full.
Interest Rates and
Fees: As set forth on Annex I hereto.
Default Rate: With respect to overdue principal, the applicable
interest rate plus 2.0% per annum and, with respect to
any other overdue amount, the interest rate then
applicable to loans bearing interest based on Chase's
Alternate Base Rate plus 2.0% per annum.
Letters of Credit: Letters of credit under the Revolving
Facility will be issued by Chase or one of its
affiliates (the "Issuing Bank"). Each letter of credit
shall expire not later than the earlier of (a) 12
months after its date of issuance and (b) the fifth
business day prior to the final maturity of the
Revolving Facility.
Drawings under any letter of credit shall be reimbursed
by the Borrower on the same business day. To the extent
that the Borrower does not reimburse the Issuing Bank
on the same business day, the Lenders under the
Revolving Facility shall be irrevocably obligated to
reimburse the Issuing Bank pro rata based upon their
respective Revolving Facility commitments.
<PAGE> 16
11
The issuance of all letters of credit shall be subject
to the customary procedures of the Issuing Bank.
Final Maturity and
Amortization: (A) The Tranche A Facility will mature on the date
that is six and one-half years after the Closing
Date (the "Tranche A Maturity Date") and will
amortize on a quarterly basis under a schedule to
be agreed upon. The amortization payment under the
Tranche A Facility on the Tranche A Maturity Date
will be $150,000,000 (as reduced by any
prepayments after the Closing Date).
(B) The Tranche B Facility will mature on the date
that is eight years after the Closing Date (the
"Tranche B Maturity Date") and will amortize on a
quarterly basis in nominal amounts during the
first seven years of such Facility and thereafter
in quarterly installments under a schedule to be
agreed upon.
(C) The Revolving Facility will mature on the date
that is six and one-half years after the Closing
Date.
Guarantees: All obligations of the Borrower under the Senior
Facilities and under any interest rate protection or
other hedging arrangements entered into with a Lender
(or any affiliate thereof) will be unconditionally
guaranteed (the "Guarantees") by the Company and each
existing and subsequently acquired or organized
domestic (and, to the extent no adverse tax
consequences to the Company or the Borrower would
result therefrom, foreign) subsidiary of the Company,
other than the Receivables Subsidiary and the Saturn
Subsidiary. Except in the case of Specified Permitted
Unsecured Debt (as defined below) consisting of senior
unsecured indebtedness, any guarantees of any
Additional Permitted Indebtedness (as defined below)
will be subordinated to the Guarantees to the same
extent as such underlying obligations are subordinated
to the Senior Facilities.
Security: The Senior Facilities, the Guarantees and any interest
rate protection and other hedging arrangements entered
into with a Lender (or any affiliate thereof) will be
secured by all the assets of the Company, the Borrower
and each other existing and subsequently acquired or
organized domestic (and, to the extent no adverse tax
consequences to the Company or the Borrower would
result therefrom, foreign) subsidiary (other than the
<PAGE> 17
12
Receivables Subsidiary and the Saturn Subsidiary) of
the Company (collectively, the "Collateral"), including
but not limited to (a) a first-priority pledge of (i)
all the capital stock of the Borrower and (ii) all the
capital stock (held by the Company, the Borrower or any
other domestic (or, subject to the foregoing
limitation, foreign) subsidiary of the Company) of each
existing and subsequently acquired or organized
subsidiary (including, without limitation, the
Receivables Subsidiary and the Saturn Subsidiary) of
the Company (which pledge, in the case of any foreign
subsidiary, shall be limited to 65% of the capital
stock of such foreign subsidiary to the extent the
pledge of any greater percentage would result in
adverse tax consequences to the Company or the
Borrower) and (b) perfected first-priority security
interests in, and mortgages on, substantially all
tangible and intangible assets of the Company, the
Borrower and each existing or subsequently acquired or
organized domestic (or, subject to the foregoing
limitation, foreign) subsidiary (other than the
Receivables Subsidiary and the Saturn Subsidiary) of
the Company (including but not limited to (i) a
collateral assignment of the Company's rights in
respect of the Shareholder Subordinated Loan Agreement
and (ii) accounts receivable, inventory, trademarks,
other intellectual property, licensing agreements, real
property, cash and proceeds of the foregoing, but
excluding (A) receivables sold to the Receivables
Subsidiary pursuant to the Receivables Facility in a
maximum amount to be agreed upon, (B) assets financed
through capital leases or purchase money indebtedness
in amounts to be agreed upon, (C) assets securing the
Industrial Revenue Bonds on the Closing Date and (D)
those assets as to which the Agent shall determine in
its reasonable discretion, after consultation with the
Borrower, that the costs of obtaining a security
interest are excessive in relation to the value of the
security afforded thereby).
All the above-described pledges, security interests and
mortgages shall be created on terms, and pursuant to
documentation, satisfactory to the Lenders, and none of
the Collateral shall be subject to any other pledges,
security interests or mortgages, other than certain
customary permitted liens to be agreed upon.
Mandatory Prepayments: Loans under the Term Loan Facilities shall be prepaid
with (a) 75% (subject to reduction based on the
achievement of financial performance tests to be agreed
upon) of Excess Cash Flow (to be defined), commencing
with the 2001 fiscal year, (b) 100% of the net cash
<PAGE> 18
13
proceeds of all asset sales or other dispositions of
property by the Company and its subsidiaries (including
insurance and condemnation proceeds in excess of an
agreed-upon amount, but excluding (i) proceeds
resulting from the Saturn Sale and (ii) receivables
sold to the Receivables Subsidiary pursuant to the
Receivables Facility in a maximum amount to be agreed
upon), subject to limited exceptions to be agreed upon
(including an exception permitting the reinvestment of
such proceeds within one year of the receipt thereof,
subject to procedural requirements to be agreed upon),
and (c) 100% of the net cash proceeds of issuances of
debt obligations of the Company and its subsidiaries
(other than the proceeds of any borrowings under the
Incremental Facility, any Shareholder Subordinated
Loans or any Additional Permitted Indebtedness).
Notwithstanding the foregoing, to the extent any
Advanced Accessories Borrowing has been made, the
proceeds resulting from any Advanced Accessories Sale
up to the amount of such Advanced Accessories Borrowing
shall be applied to repay (a) loans outstanding under
the Revolving Facility and (b) to the extent such loans
are not outstanding at such time and a default or event
of default under the Credit Agreement has occurred and
is continuing, loans outstanding under the Term Loan
Facilities.
The above-described mandatory prepayments (other than
the prepayments of loans under the Revolving Facility
resulting from an Advanced Accessories Sale) shall be
allocated pro rata among each of the Term Loan
Facilities and the Incremental Facility (to the extent
any amounts are outstanding thereunder), subject to the
provisions set forth below under the caption "Special
Application Provisions". Within each Term Loan Facility
and the Incremental Facility, mandatory prepayments
shall be applied pro rata to reduce the remaining
amortization payments under such Term Loan Facility and
the Incremental Facility.
Special Application
Provisions: Any holder of loans under the Tranche B Facility may,
so long as loans are outstanding under the Tranche A
Facility, decline to accept any mandatory prepayment
described above and, under such circumstances, all
amounts that would otherwise be used to prepay the
loans of such Lender under the Tranche B Facility shall
be used to prepay loans under the Tranche A Facility
(and within Tranche A Facility shall be applied pro
rata to reduce the remaining amortization payments
under the Tranche A Facility).
<PAGE> 19
14
Voluntary Prepayments/
Reductions in
Commitments: Voluntary prepayments of borrowings under the Senior
Facilities, and voluntary reductions of the unutilized
portion of the Revolving Facility commitments, will be
permitted at any time, in minimum principal amounts to
be agreed upon, without premium or penalty, subject to
reimbursement of the Lenders' redeployment costs in the
case of a prepayment of Adjusted LIBOR borrowings other
than on the last day of the relevant Interest Period
(to be defined). All voluntary prepayments of the Term
Loan Facilities will be allocated between the Term Loan
Facilities on a pro rata basis, and within each such
Facility, (a) 50% of each such voluntary prepayment
shall be applied to the next two scheduled amortization
payments occurring within the next twelve months under
such Term Loan Facility (provided that if such 50% of
such voluntary prepayment exceeds the amount of such
next two scheduled amortization payments, the amount of
such excess shall be applied in accordance with clause
(b) of this sentence) and (b) the remaining 50% of each
such voluntary prepayment (and any excess referred to
in clause (a) of this sentence) shall be applied pro
rata to the remaining amortization payments under such
Term Loan Facility.
Representations and
Warranties: Usual for facilities and transactions of this type and
others to be reasonably specified by the Agent
(including materiality concepts to be agreed upon),
including, without limitation, accuracy of financial
statements; no material adverse change; absence of
litigation; no violation of agreements or instruments
(including the indenture relating to the Convertible
Subordinated Debentures and any indenture or other
agreement relating to any Additional Permitted
Indebtedness or any Shareholder Subordinated Loans);
maintenance of the status of the Senior Facilities, the
Guarantees and the Collateral, and all associated
rights and obligations, as "Senior Indebtedness" under
the indenture relating to the Convertible Subordinated
Debentures and any indenture or other agreement
relating to any subordinated indebtedness (including
but not limited to any Shareholder Subordinated Loans);
compliance with laws (including but not limited to
ERISA, margin regulations and environmental laws);
payment of taxes; ownership of properties;
inapplicability of the Investment Company Act;
solvency; effectiveness of regulatory approvals; labor
matters; environmental matters; accuracy of
information; validity, priority and perfection of
<PAGE> 20
15
security interests in the collateral; and
enforceability of the Guarantees.
Conditions Precedent to
Initial Borrowing: Usual for facilities and transactions of this type,
those specified below and others to be reasonably
specified by the Agent, including, without limitation,
delivery of satisfactory legal opinions, audited
financial statements and other financial information to
be agreed upon; first-priority perfected security
interests in the Collateral (free and clear of all
liens, subject to limited exceptions to be agreed
upon); execution of the Guarantees, which shall be in
full force and effect; accuracy of representations and
warranties; absence of defaults, prepayment events or
creation of liens under debt instruments (including the
indenture or other governing document relating to any
Shareholder Subordinated Loans, any Additional
Permitted Indebtedness or the Convertible Subordinated
Debentures) or other agreements as a result of the
Transactions and the other transactions contemplated
hereby; evidence of authority; compliance with
applicable laws and regulations (including but not
limited to ERISA, margin regulations and environmental
laws); absence of material adverse change in the
business, operations, properties, assets, financial
condition, contingent liabilities or material
agreements of the Company and its subsidiaries, taken
as a whole, since December 31, 1999 (it being
understood that any change in the business, operations,
properties, assets, financial condition, contingent
liabilities or material agreements of the Company and
its subsidiaries resulting from the Asset Dropdown will
not constitute a material adverse change for purposes
of this condition precedent); payment of fees and
expenses; and obtaining of satisfactory insurance.
The initial borrowing under the Senior Facilities will
also be subject to the applicable conditions precedent
set forth on Annex III hereto.
Affirmative Covenants: Usual for facilities and transactions of this type and
others to be reasonably specified by the Agent (to be
applicable to the Company and its subsidiaries, and
with limited exceptions to be agreed upon), including,
without limitation, maintenance of corporate existence
and rights; performance of obligations; delivery of
audited annual consolidated and consolidating financial
statements for the Company, unaudited quarterly
consolidated financial statements for the Company and
other financial information; delivery of notices of
default, litigation and material adverse change;
<PAGE> 21
16
maintenance of properties in good working order;
maintenance of satisfactory insurance; compliance with
laws; inspection of books and properties; further
assurances; and payment of taxes.
The Credit Agreement will also require that (a) the
Borrower maintain appropriate interest protection and
other hedging arrangements with one or more Lenders (or
affiliates thereof) on terms reasonably satisfactory to
the Agent, (b) the Company complete the Asset Dropdown
as soon as reasonably practicable and in any event on
or prior to the date that is six months after the
Closing Date and (c) the Company obtain (and contribute
to the Borrower as common equity) on or before March 1,
2001, an additional amount of common equity in cash
(whether by means of a capital contribution or the
issuance of common stock of the Company to investors
reasonably satisfactory to the Agent) in an aggregate
amount of at least $5,200,000, all in a manner
reasonably satisfactory to the Agent.
Negative Covenants: Usual for facilities and transactions of this type and
others to be reasonably specified by the Agent (to be
applicable to the Company and its subsidiaries, and
with limited exceptions to be agreed upon), including,
without limitation, limitations on dividends or other
distributions on capital stock (but with an exception
to permit (a) the payment of dividends on the Preferred
Stock (at the rate stated in the charter annexed to the
Recapitalization Agreement as being applicable to the
Preferred Stock) if, at the time of such payment and
after giving effect thereto, no default or event of
default under the Credit Agreement has occurred and is
continuing and the Company is in compliance with the
covenants referred to below under the heading "Selected
Financial Covenants", (b) the making of deferred cash
payments under the Restricted Stock Award if, at the
time of such payments and after giving effect thereto,
no event of default under the Credit Agreement has
occurred and is continuing and (c) the Saturn Proceeds
Distribution); limitations on redemptions and
repurchases of capital stock (which will include
limitations on the redemption or repurchase of the
Preferred Stock); prohibition of prepayments,
redemptions and repurchases of debt (other than (a)
loans under the Senior Facilities and (b) the
retirement, redemption or repurchase of the Convertible
Subordinated Debentures as permitted by the provisions
set forth under the caption "Restricted Cash, Revolving
Facility and/or Receivables Facility Blockage" above or
the caption "Additional Permitted Indebtedness" below);
limitations on liens, sale-leaseback transactions and
<PAGE> 22
17
certain other lease transactions; limitations on loans
and investments; limitations on debt (including
limitations on hedging arrangements, but permitting the
Shareholder Subordinated Loans and the Additional
Permitted Indebtedness); limitations on the issuance of
preferred stock; limitations on capital expenditures;
limitations on recapitalizations, acquisitions and
asset sales (other than (a) sales of receivables
effected pursuant to the Receivables Facility in a
maximum amount to be agreed upon, (b) the Saturn Sale
and the Advanced Accessories Sale and (c) Permitted
Acquisitions); limitations on transactions with
affiliates; limitations on changes in business
conducted by the Borrower and its subsidiaries;
prohibition on the Company's engaging in any activities
other than (a) holding the capital stock of the
Borrower, (b) performing its obligations in respect of
the Restricted Stock Award and (c) activities
incidental to such matters and to the Company's
existence; prohibition on the Saturn Subsidiary's
engaging in any activities other than (a) holding the
equity investments in Saturn, (b) performing its
obligations in respect of the Saturn Sale and the
Saturn Proceeds Distribution and (c) activities
incidental to such matters and to Saturn's existence;
and limitations on amendments of debt and other
material agreements (including, without limitation, the
Shareholder Subordinated Loan Agreement).
Additional Permitted
Indebtedness: The Borrower shall be permitted to incur, and its
subsidiaries shall be permitted to guarantee, (a) up to
$250,000,000 in unsecured senior or subordinated
indebtedness (the "Specified Permitted Unsecured Debt")
in lieu of, and to be used solely for the same purposes
as, Incremental Loans, (b) up to $250,000,000 in
unsecured subordinated indebtedness (the "Additional
Acquisition Indebtedness") to be used solely to make
Permitted Acquisitions and (c) up to $305,000,000 in
unsecured subordinated indebtedness (the "Subordinated
Indebtedness" and, together with the Specified
Permitted Unsecured Debt and the Additional Acquisition
Indebtedness, the "Additional Permitted Indebtedness")
to be used solely to retire, redeem or repurchase
Convertible Subordinated Debentures as permitted by the
provisions set forth under the caption "Restricted
Cash, Revolving Facility and/or Receivables Facility
Blockage" above or the provisions set forth below under
this caption and, prior to such retirement, redemption
or repurchase, to be held in an Agent's account on
terms reasonably satisfactory to the Agent, provided
<PAGE> 23
18
that, in the case of the incurrence of any Specified
Permitted Unsecured Debt or Additional Acquisition
Indebtedness, (i) the Total Leverage Ratio (as defined
below), determined on a pro forma basis after giving
effect to the Permitted Acquisition and/or the
incurrence of the Specified Permitted Unsecured Debt or
the Additional Acquisition Indebtedness, as applicable,
shall be less than the lower of (A) the applicable
ratio that the Company is obligated to maintain at such
time pursuant to the covenants referred to below under
the caption "Selected Financial Covenants" minus 0.50
and (B) 4.25 to 1.00 and (ii) at the time of each such
Permitted Acquisition and or the incurrence of the
Specified Permitted Unsecured Debt or the Additional
Acquisition Indebtedness, as applicable, no default or
event of default under the Credit Agreement shall have
occurred and be continuing.
To the extent that the Borrower borrows under the
Incremental Facility, the principal amount of
indebtedness that the Borrower may incur as Specified
Permitted Unsecured Debt will be reduced on a
dollar-for-dollar basis.
The Company shall only be entitled, and shall be
obligated, to incur indebtedness in the form of
Shareholder Subordinated Loans in the following
circumstances: (a) if, on the earlier of the Debenture
Maturity Date and the date that is 30 days prior to the
expiration of the commitments under the Shareholder
Subordinated Loan Agreement, the Convertible
Subordinated Debentures have not been redeemed or
repurchased pursuant to the exercise of the Conversion
Right or otherwise, the Company will obtain Shareholder
Subordinated Loans in an aggregate principal amount
equal to $100,000,000 (less the aggregate amount of any
Shareholder Subordinated Loans made prior to such
time); (b) upon any conversion of any Convertible
Subordinated Debentures on or following the Closing
Date and prior to the Debenture Maturity Date pursuant
to the Conversion Right, the Borrower will obtain
Shareholder Subordinated Loans in an aggregate
principal amount equal to the lesser of (i) the amount
of cash payable to the Debenture Holders in respect of
the exercise of such Conversion Right less the amount
of any Subordinated Indebtedness held in an Agent's
account at such time and (ii) $100,000,000 (less the
aggregate amount of any Shareholder Subordinated Loans
made prior to such time); and (c) if Available Funds
have been used to make Permitted Debenture Purchases,
the Company shall obtain, at any time it is requested
to do so by the Agent or the Required Lenders,
Shareholder Subordinated Loans in the amount of such
<PAGE> 24
19
Available Funds so used; and (d) the Company may obtain
Shareholder Subordinated Loans in the form of
Subordinated Indebtedness (as contemplated by clause
(c) of the first paragraph of this caption) or in such
other circumstances as the Agent agrees, provided that
(i) the aggregate amount of Shareholder Subordinated
Loans made pursuant to clauses (a), (b), (c) and (d)
above shall not exceed $100,000,000, (ii)
notwithstanding the foregoing, unless otherwise
requested by the Agents or the Required Lenders
pursuant to clause (c) above, the Company shall not be
obligated to obtain Shareholder Subordinated Loans if
the aggregate principal amount of such loans then
obtained would be less than $10,000,000 and (iii)
notwithstanding the foregoing, (A) if an event of
default has occurred and is continuing under the Credit
Agreement, MCorp shall not be obligated to make
Shareholder Subordinated Loans except to the extent
necessary (x) to fund the aggregate amount of cash
payable to Debenture Holders who have exercised their
Conversion Right (whether before or after the
occurrence of such event of default) and (y) on the
earlier of the Debenture Maturity Date and the date
that is 30 days prior to the expiration of the
commitments under the Shareholder Subordinated Loan
Agreement, to pay the aggregate amount that is (or will
be) payable to Debenture Holders in respect of the
maturity of any Convertible Subordinated Debentures
that remain outstanding on such date and (B) if the
Borrower has been declared bankrupt by a court of
competent jurisdiction (and has not been discharged
from such bankruptcy), MCorp shall not be obligated to
make Shareholder Subordinated Loans. The Borrower shall
(a) hold the proceeds of all Shareholder Subordinated
Loans in an Agent's account on terms reasonably
acceptable to the Agent prior to the use thereof and
(b) use such proceeds only for such purposes as are
agreed upon between the Borrower and the Agent.
The terms of any Additional Permitted Indebtedness
shall be reasonably acceptable to the Agent, provided
that such terms shall (a) provide for a bullet maturity
on a date that is at least 12 months after the Tranche
B Maturity Date, (b) accrue interest at interest rates
determined in good faith by the Borrower at the time of
issuance to be market rates of interest, (c) not
require any mandatory prepayment (except upon
acceleration on default and in other customary limited
circumstances to be agreed upon) and (d) except in the
case of Specified Permitted Unsecured Debt consisting
of senior unsecured indebtedness, contain subordination
<PAGE> 25
20
and related provisions satisfying certain criteria to
be agreed upon.
Selected Financial
Covenants: Usual for facilities and transactions of this type,
including, without limitation, (a) a maximum total
leverage ratio (the "Total Leverage Ratio"), the
definition of which will be agreed upon (it being
understood that such ratio shall be calculated (i) at
any time by including the amount of the Receivables
Facility at such time and (ii) by including pro forma
adjustments to consolidated EBITDA (to be defined) to
the extent permitted by Regulation S-X), (b) a minimum
interest (including, without limitation, any dividends
on the Preferred Stock) coverage ratio and (c)
limitations on capital expenditures, in each case with
definitions and levels to be agreed upon.
Events of Default: Usual for facilities and transactions of this type and
others to be reasonably specified by the Agent,
including, without limitation, nonpayment of principal
or interest, violation of covenants, incorrectness of
representations and warranties in any material respect,
cross default and cross acceleration (including to the
Receivables Facility), defaults by MCorp under the
Shareholder Subordinated Loan Agreement, bankruptcy,
material judgments, ERISA, actual or asserted
invalidity of security documents, guarantees or the
subordination provisions of the Convertible
Subordinated Debentures, the Shareholder Subordinated
Loans or the Additional Permitted Indebtedness and
Change in Control (the definition of which will be
agreed upon, but will in any event include the failure
by Heartland at any time to control the board of
directors of the Company).
Voting: Amendments and waivers of the Credit Agreement (to be
defined) and the other definitive credit documentation
will require the approval of Lenders holding more than
50% of the aggregate amount of the loans and
commitments under the Senior Facilities (the "Required
Lenders"), except that (a) the consent of each Lender
adversely affected thereby shall be required with
respect to, among other things, (i) increases in
commitments, (ii) reductions of principal, interest or
fees, (iii) extensions of scheduled amortization or
final maturity and (iv) releases of all or
substantially all the Collateral or the guarantees and
(b) the consent of Lenders holding more than 50% of
each adversely affected tranche of the Term Loan
Facilities shall be required with respect to any
amendment that changes the allocation between the Term
<PAGE> 26
21
Loan Facilities of any voluntary or mandatory
prepayments of loans under the Term Loan Facilities (or
the application of such prepayments to the remaining
amortization payments under the Term Loan Facilities).
Cost and Yield
Protection: Usual for facilities and transactions of this type.
Assignments and
Participations: The Lenders will be permitted to assign loans and
commitments to other Lenders (or their affiliates) or
to any Federal Reserve Bank without restriction, or to
other financial institutions with the consent of the
Borrower and the Agent, in each case not to be
unreasonably withheld. Each assignment (except to other
Lenders or their affiliates) will be in a minimum
amount of (a) $10,000,000 in respect of loans under the
Tranche A Facility and the Revolving Facility and (b)
$3,000,000 in respect of loans under the Tranche B
Facility, provided that the Agent shall have the right
to reduce the amounts in clauses (a) and (b) above to
$5,000,000 and $1,000,000, respectively, if the Agent
reasonably determines, in consultation with the
Borrower, that such reductions are necessary to achieve
a successful syndication of any of the Senior
Facilities. The Agent will receive a processing and
recordation fee of $3,500, payable by the assignor and
or the assignee, with each assignment. Assignments will
be by novation and will not be required to be pro rata
among the Senior Facilities.
The Lenders will be permitted to participate loans and
commitments without restriction to other financial
institutions. Voting rights of participants shall be
limited to matters in respect of (a) increases in
commitments, (b) reductions of principal, interest or
fees, (c) extensions of scheduled amortization or final
maturity and (d) releases of all or substantially all
the Collateral or the guarantees.
Expenses and
Indemnification: All reasonable out-of-pocket expenses (including,
without limitation, expenses incurred in connection
with due diligence) of the Arranger and the Agent
associated with the syndication of the Senior
Facilities and with the preparation, execution and
delivery, administration, waiver or modification and
enforcement of the Credit Agreement and the other
documentation contemplated hereby and thereby
(including the reasonable fees, disbursements and other
charges of counsel) are to be paid by the Borrower. In
<PAGE> 27
22
addition, all reasonable out-of-pocket expenses of the
Lenders for enforcement costs and documentary taxes
associated with the Senior Facilities are to be paid by
the Borrower.
The Borrower will indemnify the Arranger, the Agent and
the other Lenders and hold them harmless from and
against all costs, expenses (including reasonable fees,
disbursements and other charges of counsel) and
liabilities of the Arranger, the Agent and the other
Lenders arising out of or relating to any claim or any
litigation or other proceedings (regardless of whether
the Arranger, the Agent or any other Lender is a party
thereto) that relate to the proposed transactions,
including the financing contemplated hereby, the
Recapitalization or any transactions connected
therewith, provided that none of the Arranger, the
Agent or any other Lender will be indemnified for its
gross negligence or willful misconduct.
Governing Law and Forum: New York.
Counsel to Agent and
Arranger: Cravath, Swaine & Moore.
<PAGE> 28
ANNEX I
Interest Rates: The interest rates under the Senior Facilities will be
as follows:
Tranche A Facility
At the option of the Borrower, Adjusted LIBOR plus
3.00% or ABR plus 2.00%.
Tranche B Facility
At the option of the Borrower, Adjusted LIBOR plus
3.75% or ABR plus 2.75%.
Revolving Facility
At the option of the Borrower, Adjusted LIBOR plus
3.00% or ABR plus 2.00%.
All Senior Facilities
The Borrower may elect interest periods of 1, 2, 3 or 6
months (or 9 or 12 months, if available from all the
Lenders) for Adjusted LIBOR borrowings.
Calculation of interest shall be on the basis of actual
days elapsed in a year of 360 days (or 365 or 366 days,
as the case may be, in the case of ABR loans based on
the Prime Rate) and interest shall be payable at the
end of each interest period and, in any event, at least
every 3 months or 90 days, as the case may be.
ABR is the Alternate Base Rate, which is the highest of
Chase's Prime Rate, the Federal Funds Effective Rate
plus 1/2 of 1% and the Base CD Rate plus 1%.
Adjusted LIBOR and the Base CD Rate will at all times
include statutory reserves (and, in the case of the
Base CD Rate, FDIC assessment rates).
Letter of Credit Fee: A per annum fee equal to the spread over Adjusted LIBOR
under the Revolving Facility will accrue on the
aggregate face amount of outstanding letters of credit
under the Revolving Facility, payable in arrears at the
end of each quarter and upon the termination of the
Revolving Facility, in each case for the actual number
of days elapsed over a 360-day year. Such fees shall be
distributed to the Lenders participating in the
Revolving Facility pro rata in accordance with the
amount of each such Lender's Revolving Facility
commitment. In addition, the Borrower shall pay to the
Issuing Bank, for its own account, (a) a fronting fee
of 0.25% per annum on the aggregate face amount of
outstanding letters of credit, payable in arrears at
the end of each quarter and upon the termination of the
Revolving Facility, in each case for the actual number
of days elapsed over a 360-day year, and (b) customary
issuance and administration fees.
Commitment Fees: With respect to any day, (a) 0.75% per annum on the
undrawn portion of the commitments in respect of the
Revolving Facility on such day if Revolving Facility
loans and letters of credit representing less than 50%
of the Revolving Facility commitments are outstanding
as of the end of such day and (b) 0.50% per annum on
the undrawn portion of the commitments in respect of
the Revolving Facility on such day if Revolving
Facility loans and letters of credit representing
greater than or equal to 50% of the Revolving Facility
<PAGE> 29
2
commitments are outstanding as of the end of such day,
in each case commencing to accrue on the Closing Date
and payable quarterly in arrears after the Closing
Date.
Adjustments to Interest
Rates and Commitment
Fees: The interest rates and the commitment fees in respect
of the Tranche A Facility and the Revolving Facility
(but not the Tranche B Facility) will be subject to
reduction after a date to be agreed upon based upon the
ratio of (a) consolidated total debt as of the date of
determination to (b) consolidated EBITDA for the period
of four consecutive fiscal quarters most recently ended
as of such date of determination, provided that the
aggregate reduction in the interest rates under either
the Tranche A Facility or the Revolving Facility shall
not exceed 1.00%.
<PAGE> 30
ANNEX II
Estimated Sources and Uses of Funds on the Closing Date
-------------------------------------------------------
(in millions of dollars)
<TABLE>
<CAPTION>
Uses of Funds Sources of Funds
----------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
Merger Consideration (net of option $ 609.2(1) Cash $ 3.7
proceeds)
Preferred Stock 36.1 Specified Asset Sale Proceeds 125.02
Repay Repaid Indebtedness 994.5 Convertible Subordinated Debentures 305.0
Convertible Subordinated Debentures 305.0 Industrial Revenue Bonds 21.5
Industrial Revenue Bonds 21.5 Restricted Stock Award 44.1(1)
Restricted Stock Award 44.1(1) Revolving Facility Loans 0.65(3)
Rollover Equity 90.6(1) Tranche A Facility Loans 550.0
Transaction Costs 78.9 Tranche B Facility Loans 450.0
---------- Preferred Stock 36.1
Receivables Facility Proceeds 120.03
Proceeds of Saturn Sale 0.04
Rollover Equity 90.61
Equity Contribution 433.2(5)
--------
Total Uses $ 2,179.9 Total Sources $2,179.9
========== ========
</TABLE>
--------
(1) Subject to increase in accordance with the Recapitalization Agreement if
the Saturn Sale is completed prior to the Closing Date.
(2) Assumes Advanced Accessories Sale is completed prior to the Closing Date.
(3) Amount expected to be drawn under the $300,000,000 Revolving Facility on
the Closing Date to fund the Transactions. Up to $20,000,000 may be drawn
under the Revolving Facility in connection with a Receivables Short-Fall
Borrowing, and up to $9,000,000 may be drawn under the Revolving Facility
in connection with an Advanced Accessories Borrowing.
(4) Subject to increase if the Saturn Sale is consummated prior to the Closing
Date.
(5) Subject to reduction by up to $18,000,000 based upon the Saturn Sale
occurring prior to the Closing Date.
<PAGE> 31
ANNEX III
Project Tailor
$1,300,000,000 Senior Secured Credit Facilities
$175,000,000 Receivables Purchase Facility
Summary of Additional Conditions Precedent
Except as otherwise set forth below, the initial borrowing under each of
the Facilities shall be subject to the following conditions precedent:
1. The Recapitalization shall be consummated simultaneously with the
closing of the Senior Facilities in accordance with applicable law, the
Recapitalization Agreement and all other related documentation, and the Lenders
shall be satisfied that the Transaction Costs payable on the Closing Date shall
not exceed $78,900,000.
2. With respect to the Senior Facilities, the Borrower shall have received
not less than $100,000,000 in cash proceeds from sales of receivables under the
Receivables Facility. The terms and conditions of the Receivables Facility
(including but not limited to terms and conditions relating to interest rates,
fees, amortization, maturity, redemption, covenants, events of default and
remedies) shall be reasonably satisfactory in all respects to the Agent (it
being understood that the terms and conditions set forth in Exhibit B to the
Commitment Letter to which this Annex is attached are satisfactory to the
Agent).
3. After giving effect to the Transactions and the other transactions
contemplated hereby, the Company and its subsidiaries shall have outstanding no
indebtedness (including any receivables facility or securitization) or preferred
stock other than (a) the loans and other extensions of credit under the Senior
Facilities, (b) the Convertible Subordinated Debentures, (c) the Preferred
Stock, (d) the Restricted Stock Award, (e) the Industrial Revenue Bonds and (f)
other limited indebtedness to be agreed upon.
4. The Agent shall be reasonably satisfied with the terms and conditions of
(a) the Recapitalization Agreement and all related documentation, (b) the
Shareholder Subordinated Loan Agreement and the terms of the Shareholder
Subordinated Loans set forth therein, (c) the Preferred Stock, (d) the
Restricted Stock Award and (e) the terms and conditions of all indebtedness to
remain outstanding after the Closing Date (it being understood and agreed that
the terms and conditions of the Recapitalization Agreement, the Shareholder
Subordinated Loan Agreement, the Shareholder Subordinated Loans, the Preferred
Stock, the Restricted Stock Award, the Industrial Revenue Bonds and the
Convertible Subordinated Debentures, in each case as provided to the Agent prior
to the date hereof, are acceptable to the Agent, and the parties thereto shall
not be entitled to effect any material amendments or waivers to such documents
not approved by the Agent).
5. The Equity Contribution and the Specified Asset Sale Proceeds shall have
been received, the Company or the Borrower shall hold any Cash and the
Shareholder Subordinated Loan Agreement shall have been entered into.
6. The Lenders shall have received unaudited consolidated balance sheets
and related statements of income, stockholders' equity and cash flows of the
Company for (a) each 2000 fiscal quarter ended 30 days before the Closing Date
and (b) each fiscal month after the most recent 2000 fiscal quarter for which
financial statements were received by the Lenders as described above and ended
30 days before the Closing Date.
7. The Lenders shall have received a pro forma consolidated balance sheet
of the Company as of the Closing Date, after giving effect to the Transactions,
which balance sheet shall not be materially inconsistent with the forecasts
previously provided to the Lenders.
<PAGE> 32
2
8. The Agent shall not have discovered or otherwise become aware of
information not previously disclosed to the Agent that the Agent believes to be
inconsistent, in a manner that is material and adverse, with its understanding,
based on information provided to the Agent prior to the date hereof, as to the
amount and nature of the environmental and employee health and safety exposures
to which the Company and its subsidiaries may be subject after giving effect to
the Transactions, and the plans of the Company or such subsidiaries with respect
thereto. To the extent requested by the Agent, the Lenders shall have received
environmental assessments (including, if applicable, Phase I reports) reasonably
satisfactory to the Agent from an environmental consulting firm reasonably
satisfactory to the Agent.
9. There shall be no litigation or administrative proceeding that would
reasonably be expected to have a material adverse effect on (a) the business,
operations, properties, assets, financial condition, contingent liabilities or
material agreements of the Company and its subsidiaries, taken as a whole, after
giving effect to the Transactions or (b) the ability of the parties to
consummate the Transactions.
10. The Agent shall not have discovered or otherwise become aware of
information not previously disclosed to the Agent that the Agent believes to be
inconsistent, in a manner that is material and adverse, with its understanding,
based on information provided to the Agent prior to the date hereof, as to the
tax position and the contingent tax and other liabilities of the Company and its
subsidiaries after giving effect to the Transactions, and the plans of the
Company with respect thereto. The Lenders shall be reasonably satisfied in all
respects with any tax sharing agreements to which the Company and its
subsidiaries will be parties following the Closing Date.
11. The Lenders shall have received a solvency letter, in form and
substance and from an independent evaluation firm reasonably satisfactory to the
Agent, together with such other evidence reasonably requested by the Lenders,
confirming the solvency of the Company and its subsidiaries on a consolidated
basis after giving effect to the Transactions.
12. The consummation of the Transactions shall not (a) violate any
applicable law, statute, rule or regulation or (b) conflict with, or result in a
default or event of default under, any material agreement of the Company or any
of its subsidiaries, after giving effect to the Transactions, and the Agent
shall have received one or more legal opinions to such effect, reasonably
satisfactory to the Agent, from counsel to the Company reasonably satisfactory
to the Agent.
13. All requisite material governmental authorities and third parties shall
have approved or consented to the Transactions to the extent required, all
applicable appeal periods shall have expired and there shall be no governmental
or judicial action, actual or threatened, that could reasonably be expected to
restrain, prevent or impose burdensome conditions on the Transactions or the
other transactions contemplated hereby.
14. The Lenders shall have received a certificate of a financial officer of
the Company with respect to the Total Leverage Ratio for the twelve-month period
ending on the last day of the most recently completed fiscal month that ended at
least 30 days prior to the Closing Date, and such Total Leverage Ratio shall be
less than 4.50 to 1.00 (it being understood that, for purposes of calculating
such Total Leverage Ratio, pro forma adjustments to consolidated EBITDA related
to the Transactions (which shall be made only to the extent previously disclosed
to the Agent or otherwise reasonably agreed by the Agent) shall not exceed
$11,600,000).
<PAGE> 33
ANNEX IV
Titan International
Advanced Accessories
Delco Remy International
MSX International
MascoTech Coatings, Inc.
Qualitor, Inc.
Tower Automotive
International Crankshaft, Inc.
<PAGE> 34
EXHIBIT B
Project Tailor
$175,000,000 Receivables Purchase Facility
Summary of Principal Terms and Conditions
I. DESCRIPTION OF THE TRANSACTIONS
Recapitalization
and other Transactions: As set forth in Exhibit A to the Commitment Letter
to which this Exhibit B is attached. Terms used
but not defined herein shall have the meanings
assigned to such terms in such Exhibit A.
II. GENERAL STRUCTURE
Facility: A trade receivables purchase facility (the
"Receivables Facility"). Sellers: The Borrower
and its subsidiaries designated as
Receivables Subsidiary: A newly formed, wholly owned, bankruptcy- remote,
special-purpose subsidiary of the Borrower
(collectively, the "Receivables Subsidiary"). The
Receivables Subsidiary will (a) satisfy certain
criteria acceptable to the Funding Agent designed
to ensure that the assets and liabilities of the
Receivables Subsidiary will not be substantively
consolidated with those of the Sellers and (b)
<PAGE> 35
2
purchase receivables and Related Security (to be
defined) from the Sellers in "true sale"
transactions as described below.
The Sellers will initially capitalize the
Receivables Subsidiary with cash in an amount
sufficient, together with amounts available under
the Receivables Facility, to fund the purchases
under the Receivables Purchase Agreement (the
"RPA"). Purchases under the RPA will be made with
customary limited recourse to the Sellers to the
extent necessary to preserve the nature of the
transaction as a true sale.
Receivables Facility
Description: The Sellers will sell the Eligible Receivables
(as The Sellers will sell the Eligible
Receivables (as defined below) in existence on
the Closing Date and arising on each day
thereafter to the Receivables Subsidiary pursuant
to the RPA (such Eligible Receivables so sold,
the Receivables"). The Receivables Subsidiary
will then transfer Transferred Interests (as
defined below) to the Purchasers (as defined
below) pursuant to a Receivables Transfer
Agreement (the "RTA"). The RPA and the RTA will
each contain terms and conditions customary for
agreements of their type, and others to be
specified by the Arranger.
Receivables Facility Limit: Up to $175,000,000 (the "Facility Limit"). The
Facility Limit is subject to receipt and review
of receivables portfolio information and may be
increased or decreased based on that review, but
assuming sufficient Eligible Receivables, will
not be reduced below an amount that would provide
$100,000,000 (but is expected to be $120,000,000)
of funding on the Closing Date.
Term of the Receivables
Facility: Five years.
Purchasers: Park Avenue Receivables Corporation ("PARCO") and
other bank-sponsored multi-seller commercial
paper conduits (collectively, with PARCO, the
"Purchasers") acceptable to the Funding Agent and
the Arranger, under an uncommitted (offering
basis) facility.
<PAGE> 36
3
Arranger: Chase Securities Inc. (the "Arranger").
Administrative Agent: Chase (the "Administrative Agent").
Funding Agent: Chase (the "Funding Agent").
Collection Agent: Initially the Borrower, subject to the right of
the Funding Agent to transfer the servicing
functions upon the occurrence of a Collection
Agent Default (as defined below).
Description of APA Facility: A committed facility (the APA Facility") pursuant
to which the APA Banks (as defined below) are
obligated, following the occurrence of certain
events, to purchase Transferred Interests from (i)
the Purchasers in order to fund maturing
commercial paper ("CP") and (ii) the Receivables
Subsidiary if the Purchasers elect not to
purchase. The purchases of Transferred Interests
by the APA Banks shall be made on a pro rata
basis.
Transferred Interest: The term "Transferred Interest" shall mean an
undivided percentage ownership interest in all
outstanding Receivables as of any day equal to the
Percentage Factor (as defined below) on such day.
Aggregate APA Commitment: $178,500,000 (102% of the Facility Limit to cover
CP discount).
APA Banks: Chase (on behalf of PARCO) and other financial
institutions (on behalf of PARCO and the other
Purchasers) (collectively, including Chase, the
"APA Banks") acceptable to the Purchasers, the
Funding Agent and the Arranger that have
short-term deposit ratings of at least A-1 by
Standard & Poor's Ratings Group ("S&P") and P-1
by Moody's Investors Service, Inc. ("Moody's").
Term of the APA Facility: Five Years.
Purchase of Transferred
Interests from a Purchaser: Each Purchaser may, at any time in its
discretion, assign (without recourse,
representation or warranty) all of its right,
title and interest in its Transferred Interests
to the APA Banks, provided that no such
assignment will be made on any day if (i) the
relevant Purchaser is the subject of any
bankruptcy, insolvency, reorganization or similar
proceedings on such day or (ii) with respect to
<PAGE> 37
4
any APA Bank, if such APA Bank's pro rata share
of the aggregate Purchase Price (as defined
below) would exceed the unused amount of such APA
Bank's commitment on such day.
The aggregate "Purchase Price" for any assignment
of a Transferred Interest to the APA Banks will be
calculated on the basis of a formula which is
based on performing, non-Defaulted Receivables (as
defined below).
Fees: The Purchasers will charge a usage fee of 1.50%
on the Net Investment (as defined below).
Additionally, the Purchasers will charge an
unused commitment fee of 0.50% per annum on the
difference between (a) the aggregate commitments
in respect of the APA Facility and (b) the Net
Investment. All fees are payable monthly to the
Funding Agent.
Interest Rates: The interest rates applicable to the Receivables
Facility will be, the CP Rate (as defined below),
if the purchase of applicable Transferred
Interests has been funded with the proceeds of a
CP issuance, or if the funding takes place under
the APA Facility, (a) the Adjusted LIBOR Rate
plus a percentage to be agreed upon within the
range of 2.25-2.50% per annum or (b) BR (as
defined below) plus a percentage to be agreed upon
within the range of 1.25-1.50% per annum.
The "CP Rate" will be equivalent to the weighted
average of the discount rates on all CP (including
dealer fees) issued by the Purchasers at a
discount and outstanding during the related
settlement period, converted to an annual
yield-equivalent rate on the basis of a 360-day
year.
Calculation of interest shall be on the basis of
actual days elapsed in a year of 360 days (or 365
or 366 days, as the case may be, in the case of BR
loans based on the Prime Rate) and interest shall
be payable on the last day of each interest
period.
"BR" is the Base Rate, which is the higher of (a)
Chase's Prime Rate or (b) the Federal Funds
Effective Rate plus 1.50% per annum.
<PAGE> 38
5
The "Adjusted LIBOR Rate" will at all times
include statutory reserves, if any.
Notwithstanding the foregoing, after the
declaration of a Termination Event, the applicable
interest rate will be BR plus 2.00% per annum.
Funding Timetable: The Purchasers will give notice to the Funding
Agent (a) by 1:00 P.M. (New York City time) two
(2) business days prior to a CP funding (or, in
the case of the initial funding, by 9:00 A.M. on
the Closing Date), or (b) by 1:00 P.M. (New York
City time) for advance(s) that same business day
under BR pricing, or (c) by 1:00 P.M. (New York
City time) three (3) Adjusted LIBOR business days
prior to a Eurodollar funding. The Funding Agent
will make such funds available by 2:00 P.M. (New
York City time) to the Purchasers or the
depository designated by the Purchasers.
Each assignment by a Purchaser to the APA Banks
will be made on a pro rata basis. However, should
an APA Bank in the syndicate fail to fund, all of
the other non-defaulting APA Banks will have the
obligation to fund the shortfall, on a pro rata
basis, of the non-defaulting APA Banks, up to the
extent of each APA Bank's applicable commitment.
Priority and Assets: The Purchasers shall have a first-priority
perfected interest in all the following (the
"Assets"), none of which shall be subject to any
other lien (except as agreed to by the Purchasers
and permitted by the definitive documentation):
(a) all Receivables purchased under the RPA at
any time on or after the Closing Date, (b) all
the Receivables Subsidiary's right, title and
interest in and to the RPA and related agreements
and (c) all Collections. The Receivables
Subsidiary will also grant to the Purchasers a
first-priority perfected security interest in all
other unencumbered property of the Receivables
Subsidiary to secure its obligations under the
RTA.
Eligible Receivables: The criteria for an "Eligible Receivable" will
include, but not be limited to, a receivable:
1. which is subject to a valid sale and
assignment from the originating Seller to the
Receivables Subsidiary under the RPA which
transfers to the Receivables
<PAGE> 39
6
Subsidiary good title thereto, free and clear
of all liens other than those imposed in
connection with the facility and other
permitted liens;
2. from an obligor which is a United States
resident and is not a government or
government agency or an affiliate of any of
the Sellers, the Receivables Subsidiary or
the Purchasers;
3. which has been billed and is required to be
paid in full in accordance with the terms of
the various contracts, however, not to
exceed 120 days;
4. which is denominated and payable only in
United States dollars in the United States;
5. which is not a Delinquent Receivable or
Defaulted Receivable (in each case, as
defined below);
6. which arises pursuant to a contract with
respect to which the originating Seller has
performed all obligations required to be
performed by it thereunder, including,
without limitation, shipment of merchandise
and/or the performance of services purchased
thereunder;
7. which if purchased with the proceeds of
commercial paper would constitute a "current
transaction" within the meaning of section
3(a)(3) of the Securities Act of 1933, as
amended;
8. which is an "account" or "general
intangible" within the meaning of section
9-106 of the UCC of all applicable
jurisdictions;
9. which arises under a contract which,
together with such receivable, is in full
force and effect and constitutes the legal,
valid and binding obligation of the related
obligor enforceable against such obligor in
<PAGE> 40
7
accordance with its terms and is subject to
no dispute, offset, counterclaim or other
defense other than unexpired volume or
pricing discounts or rebates to which the
obligor thereon may be entitled, provided
that only such portion of such receivable
subject to any such dispute, offset,
counterclaim or defense shall be deemed
ineligible under this criterion;
10. which, together with the contract related
thereto, does not contravene in any material
respect any laws, rules or regulations
applicable thereto;
11. which satisfied in all material respects all
applicable requirements of the originating
Seller's credit and collection policy;
12. which was generated in the ordinary course
of the originating Seller's business;
13. from an obligor which has been directed to
make all payments to a specified account of
the originating Seller covered under a
Lockbox Agreement (as defined below);
14. which has not been compromised, adjusted or
modified for credit reasons, provided that
only such portion of such receivable that has
been so compromised, adjusted or modified
shall be deemed ineligible pursuant to this
criterion;
15. which the validity of the assignment thereof
does not violate any law and does not
require the consent of any person;
16. from an obligor, of which not more than 35%
of that obligor's aggregate receivables are
more than 120 days past their original
invoice date;
17. which is an "eligible asset" within the
meaning of Rule 3a-7 of the Investment
Company Act of 1940, as amended; and
18. which does not arise under a contract that
has been rewritten.
Collection: "Collections" means, with respect to any
Receivable, all cash collections and other cash
proceeds of a Receivable including, without
<PAGE> 41
8
limitation, all finance charges, if any, and cash
proceeds of the related security with respect to
such Receivable, and any Deemed Collections (as
defined below) of such Receivable.
Deemed Collections: A "Deemed Collection" means that if on any day the
outstanding balance of a Receivable is reduced or
canceled as a result of either (i) any defective,
rejected or returned goods or services, any
chargeback, allowance, or any billing or other
discount, rebate or adjustment by the originating
Seller, the Receivables Subsidiary or the
Collection Agent, (ii) a setoff or offset in
respect of any claim by any person (whether such
claim arises out of the same or a related
transaction or an unrelated transaction) or (iii)
if any representation or warranty made by the
Sellers, Receivables Subsidiary or Collection
Agent becomes untrue with respect to a Receivable,
except in certain circumstances, the Receivables
Subsidiary shall be deemed to have received on
such day a collection of such Receivable in the
amount of such reduction or cancelation and shall
be obliged to pay such amount to the Funding
Agent.
Collection Account: An account (the "Collection Account") established
for the benefit of the Purchasers for the purpose
of holding all Collections under certain
circumstances. The Collection Agent will forward
all Collections from the Receivables as soon as
practical (but in no event later than one
business day) to the Collection Account.
During the revolving period of the Receivables
Facility, the Purchasers' share of Collections in
excess of discount and Servicing Fee (as defined
below) will be reinvested in newly originated
receivables. During the liquidation period of the
Receivables Facility, the Collection Agent will
deposit to the Collection Account the Purchasers'
and/or the APA Bank's Percentage Factor of all
Collections received daily.
Lockbox Agreements: Each bank at which the Sellers maintain accounts
for the purpose of receiving Collections from
receivables (a "Lockbox Bank") will be required
to enter into an agreement with the Purchasers
acknowledging the ownership and control of such
accounts by the Receivables Subsidiary and the
pledge of such accounts to the Funding Agent for
the benefit of the Purchasers. The Funding Agent
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will be permitted to give instructions to the
Lockbox Banks upon a Collection Agent Default or
certain Termination Events or Potential
Termination Events.
Collection Agent Defaults: Customary for transactions of this type
(including notice and cure periods where
applicable), including bankruptcy of the
Collection Agent, failure of the Collection Agent
to pay any amounts due under the transaction
documents, failure of the Collection Agent to
perform its duties under the transaction
documents, and failure by the Collection Agent to
deliver any Weekly Report or Settlement Report (in
each case, as defined below) within a reasonable
time frame.
III. RECEIVABLES FACILITY CALCULATIONS
Calculation of Transferred
Interest and Distribution
of Collections in Respect of
Net Investment:
Net Investment: The "Net Investment" is the sum of amounts paid to
the Receivables Subsidiary for each Transferred
Interest minus Collections (as defined below)
applied by the Funding Agent to reduce the Net
Investment.
Percentage Factor: The Percentage Factor represents the Purchasers'
ownership interest in the pool of Receivables,
expressed as a percentage, and is calculated as
the Net Investment plus Total Reserves, divided
by the Net Receivable Balance. The Purchasers'
share of Collections is based on the Percentage
Factor.
Total Reserves: The "Total Reserves" equal the sum of amounts
corresponding to (a) the Net Receivables Balance
times the sum of (i) the Loss and Dilution
Reserve percentage and (ii) the Carrying Cost
Reserve percentage and (b) the amount of
outstanding Receivables times the Servicing Fee
Reserve Ratio (as defined below).
Net Receivables Balance: The "Net Receivables Balance" represents the
aggregate balance of Eligible Receivables
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10
less amounts in excess of the Concentration
Factor (as defined below).
Concentration Factor: Means, as of any Settlement Report date and
continuing to, but not including, the next
Settlement Report date, for each obligor, 3%.
Special Obligors are obligors designated by the
Funding Agent which will each be permitted to
exceed the Concentration Factor. Special Obligors
will be Daimler-Chrysler, General Motors, Ford,
New Venture Gear and any other obligor approved
by the Funding Agent based upon the credit
quality of such obligor.
Delinquent Receivable: "Delinquent Receivable" means a receivable as to
which any payment, or part thereof, remains unpaid
for a number of days to be agreed upon or more
from the original invoice date.
Defaulted Receivable: "Defaulted Receivable" means a receivable (a) as
to which any payment, or part thereof, remains
unpaid for a number of days to be agreed upon or
more from the original invoice date for such
receivable; (b) as to which an event of
bankruptcy has occurred and is continuing with
respect to the obligor thereof; (c) which has
been identified by the Receivables Subsidiary or
the Seller originating such receivable as
uncollectible; or (d) which, consistent with the
originating Seller's credit and collection
policy, should be written off as uncollectible.
IV. RESERVES The Receivables Facility will be structured to a
single A equivalent in accordance with rating
agency criteria for trade receivables
transactions.
Loss and Dilution Reserve: The greater of (a) the sum of 12% and the average
Dilution Ratio (as defined below) over the
immediately preceding 12 month period (the
"Minimum Loss Reserve") and (b) the Loss Reserve
Ratio plus the Dilution Reserve Ratio.
"Loss Reserve Ratio" equals the product of (a) 2
times the highest 3- month average Default Ratio
during the preceding 12 months time and (b) the
loss horizon ratio. The Default Ratio is equal to
the amount of receivables aged for a number of
days to be agreed upon past the invoice date,
divided by the aggregate amount of receivables
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originated four months prior. The "loss horizon
ratio" is equal to the aggregate principal amount
of receivables originated during the preceding
4.25 months divided by the Net Receivables
Balance.
"Dilution Reserve Ratio" equals the product of (a)
Days Sales Outstanding/30 and (b) the sum of 2
times the Dilution Ratio plus the dilution
volatility ratio. The Dilution Ratio is equal to
the aggregate amount of dilution adjustments for
each month, divided by the aggregate amount of
receivables originated one month prior. The
"dilution volatility ratio" is equal to the
product of (a) the peak 12-month Dilution Ratio
minus the 12-month average Dilution Ratio
multiplied by (b) the peak 12-month Dilution Ratio
divided by the 12-month average Dilution Ratio.
Carrying Cost Reserve: As of any Settlement Report date and continuing
until (but not including) the next Settlement
Report date, the Carrying Cost Reserve is an
amount, expressed as a percentage, equal to (a)
the product of (i) 2 times Days Sales Outstanding
as of such day and (ii) the BR in effect as of
such day plus 2%, divided by (b) 365.
Days Sales Outstanding: On any Settlement Report date, the number of
calendar days equal to the product of (a) 91 and
(b) the amount obtained by dividing (i) the total
Receivables balance as of the last day of the
immediately preceding calendar month by (ii) the
aggregate amount of Receivables that arose during
the three calendar months immediately preceding
such Settlement Report date (or another similar
calculation acceptable to the Funding Agent),
which calculation shall remain in effect until
the next Settlement Report Date.
Servicing Fee Reserve: As of any Settlement Report date and continuing
until (but not including) the next Settlement
Report date, the "Servicing Fee Reserve Ratio" is
an amount, expressed as a percentage, equal to (a)
the product of (i) the Servicing Fee and (ii) 2
times Day Sales Outstanding as of such earlier
Settlement Report date divided by (b) 360.
Servicing Fee: The Collection Agent will receive a monthly fee
based upon 1.00% per annum (the "Servicing Fee")
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on the average amount of outstanding Receivables
during such period.
V. REPRESENTATIONS AND
WARRANTIES Representations and warranties by the Sellers,
Receivables Subsidiary and the Collection Agent
under the transaction documents, shall be made
upon each purchase and each (daily) reinvestment
(except that representations relating to
Receivables shall only be made with respect to
newly-created Receivables) and will consist of
those which are customary for transactions of
this nature and those which are specific to this
transaction, including, but not limited to, the
following:
1. Such party is a corporation duly organized,
validly existing and in good standing under
the laws of the State of its incorporation.
2. The execution, delivery and performance of
the transaction documents have been duly
authorized and will not contravene its
charter or by-laws, and constitutes the
legal, valid and binding obligation of such
party.
3. Upon each purchase or reinvestment in
receivables the Purchasers shall be the
lawful owner of, or shall acquire a valid
and perfected first priority undivided
percentage interest in each receivable then
existing or thereafter arising, free and
clear of any adverse claim other than
permitted liens.
4. Under the RPA, the Receivables Subsidiary
shall be the lawful owner of each receivable
then existing or thereafter arising.
5. All information furnished by or on behalf of
the Sellers, Collection Agent, and the
Receivables Subsidiary is and will be true
and complete in all material respects.
6. There are no actions, suits or proceedings
pending or, to the knowledge of each such
party, probable of assertion, against such
party, which question the validity of the
transactions or which individually or in the
aggregate, could be reasonably expected to
have a material adverse effect on such
party's ability to perform its obligation.
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7. No Termination Event or Potential
Termination Event has occurred and is
continuing.
8. Each such party is in compliance in all
material respects with ERISA.
VI. CONDITIONS PRECEDENT TO
INITIAL PURCHASE BY
PARCO Usual for facilities and transactions of this type
and those specified by the Funding Agent,
including but not limited to:
1. delivery of audited financial statements and
other financial information;
2. perfected, first priority security interests
in the receivables purchased;
3. representations and warranties are true and
correct in all material respects;
4. full payment of fees due at closing on the
Closing Date;
5. one or more legal opinions from counsel to
the Sellers and the Receivables Subsidiary,
in each case in customary form and
reasonably satisfactory to the Funding
Agent, to the effect that (a) the sales of
receivables by the Sellers to the
Receivables Subsidiary pursuant to the RPA
are true sales for purposes of U.S.
bankruptcy law and (b) a court would not
order the substantive consolidation of the
assets and liabilities of the Receivables
Subsidiary with those of the Borrower or any
of its affiliates, and addressing other
customary matters;
6. other customary legal opinions from counsel
to the Sellers and the Receivables
Subsidiary, in each case reasonably
satisfactory to the Funding Agent;
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7. consummation of the Transactions shall have
occurred or shall occur simultaneously with
the initial purchase under the RTA;
8. the Funding Agent shall have received
confirmation that the Receivables Subsidiary
has established Lockbox Accounts and the
Collection Account, and the Funding Agent
shall otherwise be satisfied with the
arrangements for the collection of
receivables to be purchased by the
Receivables Subsidiary; and
9. the Funding Agent has performed a review of
the credit and collection policies of the
Sellers.
VII. COVENANTS Affirmative and negative covenants by the
Sellers, the Receivables Subsidiary and the
Collection Agent will consist of those which
are customary for transactions of this
nature and those which are specific to this
transaction, including, but not limited to,
the following:
1. Such party will comply in all material
respects with applicable laws.
2. Such party will furnish information and
permit the inspection of its records.
3. Such party will keep and maintain records and
books of account reasonably necessary or
advisable for the collection of Receivables.
4. Such party will fully perform and comply
with the contracts related to the
Receivables.
5. Such party will comply in all material
respects with the credit and collection
policies applicable to the Receivables.
6. Such party shall cause obligors to cause
Collections to be deposited directly to a
lock-box account at a Lockbox Bank.
7. Each Seller will treat and report each
conveyance of Receivables as a sale.
8. Such party will not sell, assign or encumber
any Receivables or Related Security or any
lock-box account.
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9. Such party will not extend, amend or
otherwise modify the terms of any
Receivable, except as permitted or
contemplated.
10. Such party will not make any change in the
character of its business or in the credit
and collection policies which would impair
the collectibility of the Receivables or
otherwise adversely affect the interests or
remedies of the Purchasers.
11. Such party will not merge or consolidate with
or into any other person except for mergers
that would not cause a Termination Event to
occur under paragraph 5 below.
12. Such party will not add or terminate any
lock-box account or change remittance
instructions to obligors except as permitted
or deposit or credit to any lock-box account
any cash other than Collections of
Receivables, except as permitted.
13. The Receivables Subsidiary will maintain a
minimum net worth in an amount to be
specified and will not incur any other
indebtedness except as provided in the
agreements.
VIII. TERMINATION
Termination Events: Shall include but not be limited to the
occurrence of any of the following (subject
to notice and cure periods where
applicable):
1. a material breach of representation or
warranty or failure to perform or observe any
term or covenant (other than as described in
paragraph 4 below) by any Seller, Collection
Agent, or Receivables Subsidiary under the
transaction documents;
2. the bankruptcy, insolvency, or receivership
of any Seller, the Collection Agent, or
Receivables Subsidiary;
3. a Collection Agent Default shall have
occurred;
4. any Seller or the Receivables Subsidiary
shall default in the performance of any
<PAGE> 49
16
payment required to be made by it pursuant
to transaction documents;
5. a merger or transaction involving the
Receivables Subsidiary or any Seller,
whereby it is not the surviving entity
(other than in the case of any Seller a
merger or consolidation which does not, in
the opinion of the Funding Agent, materially
adversely affect the collectibility of the
receivables or the performance of such
Seller's obligations under the transaction
documents);
6. the Percentage Factor is greater than 100%
unless the Receivables Subsidiary reduces
the Net Investment on the next business day,
bringing the Percentage Factor to less than
or equal to 100%;
7. triggers based on the performance of the
receivables portfolio, including dilution,
default and agings;
8. certain cross defaults to the Borrower's
Senior Secured Facilities; and
9. the termination of the RPA.
Upon the occurrence of any Termination Event, the
Funding Agent may, or at the direction of the
Required APA Banks (as defined below) shall, by
notice to the Receivables Subsidiary and
Collection Agent, declare the commencement of a
wind-down period, provided that, upon the
occurrence of certain Termination Events to be
specified, the wind-down period shall be deemed to
have occurred automatically upon the occurrence of
such event. In addition, if any Termination Event
occurs hereunder, (a) the Facility Limit shall be
reduced as of each calendar date thereafter equal
to the Net Investment as of such date and (b) no
CP with respect to the Receivables Subsidiary will
thereafter be issued by the Purchasers.
Voting: Amendments and waivers under the RTA and the
other definitive documentation will require the
approval of APA Banks holding commitment
percentages aggregating more than 66-2/3% (the
"Required APA Banks") of the commitment
percentages under the RTA, except that the
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consent of all APA Banks shall be required with
respect to (a) increases in the Facility Amount,
commitment or participating percentages or
Purchase Price, (b) reductions of interest or
fees, (c) extensions of scheduled final
termination and (d) certain releases of
collateral.
IX. OTHER
Expenses: The Receivables Subsidiary will pay transaction
costs (including reasonable legal fees, rating
agency fees and disbursements) and enforcement
costs of the Funding Agent, the Arranger, the APA
Banks and the Purchasers.
Indemnities: The Sellers and the Receivables Subsidiary shall
indemnify the Funding Agent, the Arranger, the
APA Banks and the Purchasers for certain
liabilities in connection with the Receivables
Facility.
Minimum Purchase: There shall be no purchase by the Purchasers
unless the Purchase Price shall be at least
$1,000,000, and if greater, in integral multiples
of $100,000 or if less at such time, the
remaining available amount under the Receivables
Facility. This requirement shall not apply to
reinvestments.
Reporting Requirements: Reporting Requirements will include:
1. a weekly report (a "Weekly Report")
indicating the total amount of non-Defaulted
Receivables and such other information as
shall be reasonably specified by the Funding
Agent;
2. a monthly settlement report (a "Settlement
Report") to the Funding Agent and Purchasers
setting forth the Net Receivable Balance, the
required reserve calculations, the Percentage
Factor, and providing receivable performance
and agreement compliance information;
3. a report which the Receivables Subsidiary
will provide to the Funding Agent, on each
day wherein the Receivables Subsidiary
requests an increase in the Purchasers' Net
Investments, indicating, among other items,
non-Defaulted Receivables as of such date;
and
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4. quarterly unaudited and annual audited
financial statements for the Receivables
Subsidiary, and for the Company and its
consolidated subsidiaries.
Further Assurances: The Borrower will, at its expense, upon the
request of the Administrative Agent (in
consultation with the Funding Agent), from time
to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered,
within a reasonable time period after such
request, such amendments, supplements and further
instruments and take such further action as may
be reasonably necessary to maintain the
Purchasers' CP ratings (on an unwrapped basis).
In furtherance of the foregoing, the Borrower
will cooperate with each of Standard & Poor's and
Moody's and will provide the rating agencies such
information as they may reasonably request.
Governing Law: The State of New York.
Counsel to the Funding Agent
and the Arranger: Cravath, Swaine & Moore.
