UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
Staff Leasing, Inc.
----------------------------------------
(Name of Issuer)
Shares of Common Stock, ($.01 par value)
----------------------------------------
(Title of Class of Securities)
0008523811
(CUSIP Number)
with copies to:
Gary Binning John M. Reiss, Esq.
Paribas White & Case LLP
787 Seventh Avenue 1155 Avenue of the Americas
New York, NY 10019 New York, NY 10036
(212) 841-2141 (212) 819-8247
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 2, 1999
----------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or13d-1(g), check the following box
/ /.
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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<PAGE>
SCHEDULE 13D
- ---------------------------------
CUSIP No. 0008523811
- ---------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Paribas I.R.S. Identification No.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
/ / (a)
/X/ (b)
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
/ /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Republic of France
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY 7 SOLE VOTING POWER
OWNED BY EACH REPORTING PERSON 0*
WITH
--------------------------------------------
8 SHARED VOTING POWER
0
--------------------------------------------
9 SOLE DISPOSITIVE POWER
0*
--------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0*
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
BK
- --------------------------------------------------------------------------------
* Paribas may be deemed to be the beneficial owner of the Common Stock of Staff
Leasing, Inc. reported herein through its ownership of Paribas North America,
Inc. Such shares of Staff Leasing, Inc. are not included above so as to avoid
double counting.
<PAGE>
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Paribas North America, Inc. I.R.S. Identification No. 13-1929559
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
/ / (a)
/X/ (b)
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC, OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
/ /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY 7 SOLE VOTING POWER
OWNED BY EACH REPORTING PERSON 425,000*
WITH
--------------------------------------------
8 SHARED VOTING POWER
0
--------------------------------------------
9 SOLE DISPOSITIVE POWER
425,000*
--------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
425,000*
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.9
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
Co
- --------------------------------------------------------------------------------
* Paribas North America, Inc. may be deemed to be the beneficial owner of the
Common Stock of Staff Leasing, Inc. reported herein by Paribas Principal,
Inc. through its ownership of Paribas Principal, Inc. Such shares of Staff
Leasing, Inc. are not included above so as to avoid double counting.
<PAGE>
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Paribas Principal Incorporated I.R.S. Identification No. 13-3529118
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
/ / (a)
/X/ (b)
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC, OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
/ /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of New York
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY 7 SOLE VOTING POWER
OWNED BY EACH REPORTING PERSON 2,321,891
WITH
--------------------------------------------
8 SHARED VOTING POWER
0
--------------------------------------------
9 SOLE DISPOSITIVE POWER
2,321,891
--------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,321,891
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
/ /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.2
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
Co
- --------------------------------------------------------------------------------
<PAGE>
Paribas, Paribas North America, Inc. ("PNA") and Paribas Principal,
Incorporated ("PPI" and collectively with Paribas and PNA, the "Reporting
Persons") hereby amend the report on Schedule 13D, dated March 19, 1999 (the
"Schedule 13D"), filed by PNA, PPI and Paribas in respect of shares of Common
Stock, par value $.01 per share (the "Common Stock"), of Staff Leasing, Inc., a
Delaware corporation (the "Company"). Capitalized terms used but not defined
herein shall have the meaning attributed to such terms in the Schedule 13D.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 of the Schedule 13D is hereby amended by adding at the end
thereof the following:
"In connection with the proposed transactions, Leasing Acquisition,
Inc., an affiliate of PPI, has received from Merrill Lynch Capital Corporation
("MLCC") a commitment letter (the "Commitment Letter") (attached hereto as
Exhibit 5), for up to $100 million of senior secured bank debt. MLCC's
commitment is subject to customary conditions including no disruption or
material adverse change in or affecting the domestic or international loan
syndication or financial, banking or capital markets conditions generally,
MLCC's completion of its due diligence and MLCC's satisfaction, in its sole
discretion, therewith and there not having occurred or become known any material
adverse change in the business, assets, operations, properties, financial
condition or liabilities (contingent or otherwise). Pursuant to a separate
letter of the same date (the "Highly Confident Letter") (attached hereto as
Exhibit 6) Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill")
expressed that it is highly confident that it can sell or place $150 million of
unsecured senior subordinated notes in connection with the Merger. Merrill's
expression of confidence is based on conditions similar to those contained in
the Commitment Letter, including those described in the second preceding
sentence."
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is hereby amended by adding the following
after the fourth paragraph thereof:
"In order to provide additional information with respect to the
transactions described in the Proposal Letter, on April 2, 1999, the Purchaser
and PPI provided the following letter to the Special Committee of the Board of
the Directors of the Company:
April 2, 1999
Special Committee of the Board of Directors
Staff Leasing, Inc.
600 301 Boulevard West
Suite 202
Bradenton, Florida 34205
Attention: George B. Beitzel
Chairman
Dear Mr. Beitzel:
Paribas Principal Partners ("PPP") by letter dated March 17, 1999 proposed
to acquire Staff Leasing, Inc. (the "Company") through the merger of Transport
Labor Contract/Leasing, Inc. (the "Purchaser") into the Company. At this time
the Purchaser and PPP, through its affiliate Paribas Principal Inc., would like
to offer to acquire all of the outstanding capital stock of the Company pursuant
to the Merger described below, subject to customary conditions for a transaction
of this type, including without limitation, the conditions described below. We
would also like to take this opportunity to provide to the Special Committee and
its advisors additional details of our offer.
The Purchaser would enter into a merger agreement with the Company,
pursuant to which holders of the common stock of the Company would receive
$17.50 per share in cash for their shares in the Company. The Purchaser would
merge (the "Merger") with and into the Company, with the Company as the
surviving entity in the Merger. In connection with the Merger, certain strategic
stockholders of the Company and their related parties would be given the
opportunity to exchange their equity interests in the Company for equity
interests in the surviving entity on a tax-free basis.
Based on publicly available information, we believe the total purchase
price for all outstanding common shares of the Company would be approximately
$382 million based on 21.8 million shares outstanding as of March 10, 1999. We
have also assumed that additional funds of approximately $30 million would be
required to make certain payments to current stockholders for outstanding
options and to cover transaction fees and expenses. The total amount of funds
for the transactions described above would therefore be approximately $412
million and would be funded with a combination of debt and exchanged equity as
described above and, under the circumstances described below, additional equity
to be provided by PPP. The debt financing (the "Debt Financing") would consist
of $250 million of bank debt and senior subordinated notes. Enclosed herewith is
a commitment letter from Merrill Lynch Capital Corporation for $100 million of
senior bank financing and a highly confident letter from Merrill Lynch, Pierce,
Fenner & Smith Incorporated with respect to $150 million of senior subordinated
notes. Alternatively, if the Special Committee desires we have been informed by
Merrill that they are also prepared to deliver a commitment for $185 million of
senior bank financing and a bridge commitment for $65 million of unsecured
senior subordinated interim debt. This second structure would, of course, allow
the transaction to be consummated prior to the completion of a high yield
offering. The existing equity interests of PPP and its affiliates in the Company
and the Purchaser and the exchange by certain strategic stockholders of the
Company of their equity interests in the Company for equity interests in the
surviving entity would provide the equity for the transaction. In the event that
additional cash were to be required to cash out strategic shareholders then,
subject to the terms and conditions of this offer, PPP would provide additional
cash equity.
This offer is conditioned upon the negotiation of mutually satisfactory
transaction documents, which would include a merger agreement between the
Purchaser and the Company and stock option and voting agreements with all
stockholders of the Company who are officers or directors of the Company and
other large stockholders of the Company. The merger agreement would contain
customary terms and conditions, including without limitation, representations
and warranties, covenants, closing conditions, a no-shop provision and break-up
and expense reimbursement provisions customary for a transaction of this type.
This offer is also conditioned upon the nonapplicablity to the transactions
contemplated hereby of any state takeover statutes, "poison pills" and any
supermajority or similar charter provisions; receipt of the proceeds of the Debt
Financing; the Company having unrestricted cash on hand of at least $56 million
immediately prior to the Merger; satisfactory arrangements with existing
management as to the terms of their continued employment; and other conditions
to closing customary for a transaction of this type. Assuming satisfactory
completion of our due diligence we would not expect the definitive transaction
documents to contain any contingency relating to workers compensation
arrangements. While we would clearly prefer to obtain recapitalization
accounting treatment, we would consider not having it as a condition in the
merger agreement.
This offer is also subject to PPP and its advisors and financing sources
being given full access to the Company, its officers, directors, employees,
customers, insurance providers (and potential insurance providers), accountants
and other relevant persons for the purpose of conducting due diligence and to
PPP's satisfaction, in its sole discretion, with the results of such diligence.
Because we are, and our financing source is, very familiar with the Company and
the PEO industry generally, we believe that we both can complete our due
diligence in an expeditious manner.
PPP and its financial and legal advisors are prepared to meet with you and
your advisors at your convenience to provide any additional information on this
offer. PPP is very excited about this transaction. We believe this offer
provides full value to your stockholders but we remain flexible with respect to
all aspects of the offer. We look forward to having the opportunity to conduct
our due diligence.
This offer is open until 5:00 p.m. on April 9, 1999. Thereafter, we reserve
the right to withdraw this offer at any time and for any reason.
Very truly yours,
PARIBAS PRINCIPAL INC. TRANPORT LABOR CONTRACT/
LEASING, INC.
By: /s/ GARY A. BINNING By: /s/ GARY A. BINNING
------------------------- -------------------------
Gary A. Binning Gary A. Binning
cc: Robert A. Kindler, Esq.
James Katzman
In connection with the approval by the Board of Directors of the Purchaser
of the merger of the Purchaser with and into the Company, the Board authorized a
Merger Committee consisting of Gary Binning to pursue the transactions described
in the letter referred to above."
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 of the Schedule 13D is hereby amended to read in its entirety as
follows:
"Set forth in the table below is the number and percentage of shares of
Common Stock beneficially owned by each Reporting Person. None of the Reporting
Persons beneficially owns shares of any other class of capital stock of the
Company.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Beneficially Owned Beneficially Owned Aggregate Number of Percentage of
with Sole Voting and with Shared Voting Shares Beneficially Class Beneficially
Name Dispositive Power<F1> and Dispositive Power Owned Owned<F2>
<S> <C> <C> <C> <C>
Reporting Persons<F3> 2,746,891 0 2,746,891 12.6%
PPI<F4> 2,321,891 0 2,321,891 10.2%
PNA<F5> 425,000 0 425,000 1.9%
Paribas<F6> 0 0 0 0%
<FN>
<F1> Pursuant to Rule 13d-3 under the Exchange Act, a person is deemed to be
a "beneficial owner" of a security if that person has or shares "voting
power" (which includes the power to vote or to direct the voting of
such security) or "investment power" (which includes the power to
dispose or to direct the disposition of such security). A person is
also deemed to be a beneficial owner of any security of which that
person has a right to acquire beneficial ownership (such as by exercise
of options or pursuant to a conversion feature of a security) on or
within 60 days after the date hereof. In addition, more than one person
may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which
he or she may disclaim any beneficial interest.
<F2> The percentages of Common Stock indicated in this table are based on
the 21,819,767 shares of Common Stock outstanding as of March 10, 1999,
as disclosed in the Company's most recent Form 10-K filed with the
Securities and Exchange Commission. Any Common Stock not outstanding
which is subject to options or conversion privileges which the
beneficial owner had the right to exercise on or within 60 days after
the date hereof is deemed outstanding for purposes of computing the
percentage of Common Stock owned by such beneficial owner but is not
deemed outstanding for the purpose of computing the percentage of
outstanding Common Stock owned by any other beneficial owner.
<F3> Includes (i) 1,323,521 shares of Common Stock owned of record by PPI,
(ii) warrants to purchase 998,370 shares of Common Stock owned of
record by PPI, and (iii) 425,000 shares of Common Stock owned of record
by PNA.
<F4> Includes (i) 1,323,521 shares of Common Stock owned of record by PPI,
and (ii) warrants to purchase 998,370 shares of Common Stock owned of
record by PPI.
<F5> Includes 425,000 shares of Common Stock owned of record by PNA. PNA may
be considered the beneficial owner of the shares reported by PPI herein
through its ownership of PPI. Such shares are not included in the table
so as to avoid double counting.
<F6> Paribas may be considered the beneficial owner of the shares reported
by PPI and PNA herein through its ownership of PNA. Such shares are not
included in the table so as to avoid double counting.
</FN>
</TABLE>
To the best knowledge of Paribas, PPI and PNA, no executive officer or
director of PPI or PNA beneficially own any securities of the Company except
certain executive officers and directors of PNA and PPI beneficially own an
aggregate of 154,951 shares of Common Stock (representing 0.7% of the
outstanding shares of Common Stock) and warrants exercisable into 153,569 shares
of Common Stock (representing 0.7% of the outstanding shares of Common Stock)
and have sole voting and dispositive power with respect thereto. The Reporting
Persons do not have any reason to believe that any executive officer or director
of Paribas beneficially owns any securities of the Company although no actual
inquiry of such persons has been made."
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed with this statement:
5. Commitment Letter, dated April 2, 1999, from Merrill Lynch
Capital Corporation to Leasing Acquisition, Inc.
6. Highly Confident Letter, dated April 2, 1999, from Merrill
Lynch, Pierce, Fenner & Smith Incorporated to Leasing
Acquisition, Inc.
<PAGE>
SIGNATURE
Each Reporting Person certifies that, after reasonable inquiry and to
the best of its knowledge and belief, the information set forth in this
statement is true, complete and correct.
Dated: April 7, 1999
PARIBAS
By: /s/ Gary A. Binning
----------------------------
Name: Gary A. Binning
Title: Managing Director
PARIBAS NORTH AMERICA, INC.
By: /s/ John G. Martinez
----------------------------
Name: John G. Martinez
Title: Financial Controller
PARIBAS PRINCIPAL INCORPORATED
By: /s/ Gary A. Binning
----------------------------
Name: Gary A. Binning
Title: Director
MERRILL LYNCH CAPITAL CORPORATION
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
April 2, 1999
Leasing Acquisition, Inc.
c/o Paribas Principal Partners
787 7th Avenue
New York, New York 10019
RE: PROJECT MOBY DICK -- CREDIT
FACILITIES COMMITMENT LETTER
Ladies and Gentlemen:
Leasing Acquisition, Inc., a wholly-owned subsidiary of Paribas
Principal, Inc. ("you") has advised Merrill Lynch Capital Corporation ("Merrill
Lynch" or "we" or "us") that certain affiliates of Leasing Acquisition, Inc.
(including Paribas Principal Inc., collectively, "Sponsor") hold an equity
position in a company previously identified to us and code named Whale ("Target"
or "Borrower"). You have advised us that (i) Transport Labor Contract Leasing,
Inc. ("Purchaser"), a company operating in the professional employer
organization ("PEO") industry and in which Sponsor has a substantial equity
interest intends to merge with and into Target pursuant to a merger agreement
(the "Merger Agreement") to be entered into between Purchaser and Target; (ii)
pursuant to the Merger Agreement, Purchaser will merge (the "Merger") with and
into Target, with Target as the survivor; (iii) at the date of consummation of
the Merger (the "Closing Date"), the existing stockholders of Target, other than
Sponsor and its affiliates and certain other stockholders, immediately prior to
the Merger (the "Cashed-Out Stockholders") will receive an amount of cash
mutually acceptable to you and us for each share of common stock held by such
stockholder (and such shares shall be canceled); (iv) the total purchase price
for the common stock of the Cashed-Out Stockholders of Target will not exceed
$228.0 million; (v) pursuant to the Merger Agreement, management of Target and
Sponsor and its affiliates and certain other stockholders (collectively, the
"Rollover Shareholders") will retain their equity interests in Target; (vi)
prior to the Merger, Purchaser will repurchase (the "Share Repurchase") certain
outstanding shares of common stock held by certain shareholders of Purchaser for
aggregate consideration acceptable to us; and (vii) the sources and uses of the
funds necessary to consummate the Merger and the related transactions are set
forth on Annex I to this Commitment Letter.
In addition you have advised Merrill Lynch that in connection with the
consummation of the Merger, (a) Borrower will raise gross cash proceeds of not
less than $150.0 million from the offering (the "Senior Subordinated Note
Offering") by it of unsecured senior subordinated notes due 2009 (the "Senior
Subordinated Notes") having no scheduled principal payments prior to maturity;
and (b) Borrower will enter into the senior secured credit facilities (the
"Credit Facilities") described herein.
The Merger, the Senior Subordinated Note Offering, the Share
Repurchase, the entering into and borrowings under the Credit Facilities by the
parties herein described and the other transactions described above entered into
and consummated in connection with the Merger are herein referred to as the
"Transactions".
You have requested that Merrill Lynch commit to provide to Borrower up
to $100.0 million aggregate principal amount under the Credit Facilities to
finance the Transactions and certain related fees and expenses.
Accordingly, subject to the terms and conditions set forth below,
Merrill Lynch hereby agrees with you as follows:
1. Commitment. Merrill Lynch hereby commits to provide to Borrower the
Credit Facilities upon the terms and subject to the conditions set forth or
referred to herein, in the Credit Facilities fee letter (the "Fee Letter") dated
the date hereof and delivered to you, and in the Summary of Terms and Conditions
attached hereto (and incorporated by reference herein) as Exhibit A (the "Term
Sheet").
2. Syndication. We reserve the right and intend, prior to or after the
execution of the definitive documentation for the Credit Facilities (the "Credit
Documents"), to syndicate all or a portion of our commitment to one or more
financial institutions (together with Merrill Lynch, the "Lenders"). Our
commitment hereunder is subject to our (or one of our affiliates') acting as
sole and exclusive lead arranger of and syndication and documentation agent for
the Credit Facilities. We (or one of our affiliates) will manage all aspects of
the syndication (in consultation with you), including decisions as to the
selection of potential Lenders reasonably acceptable to Borrower to be
approached and when they will be approached, when their commitments will be
accepted and which Lenders will participate and the final allocations of the
commitments among the Lenders (which are likely not to be pro rata across
facilities among Lenders), and we will exclusively perform all functions and
exercise all authority as customarily performed and exercised in such
capacities, including selecting counsel for the Lenders and negotiating the
Credit Documents. Any agent or arranger titles (including co-agents) awarded to
other Lenders are subject to our prior approval and would not entail any role
with respect to the matters referred to in this paragraph without our prior
consent. You agree that no Lender will receive compensation outside the terms
contained herein and in the Fee Letter in order to obtain its commitment to
participate in the Credit Facilities. We may select a Lender (who shall be
reasonably acceptable to you) to act as an administrative agent (the
"Administrative Agent") for the Credit Facilities to perform such ministerial
and administrative functions as we shall reasonably designate.
We intend to commence the syndication promptly and you agree actively
to assist us in achieving a timely syndication that is satisfactory to us. The
syndication efforts will be accomplished by a variety of means, including direct
contact during the syndication between senior management, advisors and
affiliates of Borrower on the one hand and the proposed Lenders on the other
hand. You agree to, promptly, upon our request, (a) provide, and cause your
affiliates and advisors to provide, and use your best efforts to have Purchaser
and Target provide, to us all information deemed necessary by us to complete
successfully the syndication, including information and projections (including
updated projections) contemplated hereby, (b) assist, and cause your affiliates
and advisors to assist, and use your best efforts to have Purchaser and Target
assist, us in the preparation of a Confidential Information Memorandum and other
marketing materials to be used in connection therewith, and (c) make available
representatives of Purchaser, Target and their respective subsidiaries. You also
agree to use your best efforts to ensure that our syndication efforts benefit
materially from your (and your affiliates') existing lending relationships. To
the extent that the syndication of a credit facility or debt financing in
connection with any other investment by Sponsor could disrupt or otherwise
interfere with the orderly syndication of, the Credit Facilities, you will
provide us with reasonable prior notice thereof and, upon our reasonable
request, endeavor in good faith to coordinate such syndication and the
syndication of the Credit Facilities consistent with the terms hereof.
3. Fees. As consideration for Merrill Lynch's commitment hereunder and
its agreement to arrange, manage, structure and syndicate the Credit Facilities,
you agree to pay to Merrill Lynch the fees as set forth in the Fee Letter.
4. Conditions. Merrill Lynch's commitment hereunder is subject to the
conditions set forth elsewhere herein and in the Term Sheet. For purposes of
this Commitment Letter and the Term Sheet, the "subsidiaries" of Purchaser shall
be deemed to include those who will become subsidiaries of Purchaser in
connection with the consummation of the Transactions.
Merrill Lynch's commitment hereunder is also subject to (a) no
disruption or material adverse change (or development reasonably likely to
result in a material adverse change) shall have occurred in or affecting the
domestic or international loan syndication or financial, banking or capital
market conditions generally from those in effect on the date hereof, and no
banking moratorium shall have been declared by federal or New York State banking
authorities and shall be continuing; (b) we shall be satisfied that, prior to
and during the syndication of the Credit Facilities, there is no competing
syndication or issuance, or announcement of a syndication or issuance, of any
credit facility or debt security of Purchaser, Target, or any of their
respective subsidiaries or affiliates, including renewals thereof, other than
the Senior Subordinated Note Offering and the Credit Facilities and Sponsor
shall not have failed to endeavor in good faith to coordinate the syndication of
any other credit facility or debt financing relating to another investment by
Sponsor such that there has been a disruption or interference with the
syndication of the Credit Facilities; (c) we shall be reasonably satisfied with
all terms of the Transactions and we shall have had the opportunity to review
and shall be reasonably satisfied with the Merger Agreement (and all exhibits,
schedules appendices and attachments thereto); (d) we shall have completed our
due diligence investigation of Purchaser, Target and their respective
subsidiaries both before and after giving effect to the Transactions in scope,
and with results, satisfactory to us in our sole discretion and, in connection
therewith, we shall have been given such access to information regarding
Purchaser, Target and their respective subsidiaries as we shall have requested
including, without limitation, access to the management, records, books of
account, contracts and properties of Purchaser, Target and their respective
subsidiaries and we shall have received such financial, business and other
information regarding Purchaser, Target and their respective subsidiaries as we
shall have requested; (e) Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S") shall have been retained by Borrower as sole and exclusive
underwriter, placement agent or initial purchaser with respect to the Senior
Subordinated Note Offering pursuant to an engagement letter (the "Engagement
Letter") in form and substance satisfactory to Merrill Lynch and such Engagement
Letter shall be in full force and effect and Borrower shall not be in breach
thereof; and (f) none of the Information or Projections (each as defined in
Section 5 hereof) shall be misleading or incorrect in any material respect.
5. Information and Investigations. You hereby represent and covenant
that (a) all information and data (excluding financial projections) concerning
Sponsor, Purchaser, Target, their respective subsidiaries and the Transactions
that have been made or will be prepared by or on behalf of you or any of your
affiliates, representatives or advisors and that have been or will be made
available to Merrill Lynch or any Lender (whether prior to or after the date
hereof), taken as a whole (the "Information"), does not and will not, taken as a
whole, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which such statements are made,
and (b) all financial projections concerning Borrower and its subsidiaries and
the transactions contemplated hereby (the "Projections") that have been made or
will be prepared by or on behalf of you or any of your affiliates,
representatives or advisors and that have been or will be made available to
Merrill Lynch or any Lender (whether prior to or after the date hereof) have
been and will be prepared in good faith based upon assumptions believed by you
to be reasonable; provided, that no assurance can be given that such Projections
will be attained and it is possible that actual results will differ from results
set forth in the Projections. You agree to supplement the Information and the
Projections from time to time until the Closing Date and, if requested by us,
for a reasonable period thereafter necessary to complete the syndication of the
Credit Facilities so that the representation and covenant in the preceding
sentence remain correct. In syndicating the Credit Facilities we will be
entitled to use and rely primarily on the Information and the Projections
without responsibility for independent check or verification thereof.
6. Indemnification. You agree (i) to indemnify and hold harmless
Merrill Lynch and each of the other Lenders and their respective officers,
directors, employees, affiliates, agents and controlling persons (Merrill Lynch
and each such other person being an "Indemnified Party") from and against any
and all losses, claims, damages, costs, expenses and liabilities, joint or
several, to which any Indemnified Party may become subject under any applicable
law, or otherwise related to or arising out of or in connection with this
Commitment Letter, the Fee Letter, the Term Sheet, the Credit Facilities, the
loans under the Credit Facilities, the use of proceeds of any such loan, any of
the Transactions or any related transaction and the performance by any
Indemnified Party of the services contemplated hereby and will reimburse each
Indemnified Party for any and all reasonable expenses (including counsel fees
and expenses) as they are incurred in connection with the investigation of or
preparation for or defense of any pending or threatened claim or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
and whether or not such claim, action or proceeding is initiated or brought by
or on behalf of Sponsor, Purchaser, Target or any of their respective affiliates
and whether or not any of the transactions contemplated hereby are consummated
or this Commitment Letter is terminated, except to the extent found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
primarily from such Indemnified Party's bad faith or gross negligence and (ii)
not to assert any claim against any Indemnified Party for consequential,
punitive or exemplary damages on any theory of liability in connection in any
way with the transactions described in or contemplated by this Commitment
Letter.
You agree that, without Merrill Lynch's prior written consent, neither
you nor any of your affiliates or subsidiaries will settle, compromise or
consent to the entry of any judgment in any pending or threatened claim, action
or proceeding in respect of which indemnification has been or could be sought
under the indemnification provisions hereof (whether or not Merrill Lynch or any
other Indemnified Party is an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent (i) includes an
unconditional written release in form and substance satisfactory to the
Indemnified Parties of each Indemnified Party from all liability arising out of
such claim, action or proceeding and (ii) does not include any statement as to
or an admission of fault, culpability or failure to act by or on behalf of any
Indemnified Party.
In the event that an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against you or
any of your subsidiaries or affiliates in which such Indemnified Party is not
named as a defendant, you agree to reimburse such Indemnified Party for all
reasonable expenses incurred by it in connection with such Indemnified Party's
appearing and preparing to appear as such a witness, including, without
limitation, the reasonable fees and expenses of its legal counsel, and to
compensate Merrill Lynch in an amount to be mutually agreed upon.
7. Expenses. You agree to reimburse Merrill Lynch and its affiliates
for their reasonable out-of-pocket expenses (including, without limitation, all
due diligence investigation expenses, fees of consultants engaged with your
consent, syndication expenses, appraisal and valuation fees and expenses, travel
expenses, and the reasonable fees, disbursements and other charges of counsel
(including local counsel)) incurred in connection with the negotiation,
preparation, execution and delivery, waiver or modification, administration,
collection and enforcement of this Commitment Letter, the Term Sheet, the Fee
Letter and the Credit Documents and the security arrangements (if any) in
connection therewith and whether or not the Transactions are consummated or any
extensions of credit are made under the Credit Facilities or this Commitment
Letter is terminated or expires.
8. Confidentiality. This Commitment Letter, the Term Sheet, the
contents of any of the foregoing and our and/or our affiliates' activities
pursuant hereto or thereto are confidential and shall not be disclosed by or on
behalf of you or any of your affiliates to any person without our prior written
consent, except that you may disclose this Commitment Letter and the Term Sheets
(i) to your, Purchaser's' and Target's officers, directors, employees and
advisors, and then only in connection with the Transactions and on a
confidential basis and (ii) following your acceptance hereof, as you are
required to make by applicable law (including pursuant to the Securities Act of
1933, as amended and the rules promulgated thereunder and the Securities
Exchange Act of 1934, as amended and the rules promulgated thereunder
(collectively, the "Securities Acts")) or compulsory legal process (based on the
advice of legal counsel); provided, however, that in such event you agree to
give us prompt notice thereof and to cooperate with us in securing a protective
order in the event of compulsory disclosure (other than with regard to
compulsory disclosure required by the Securities Acts). You agree that you will
permit us to review and (other than in respect of any disclosure required by the
Securities Acts) approve any reference to Merrill Lynch or any of its affiliates
in connection with the Credit Facilities or the transactions contemplated hereby
contained in any press release or similar public disclosure prior to public
release. You agree that we and our affiliates may share information concerning
Sponsor, Purchaser, Target and their respective subsidiaries among ourselves for
purposes of evaluating and completing the transactions contemplated hereby.
9. Termination. In the event that (i) Merrill Lynch becomes aware of
or discovers new information or developments concerning conditions or events
previously disclosed to Merrill Lynch that Merrill Lynch believes is
inconsistent in any material respect with the Projections or the Information
provided to Merrill Lynch prior to the date hereof or has had or could
reasonably be expected to have a material adverse effect on the Transactions or
the business, assets, operations, properties, financial condition or liabilities
(contingent or otherwise) of Borrower, together with its subsidiaries taken as a
whole (after giving effect to the Transactions) since December 31, 1997 (or, if
Merrill Lynch has received audited consolidated financial statements for
Borrower and its consolidated subsidiaries at and for fiscal year ended December
31, 1998 with the unqualified opinion of Borrower's current auditor accompanying
such financials and Merrill Lynch is, in its sole discretion, satisfied with
such opinion and financial statements, December 31, 1998); (ii) on any date on
or prior to the Closing Date the condition set forth in clause (a) of the second
paragraph of Section 4 hereof would not be satisfied if such date were the
Closing Date; or (iii) the Merger Agreement is terminated or expires or the
effort to acquire Target is abandoned, this Commitment Letter and Merrill
Lynch's commitment hereunder shall terminate upon written notice by Merrill
Lynch; provided, however, that in the case of clauses (i) and (ii) of this
Section 9, we shall not be permitted to terminate our commitment unless there
shall be no reasonable expectation that prior to the originally scheduled date
of termination of this Commitment Letter the events giving rise to the right of
termination shall be able to be cured; it being understood that no such deferral
of the right to terminate this Commitment Letter shall in any event be in
derogation of the right of the Lenders to require the satisfaction of all
conditions set forth in the Term Sheet under the caption "Conditions to
Effectiveness and to Initial Loans" prior to making any extension of credit
under the Credit Facilities. Notwithstanding the foregoing, the provisions of
Sections 6, 7, 8 and 11 hereof shall survive any such termination.
10. Assignment, etc. Subject to the last sentence of this Section 10,
this Commitment Letter and Merrill Lynch's commitment hereunder shall not be
assignable by any party hereto without the prior written consent of the other
party hereto, and any attempted assignment shall be void and of no effect;
provided, however, that nothing contained in this Section 10 shall prohibit us
(in our sole discretion) from (i) performing any of our duties hereunder through
any of our affiliates, and you will owe any related duties (including those set
forth in Section 2 hereof) to any such affiliate, and (ii) granting
participations in, or selling assignments of all or a portion of, the
commitments or the loans under the Credit Facilities pursuant to arrangements
satisfactory to us. This Commitment Letter is solely for the benefit of the
parties hereto and does not confer any benefits upon, or create any rights in
favor of, any other person. Notwithstanding the foregoing, we agree that you may
assign, after the consummation of the Merger, any or all of your rights and
obligations hereunder and under the Fee Letter to Target; provided, however,
that we shall have received Target's written acceptance thereof, and thereafter
you will be fully released with respect to any rights and obligations so
assigned and assumed.
11. Governing Law; Waiver of Jury Trial. This Commitment Letter shall
be governed by, and construed in accordance with, the laws of the State of New
York (without regard to principles of conflicts of law). Each of the parties
hereto waives all right to trial by jury in any action, proceeding or
counterclaim (whether based upon contract, tort or otherwise) related to or
arising out of any of the Transactions or the other transactions contemplated
hereby, or the performance by us or any of our affiliates of the services
contemplated hereby.
12. Amendments; Counterparts; etc. No amendment or waiver of any
provision hereof or of the Term Sheet shall be effective unless in writing and
signed by the parties hereto and then only in the specific instance and for the
specific purpose for which given. This Commitment Letter, the Term Sheet, the
Fee Letter and the Engagement Letter are the only agreements between the parties
hereto with respect to the matters contemplated hereby and thereby and set forth
the entire understanding of the parties with respect thereto. This Commitment
Letter may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart by telecopier shall be
effective as delivery of a manually executed counterpart.
13. Public Announcements; Notices. We may, at our expense, publicly
announce as we may choose the capacities in which we or our affiliates have
acted hereunder in the event any of the Transactions are effected, in whole or
in part, utilizing financing or advisory services provided by us. Any notice
given pursuant hereto shall be mailed or hand delivered in writing, if to (i)
you, at your address set forth on page one hereof, with a copy to John Reiss,
Esq. at White & Case, 1155 Avenue of the Americas, New York, New York 10036; and
(ii) us, at our address set forth on page one hereof, Attention: Christopher J.
Birosak, with a copy to Michael E. Michetti, Esq., at Cahill Gordon & Reindel,
80 Pine Street, New York, New York 10005.
[Signature Page Follows]
<PAGE>
Please confirm that the foregoing correctly sets forth our agreement
of the terms hereof and the Fee Letter by signing and returning to the
undersigned the duplicate copy of this letter and Fee Letter enclosed herewith.
Unless we shall have received your executed duplicate copies hereof by 5:00
p.m., New York City time, on April 5, 1999, our commitment hereunder will expire
at such time and date.
We are pleased to have this opportunity and we look forward to working
with you on this transaction.
Very truly yours,
MERRILL LYNCH CAPITAL CORPORATION
By: /s/ CHRISTOPHER BIROSAK
-----------------------------------
Name: Christopher Birosak
Title: Vice President
Accepted and agreed to as of
the date first written above:
LEASING ACQUISITION, INC.
By: /s/ GARY A. BINNING
-----------------------------------
Name: Gary A. Binning
Title: Director
<PAGE>
SOURCES AND USES OF FUNDS
(in millions)
Sources
-------
Excess Cash $56.4
Revolving Facility* 24.2
Term Loan A 50.0
Senior Subordinated Notes 150.0
Rolled Equity 198.0
------
Total Sources $478.6
======
Uses
----
Purchase Price of Public Shares $228.0
Rolled Equity 198.0
Estimated Fees and Related Transaction
Expenses and Purchaser Related
Transaction Expenses 52.6
------
Total Uses $478.6
======
* $50.0 million of availability; $24.2 million drawn at closing.
<PAGE>
CONFIDENTIAL EXHIBIT A
SENIOR SECURED CREDIT FACILITIES
SUMMARY OF TERMS AND CONDITIONS*
* Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the attached Credit Facilities Commitment Letter
(the "Commitment Letter").
Borrower: Target ("Borrower").
Lead Arranger, Syndication Agent and
Documentation Agent: Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated
("Merrill Lynch") will act as sole and
exclusive lead arranger, syndication
agent and documentation agent (the "Lead
Arranger").
Administrative Agent: A Lender or other financial institution
to be selected by Merrill Lynch and
approved by Borrower (such approval not
to be unreasonably withheld) (the
"Administrative Agent").
Lenders: Merrill Lynch Capital Corporation (or
one of its affiliates) and a syndicate
of financial institutions (the
"Lenders") arranged by the Lead Arranger
in consultation with Borrower.
Credit Facilities: Senior secured credit facilities (the
"Credit Facilities") in an aggregate
principal amount of $100.0 million to be
made available to Borrower, such Credit
Facilities comprising:
(A) Term Loan Facility. Term loan
facilities in an aggregate
principal amount of $50.0 million
(the "Term Loan Facility"). Loans
under the Term Loan Facility are
herein referred to as "Term Loans."
(B) Revolving Credit Facility. A
revolving credit facility in an
aggregate principal amount of $50.0
million (the "Revolving Facility").
Loans under the Revolving Facility
are herein referred to as
"Revolving Loans"; the Term Loans
and the Revolving Loans are herein
referred to collectively as
"Loans." Up to $20.0 million of the
Revolving Facility will be
available as a letter of credit
subfacility.
Documentation: Usual for facilities and transactions of
this type and reasonably acceptable to
Borrower and the Lenders. The
documentation for the Credit Facilities
will include, among others, a credit
agreement (the "Credit Agreement"),
guarantees and appropriate pledge,
security interest, mortgage and other
collateral documents (collectively, the
"Credit Documents"). Borrower and each
Guarantor (as defined below under
"Guarantors") are herein referred to as
the "Credit Parties."
Transactions: As described in the Commitment Letter.
Availability/Purpose: (A) Term Loan Facility. Term Loans will
be available, subject to the terms and
conditions set forth in the Credit
Documents, in a single draw on the date
of the consummation of the Merger to
finance the Merger and the Existing Debt
Repayment and to pay related fees and
expenses. Term Loans that are repaid or
prepaid may not be reborrowed.
(B) Revolving Facility. The Revolving
Facility will be available, subject to
the terms and conditions set forth in
the Credit Documents, for the purposes
described above (not more than $25.0
million drawn at closing) and for
working capital and general corporate
purposes on and after the Closing Date
until the date which is five years after
the Closing Date (the "Revolving Loan
Maturity Date"). Revolving Loans may,
subject to the terms and conditions set
forth in the Credit Documents, be
reborrowed to the extent of the
commitments under the Revolving Facility
then in effect.
Guarantors: Borrower's direct and indirect domestic
subsidiaries existing on the Closing
Date or thereafter created or acquired
shall unconditionally guarantee, on a
senior secured joint and several basis,
all obligations of Borrower under the
Credit Facilities and (to the extent
relating to the Loans) under each
interest rate protection agreement
entered into with a Lender or an
affiliate of a Lender. Each guarantor of
any of the Credit Facilities is herein
referred to as a "Guarantor" and its
guarantee is referred to herein as a
"Guarantee."
Security: The Credit Facilities, the Guarantees,
and (to the extent relating to the
Loans) the obligations of Borrower under
each interest rate protection agreement
entered into with a Lender or an
affiliate of a Lender will be secured by
(A) a perfected first priority lien on,
and pledge of, all of the capital stock
and intercompany notes of Borrower and
each of the direct and indirect
subsidiaries of Borrower existing on the
Closing Date or thereafter created or
acquired, except to the extent that the
pledge thereof would cause material
adverse tax consequences, such pledge
with respect to foreign subsidiaries
shall be limited to 65% of the capital
stock of "first tier" foreign
subsidiaries, and (B) a perfected first
priority lien on, and security interest
in, all of the tangible and intangible
properties and assets (including all
contract rights (including under
partnership agreements, management
agreements, operating agreements,
affiliation agreements and similar
agreements) real property interests,
trademarks, trade names, equipment and
proceeds of the foregoing) of each
Credit Party (collectively, the
"Collateral"), except for those
properties and assets which the Lead
Arranger shall determine in its sole
discretion that the costs of obtaining
such security interest are excessive in
relation to the value of the security to
be afforded thereby (it being understood
that none of the foregoing shall be
subject to any other liens or security
interests, except for certain customary
exceptions to be agreed upon). All such
security interests will be created
pursuant to documentation satisfactory
in all respects to the Lead Arranger and
on the Closing Date such security
interests shall have become perfected
and the Lead Arranger shall have
received satisfactory evidence as the
enforceability and priority thereof.
Termination of
Commitments: The commitments in respect of the Credit
Facilities (including pursuant to the
Commitment Letter) will terminate in
their entirety on July 31, 1999 if the
initial funding under the Credit
Facilities does not occur on or prior to
such date.
Final Maturity: (A) Term Loan Facility. The Term Loan
Facility will mature on the date five
years after the Closing Date.
(B) Revolving Facility. The Revolving
Facility will mature on the Revolving
Loan Maturity Date.
Amortization Schedule: The Term Loan Facility will amortize on
a quarterly basis (beginning in 2000)
according to the following schedule:
Year Amount of Reduction
2000 $10.0 MM
2001 10.0 MM
2002 15.0 MM
2003 15.0 MM
--------
$50.0 MM
========
Letters of Credit: Letters of credit under the Revolving
Facility ("Letters of Credit") will be
issued by a Lender selected by the Lead
Arranger and reasonably satisfactory to
Borrower thereof (in such capacity, the
"L/C Lender"). The issuance of all
Letters of Credit shall be subject to
the customary procedure of the L/C
Lender.
Letter of Credit Fees: Letter of Credit fees will be payable
for the account of the Revolving
Facility Lenders on the daily average
undrawn face amount of each Letter of
Credit at a rate per annum equal to the
applicable margin for Revolving Loans
which are LIBOR rate loans in effect at
such time (but in no event less than
$500 per Letter of Credit), which fees
shall be paid quarterly in arrears. In
addition, an issuing fee on the face
amount of each Letter of Credit equal to
0.125% per annum (but not less than $500
per Letter of Credit) shall be payable
to the L/C Lender for its own account,
which fee shall be paid upon issuance.
Interest Rates and Fees: Interest rates and fees in connection
with the Credit Facilities will be as
specified on Annex I attached hereto.
Default Rate: On overdue amounts, the applicable
interest rate (including applicable
margin) plus 2.00% per annum.
Mandatory Prepayments/
Reductions in Commitments: The Credit Facilities will be required
to be prepaid with (a) 50% of annual
Excess Cash Flow (to be defined), (b)
100% of the net cash proceeds of asset
sales and other asset dispositions by
any Credit Party or any of its
subsidiaries (including insurance
proceeds) if not reinvested within a
specified time period, (c) 100% of the
net cash proceeds of the issuance or
incurrence of debt by any Credit Party
or any of its subsidiaries, and (d) 50%
of the net cash proceeds from any
issuance of equity securities in any
public offering or private placement or
from any capital contribution.
Mandatory prepayments will be
applied pro rata to the remaining
scheduled amortization payments . To the
extent that the amount to be applied to
the prepayment of Term Loans exceeds the
aggregate amount of Term Loans then
outstanding, such excess shall be
applied to the Revolving Facility to
permanently reduce the commitments
thereunder.
Revolving Loans will be immediately
prepaid to the extent that the aggregate
extensions of credit under the Revolving
Facility exceeds the commitments then in
effect under the Revolving Facility. To
the extent that the amount to be applied
to the repayment of the Revolving Loans
exceeds the amount thereof then
outstanding, Borrower shall cash
collateralize outstanding Letters of
Credit.
Voluntary Prepayments/
Reductions in Commitments: (A) Term Loan Facility. Borrowings under
the Term Loan Facility may be prepaid at
any time in whole or in part at the
option of Borrower, in a minimum
principal amount and in multiples to be
agreed upon, without premium or penalty
(except, in the case of LIBOR
borrowings, breakage costs related to
prepayments not made on the last day of
the relevant interest period). Voluntary
prepayments under the Term Loan Facility
will be applied pro rata to the
remaining scheduled amortization
payments.
(B) Revolving Facility. The
unutilized portion of the commitments
under the Revolving Facility may be
reduced and loans under the Revolving
Facility may be repaid at any time, in
each case, at the option of Borrower, in
a minimum principal amount and in
multiples to be agreed upon, without
premium or penalty (except, in the case
of LIBOR borrowings, breakage costs
related to prepayments not made on the
last day of the relevant interest
period).
Conditions to Effectiveness
and to Initial Loans: The effectiveness of the credit
agreement and the making of the initial
Loans under the Credit Facilities shall
be subject to conditions precedent that
are usual for facilities and
transactions of this type, to those
specified herein and in the Commitment
Letter and to such additional conditions
precedent as may be required by the Lead
Arranger (all such conditions to be
satisfied in a manner satisfactory in
all respects to the Lead Arranger and
the Lenders or the Required Lenders (as
the case may be) (as defined below under
"Required Lenders")), including, but not
limited to, execution and delivery of
the Credit Documents acceptable in form
and substance to the Lead Arranger and
the Lenders; delivery of satisfactory
borrowing certificates and other
customary closing certificates; receipt
of valid security interests as
contemplated hereby; absence of
defaults, prepayment events or creation
of liens under debt instruments or other
agreements as a result of the
transactions contemplated hereby;
absence of material litigation; evidence
of authority; compliance with applicable
laws and regulations (including but not
limited to ERISA, margin regulations,
bank regulatory limitations and
environmental laws); delivery of
satisfactory legal opinions; and
adequate insurance.
The making of the initial Loans under
the Credit Facilities will be subject to
the following conditions:
(A) The delivery, on or prior to the
Closing Date, of a certificate from
the chief financial officer of
Borrower and, at Borrower's
expense, a nationally recognized
appraisal firm or valuation
consultant reasonably satisfactory
to the Lead Arranger in form and
substance reasonably satisfactory
to the Lead Arranger and the
Lenders with respect to the
solvency of, with respect to such
officer's certificate, each Credit
Party on a consolidated basis, and
with respect to such appraisal
firm, Borrower on consolidated
basis, in each case immediately
after the consummation of the
Transactions to occur on the
Closing Date.
(B) Borrower shall have received
aggregate gross proceeds of at
least $150.0 million from the
Senior Subordinated Note Offering
on terms and conditions and
pursuant to documentation
reasonably satisfactory to the Lead
Arranger.
(C) Immediately after giving effect to
the Merger, Sponsor and its
affiliates shall beneficially own
not less than 35% of the voting and
economic interests in Target.
(D) The Board of Directors of
Purchaser, Target and their
respective subsidiaries shall have
authorized and approved the
Transactions and the Lead Arranger
shall have received satisfactory
evidence of the same. Purchaser and
Target shall have entered into the
Merger Agreement, which shall be in
full force and effect. The terms,
conditions and structure of the
Merger and the Merger Agreement,
including any amendments thereto
(and the documentation therefor
(including all proxy solicitation
materials)) shall be in form and
substance reasonably satisfactory
to the Lead Arranger and the
Lenders. Target shall not have any
"poison pill" rights or shall have
redeemed such rights at a nominal
price, or the Lead Arranger shall
otherwise be reasonably satisfied
that such rights are null and void
as applied to the Merger. The Lead
Arranger and the Lenders shall have
received copies, certified by
Borrower, of all filings made with
any governmental authority in
connection with the Transactions.
(E) Each of the Transactions (other
than extensions of credit under the
Credit Facilities and the Share
Repurchase) shall have been
consummated in all material
respects in accordance with the
terms hereof and the terms of
documentation therefor (without the
waiver or amendment of any material
condition unless consented to by
the Lead Arranger and the Lenders)
that are in form and substance
reasonably satisfactory to the Lead
Arranger and the Lenders (with any
condition therein requiring the
satisfaction or consent of any
person other than the Lead Arranger
or the Lenders being deemed to
require the satisfaction or consent
of the Lead Arranger and the
Lenders). Each of the parties
thereto shall have complied in all
material respects with all
covenants set forth in the Merger
Agreement (without the waiver or
amendment of any of the terms
thereof unless consented to by the
Lead Arranger and the Lenders).
(F) All liens in respect of any
existing debt shall have been
released and the Lead Arranger
shall have received evidence
thereof satisfactory to the Lead
Arranger and a "pay-off" letter
satisfactory to the Lead Arranger
with respect to such debt. (G)
After giving effect to the
Transactions and the other
transactions contemplated hereby,
each Credit Party and its
subsidiaries shall have outstanding
no indebtedness or preferred stock
(or direct or indirect guarantee or
other credit support in respect
thereof) outstanding other than the
loans under the Credit Facilities,
the Senior Subordinated Notes and
such other debt in an amount
acceptable to the Lead Arranger and
the Lenders and for which
arrangements reasonably
satisfactory to the Lead Arranger
and the Lenders have been made.
(G) After giving effect to the
Transactions and the other
transactions contemplated hereby,
each Credit Party and its
subsidiaries shall have outstanding
no indebtedness or preferred stock
(or direct or indirect guarantee or
other credit support in respect
thereof) outstanding other than the
loans under the Credit Facilities,
the Senior Subordinated Notes and
such other debt in an amount
acceptable to the Lead Arranger and
the Lenders and for which
arrangements reasonably satisfac-
tory to the Lead Arranger and the
Lenders have been made.
(H) There shall not have occurred or
become known any material adverse
change or any condition or event
that could reasonably be expected
to result in a material adverse
change in the business, assets,
operations, properties, financial
condition or liabilities
(contingent or otherwise) (each, a
"Material Adverse Change") of
Target together with its
subsidiaries taken as a whole (and
before and after giving effect to
the Transactions) since December
31,1997 (or, if Merrill Lynch has
received audited consolidated
financial statements for Target and
its consolidated subsidiaries at
and for fiscal year ended December
31, 1998 with the unqualified
opinion of Borrower's current
auditor accompanying such
financials and Merrill Lynch is, in
its sole discretion, satisfied with
such opinion and financial
statements, December 31, 1998).
(I) The Lead Arranger and the Lenders
shall have received satisfactory
evidence (including satisfactory
supporting schedules and other
data) that pro forma EBITDA of
Borrower (calculated in a manner
acceptable to the Lead Arranger)
after giving effect to the
Transactions for the 12 months
ended December 31, 1998 and the
trailing 12 months prior to the
Closing Date would not be less than
$46.0 million.
(J) The Lenders shall have received a
pro forma consolidated balance
sheet of Borrower dated as of the
date of the most recently available
financial statements after giving
effect to the Transactions, which
balance sheet shall be consistent
in all material respects with the
sources and uses shown on Annex I
to the Commitment Letter and the
forecast previously provided to the
Lenders. The sources and uses to
effect the Transactions shall not
differ in any material respect from
that set forth in Annex I to the
Commitment Letter.
(K) All material requisite governmental
authorities and third parties shall
have approved or consented to the
Transactions and the other
transactions contemplated hereby to
the extent required (without the
imposition of any burdensome or
materially adverse condition or
requirement in the reasonable
judgment of the Lead Arranger), all
applicable appeal periods shall
have expired and there shall be no
governmental or judicial action,
actual or threatened, that has or
could have a reasonable likelihood
of restraining, preventing or
imposing materially burdensome
conditions on any of the
Transactions or the other
transactions contemplated hereby.
(L) All accrued fees and expenses
(including the reasonable fees and
expenses of counsel to the Lead
Arranger) of the Lenders, the Lead
Arranger and the Administrative
Agent in connection with the Credit
Documents shall have been paid.
(M) The Lead Arranger and the Required
Lenders shall be satisfied (in
their reasonable judgment) with the
proposed and actual capitalization
and corporate and organizational
structure of Borrower and its
subsidiaries (after giving effect
to the Transactions), including as
to direct and indirect ownership
and as to the terms of the
indebtedness and capital stock of
Borrower and its subsidiaries.
(N) The Lenders shall have received a
reasonably satisfactory business
plan or budget for Borrower and its
subsidiaries after giving effect to
the Transactions for the remainder
of the 1999 fiscal year and the
fiscal year 2000.
(O) The Lenders shall have received
projected cash flows and income
statements for the period of six
years following the Closing Date,
which projections shall be (i)
based upon reasonable assumptions
made in good faith, (ii) reasonably
satisfactory to the Lenders and
(iii) substantially in conformity
with those projections delivered to
the Lenders during syndication. The
Lenders shall have received (i)
audited financial statements of
Borrower for fiscal year 1998 and
(ii) unaudited interim combined
financial statements of Borrower
for each fiscal month and quarterly
period ended subsequent to December
31, 1998 as to which such financial
statements are available, and such
financial statements shall not
reflect any Material Adverse Change
with respect to Borrower as
compared with the financial
statements or projections
previously furnished to the
Lenders.
(P) The Lead Arranger shall have
received satisfactory information
confirming that (a) Borrower and
its subsidiaries are taking all
necessary and appropriate steps to
ascertain the extent of, and to
quantify and successfully address,
business and financial risks facing
Borrower and its subsidiaries as a
result of what is commonly referred
to as the "Year 2000 problem,"
including risks resulting from the
failure of key vendors and
customers of Borrower and its
subsidiaries to successfully
address the Year 2000 problem; and
(b) Borrower's and its subsidiaries
material computer applications
will, on a timely basis, adequately
address the Year 2000 problem in
all material respects.
(Q) The Lenders shall have received the
results of a recent lien, tax and
judgment search in each of the
jurisdictions and offices where
assets of each of Borrower and its
subsidiaries are located or
recorded, and such search shall
reveal no liens on any of their
assets except for liens permitted
by the Credit Documents or liens to
be discharged in connection with
the transactions contemplated
hereby.
(R) The Lenders shall have received
such other legal opinions,
corporate documents and other
instruments and/or certificates as
they may reasonably request.
Conditions to All
Extensions of Credit: Each extension of credit under the
Credit Facilities will be subject to
customary conditions, including the (i)
absence of any Default or Event of
Default, and (ii) continued accuracy of
representations and warranties.
Representations and
Warranties: Customary for facilities similar to the
Credit Facilities and such additional
representations and warranties as may be
required by the Lead Arranger.
Affirmative Covenants: Customary for facilities similar to the
Credit Facilities and such others as may
be required by the Lead Arranger.
Negative Covenants: Customary for facilities similar to the
Credit Facilities and such others as may
be required by the Lead Arranger,
including, but not limited to,
limitation on indebtedness; limitation
on liens and further negative pledges;
limitation on investments; limitation on
contingent obligations; limitation on
dividends, redemptions and repurchases
of equity interests; limitation on
mergers, acquisitions and asset sales;
limitation on capital expenditures;
limitation on sale-leaseback
transactions; limitation on transactions
with affiliates; limitation on dividend
and other payment restrictions affecting
subsidiaries; limitation on changes in
business conducted; limitation on
amendment of documents relating to other
indebtedness and other material
documents; limitation on creation of
subsidiaries; and limitation on
prepayment or repurchase of other
indebtedness.
Financial Covenants: The Credit Facilities will contain
financial covenants appropriate in the
context of the proposed transaction
based upon the financial information
provided to the Lead Arranger,
including, but not limited to
(definitions and numerical calculations
to be set forth in the Credit
Agreement): minimum interest coverage
ratio, minimum fixed charge coverage
ratio, and maximum ratio of total debt
to EBITDA (to be defined). The financial
covenants contemplated above will be
tested on a quarterly basis and will
apply to Borrower and its subsidiaries
on a consolidated basis.
Events of Default: Customary for facilities similar to the
Credit Facilities and others to be
specified by the Lead Arranger.
Yield Protection and
Increased Costs: Usual for facilities and transactions of
this type.
Assignments and
Participations: Each assignment (unless to another
Lender or its affiliates) shall be in a
minimum amount of $5.0 million (unless
Borrower and the Lead Arranger otherwise
consent or unless the assigning Lender's
exposure is thereby reduced to $0).
Assignments (which may be non-pro rata
among loans and commitments) shall be
permitted with Borrower's and the Lead
Arranger's consent (such consent not to
be unreasonably withheld, delayed or
conditioned), except that no such
consent of Borrower need be obtained to
effect an assignment to any Lender (or
its affiliates) or if any default has
occurred and is continuing or if
determined by the Lead Arranger, in
consultation with Borrower, to achieve a
successful syndication. Participations
shall be permitted without restriction.
Voting rights of participants will be
subject to customary limitations.
Required Lenders: Lenders having a majority of the
outstanding credit exposure (the
"Required Lenders"), subject to
amendments of certain provisions of the
Credit Documents requiring the consent
of Lenders having a greater percentage
(or all) of the outstanding credit
exposure or a specified percentage of a
particular facility of the Credit
Facilities.
Expenses and Indemnification: In addition to those reasonable
out-of-pocket expenses reimbursable
under the Commitment Letter, all
out-of-pocket expenses of the Lead
Arranger and the Administrative Agent
(and the Lenders for enforcement costs
following any event of default and
documentary taxes) associated with the
preparation, execution and delivery of
any waiver or modification (whether or
not effective) of, and the enforcement
of, any Credit Document (including the
reasonable fees, disbursements and other
charges of counsel for the Lead Arranger
and the Administrative Agent) are to be
paid by the Credit Parties. The Credit
Parties will indemnify each of the Lead
Arranger, the Administrative Agent and
the other Lenders and hold them harmless
from and against all costs, expenses
(including fees, disbursements and other
charges of counsel) and liabilities
arising out of or relating to any
litigation or other proceeding
(regardless of whether the Lead
Arranger, the Administrative Agent or
any such other Lender is a party
thereto) that relate to the Transactions
or any transactions related thereto,
except to the extent determined by a
court of competent jurisdiction in a
final and nonappealable judgment to have
resulted primarily from such person's
gross negligence or bad faith.
Governing Law and Forum: New York.
Waiver of Jury Trial: All parties to the Credit Documents
waive right to trial by jury.
Special Counsel for Lead Arranger: Cahill Gordon & Reindel (and such local
counsel as may be selected the Lead
Arranger).
<PAGE>
ANNEX I
Interest Rates and Fees: Borrower will be entitled to make
borrowings based on the ABR plus the
Applicable Margin or LIBOR plus the
Applicable Margin. The "Applicable
Margin" shall be (A) with respect to
LIBOR Loans, (i) under the Revolving
Facility, 2.50% per annum; and (ii)
under the Term Loan Facility, 2.50% per
annum; and (B) with respect to ABR
Loans, (i) under the Revolving Facility,
2.00% per annum; and (ii) under the Term
Loan Facility, 2.00% per annum.
Unless consented to by the Lead Arranger
in its sole discretion, no LIBOR Loans
may be elected on the Closing Date or
prior to the date 30 days thereafter
(unless the completion of the primary
syndication of the Credit Facilities as
determined by the Lead Arranger shall
have occurred).
Notwithstanding the foregoing, on and
after the first date (the "Trigger
Date") after the Closing Date on which
Borrower delivers financial statements
and a computation of the ratio (the
"Leverage Ratio") of total debt to
EBITDA for the first fiscal quarter
ended at least six months after the
Closing Date in accordance with the
Credit Agreement, the Applicable Margin
shall be subject to a grid to be
negotiated based on the most recent
Leverage Ratio.
"ABR" means the higher of (i) the
corporate base rate of interest
announced by the Administrative Agent
from time to time, changing when and as
said corporate base rate changes, and
(ii) the Federal Fund Rate plus 0.50%
per annum. The corporate base rate is
not necessarily the lowest rate charged
by the Administrative Agent to its
customers.
"LIBOR" means the rate determined by the
Administrative Agent to be available to
the Lenders in the London interbank
market for deposits in the amount of,
and for a maturity corresponding to, the
amount of the applicable LIBOR Loan, as
adjusted for maximum statutory reserves.
Borrower may select interest periods of
one, two, three or six months for LIBOR
borrowings. Interest will be payable in
arrears (i) in the case of ABR Loans, at
the end of each quarter and (ii) in the
case of LIBOR Loans, at the end of each
interest period and, in the case of any
interest period longer than three
months, no less frequently than three
months. Interest on all borrowings shall
be calculated on the basis of the actual
number of days elapsed over (x) in the
case of LIBOR Loans, a 360-day year, and
(y) in the case of ABR Loans, a 365- or
366-day year, as the case may be.
Commitment fees accrue on the undrawn
amount of the Credit Facilities,
commencing on the date of the making of
the initial Loans under the Credit
Facilities. The commitment fee in
respect of the Credit Facilities will be
0.50% per annum.
All commitment fees will be payable in
arrears at the end of each quarter and
upon any termination of any commitment,
in each case for the actual number of
days elapsed over a 360-day year.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
April 2, 1999
Leasing Acquisition, Inc.
c/o Paribas Principal Partners
787 7th Avenue
New York, New York 10019
Re: Project Moby Dick -- Highly Confident Letter
Ladies and Gentlemen:
Leasing Acquisition, Inc., a wholly-owned subsidiary of Paribas
Principal, Inc. ("you") has advised Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch or "we" or "us") that certain affiliates of Leasing
Acquisition, Inc. (including Paribas Principal Inc., collectively, "Sponsor")
hold an equity position in a company previously identified to us and code named
Whale ("Target" or "Issuer"). You have advised us that (i) Transport Labor
Contract Leasing, Inc. ("Purchaser"), a company operating in the professional
employer organization ("PEO") industry and in which Sponsor has a substantial
equity interest intends to merge with and into Target pursuant to a merger
agreement (the "Merger Agreement") to be entered into between Purchaser and
Target; (ii) pursuant to the Merger Agreement, Purchaser will merge (the
"Merger") with and into Target, with Target as the survivor; (iii) at the date
of consummation of the Merger (the "Closing Date"), the existing stockholders of
Target, other than Sponsor and its affiliates and certain other stockholders,
immediately prior to the Merger (the "Cashed-Out Stockholders") will receive an
amount of cash mutually acceptable to you and us for each share of common stock
held by such stockholder (and such shares shall be canceled); (iv) the total
purchase price for the common stock of the Cashed-Out Stockholders of Target
will not exceed $228.0 million; (v) pursuant to the Merger Agreement, management
of Target and Sponsor and its affiliates and certain other stockholders
(collectively, the "Rollover Shareholders") will retain their equity interests
in Target; (vi) prior to the Merger, Purchaser will repurchase (the "Share
Repurchase") certain outstanding shares of common stock held by certain
shareholders of Purchaser for aggregate consideration acceptable to us; and
(vii) the sources and uses of the funds necessary to consummate the Merger and
the related transactions are set forth on Annex I to this Highly Confident
Letter.
In addition you have advised Merrill Lynch that in connection with the
consummation of the Merger, (a) Issuer will raise gross cash proceeds of not
less than $150.0 million from the offering (the "Senior Subordinated Note
Offering") by it of unsecured senior subordinated notes due 2009 (the "Senior
Subordinated Notes") having no scheduled principal payments prior to maturity;
and (b) Issuer will enter into senior secured credit facilities (the "Credit
Facilities") in an amount of $100.0 million.
The Merger, the Senior Subordinated Note Offering, the Share
Repurchase, the entering into and borrowings under the Credit Facilities and the
other transactions described above entered into and consummated in connection
with the Merger are herein referred to as the "Transactions".
Based on the foregoing and subject to the factors listed below, as of
the date hereof we are highly confident of our ability to sell or place the
Senior Subordinated Notes. The structure, covenants and terms of the Senior
Subordinated Notes will be as determined by Merrill Lynch and its affiliates in
consultation with you based on market conditions at the time of the offering or
placement of the Senior Subordinated Notes and on the structure and
documentation of the Merger, the Existing Debt Repayment and the related
transactions. Our views expressed herein assume that we and/or one of our
affiliates act as sole and exclusive underwriter, placement agent or initial
purchaser in connection with the Senior Subordinated Note Offering.
Our view is based upon (i) in Merrill Lynch's sole judgment, there not
having occurred or becoming known any material adverse change, or any condition
or event that could reasonably be expected to result in a material adverse
change, in the business, assets, liabilities (contingent or otherwise),
operations, financial condition or prospects of Issuer together with its
subsidiaries taken as a whole (after giving effect to the Transactions) since
December 31, 1997 (or, if Merrill Lynch has received audited consolidated
financial statements for Issuer and its consolidated subsidiaries for fiscal
year ended December 31, 1998 with the unqualified opinion of Borrower's current
auditor accompanying such financials and Merrill Lynch is, in its sole
discretion, satisfied with such opinion and financial statements, December 31,
1998) or in the business plan prepared by Issuer's management (or as provided by
you) and provided to Merrill Lynch (the "Business Plan"); (ii) the existence of
market conditions at least as favorable as those currently existing for high
yield senior subordinated notes comparable in terms, structure and contemplated
credit rating to the Senior Subordinated Notes, and there not having occurred
and continuing any disruption or material adverse change (or development
involving a prospective material adverse change) in the financial or capital
markets conditions generally from those in effect on the date hereof; (iii) the
sources and use of funds necessary to consummate the Transactions shall be
consistent with Annex I hereto and the pro forma capitalization of the Issuer
shall be on terms and conditions and pursuant to documentation satisfactory to
Merrill Lynch and Merrill Lynch shall have received satisfactory evidence that
consolidated pro forma EBITDA (calculated in a manner acceptable to Merrill
Lynch) is at least $46.0 million for the twelve months ended December 31, 1998
and the trailing twelve months prior to the Closing Date; (iv) the execution and
delivery of, and closing under, definitive documentation relating to the
Transactions, all in form and substance reasonably satisfactory to Merrill
Lynch; (v) receipt of all material requisite regulatory, governmental,
shareholder and other third party consents without the imposition of materially
adverse or burdensome restrictions; (vi) the execution and delivery by Issuer of
a customary underwriting agreement or placement agreement and registration
rights agreement and other documents in Merrill Lynch's standard forms and
satisfaction of the conditions therein stated; (vii) Merrill Lynch's having a
reasonable time to market the Senior Subordinated Notes based on its experience
in comparable transactions and existing market conditions, the marketing process
being conducted in a manner satisfactory to Merrill Lynch (including cooperation
by Issuer) including holding meetings with institutional investors, and
utilizing offering materials that contain all financial and non-financial
information required by the Securities Act of 1933 (whether or not the Senior
Subordinated Notes are sold in a transaction registered under the Securities Act
of 1933) and the rules and regulations thereunder for registration statements
filed thereunder, including, without limitation, audited consolidated financial
statements, with an auditors report thereon (without qualifications); (viii) we
shall have completed our due diligence investigation of Purchaser, Target and
their respective subsidiaries both before and after giving effect to the
Transactions in scope, and with results, satisfactory to us in our sole
discretion and, in connection therewith, we shall have been given such access to
information regarding Purchaser, Target and their respective subsidiaries as we
shall have requested including, without limitation, access to the management,
records, books of account, contracts and properties of Purchaser, Target and
their respective subsidiaries and we shall have received such financial,
business and other information regarding Purchaser, Target and their respective
subsidiaries as we shall have requested, and we shall not have become aware of
any fact, circumstance or development which we believe in our sole discretion is
inconsistent in any material adverse respect with any information provided to us
prior to the date hereof; and (ix) the Senior Subordinated Notes having received
a rating of at least B3 from Standard & Poor's and at least B- from Moody's
Investors Service, Inc. In the absence of specific terms for the Senior
Subordinated Notes, we have assumed that all of the terms, conditions and
covenants thereof will be as required by market conditions and Merrill Lynch in
its sole judgment.
This letter is not intended to be and should not be construed as a
commitment with respect to the Senior Subordinated Notes or any other financing
and creates no obligation or liability on the part of Merrill Lynch or any of
its affiliates in connection with or any agreement by Merrill Lynch or any of
its affiliates to arrange, syndicate, provide, place, underwrite or participate
in any financing. Any commitment, if appropriate, which we may subsequently
determine to extend would be pursuant to a formal commitment letter or
underwriting or purchase agreement (as the case may be) which would contain
terms, covenants and costs of capital typical for transactions of this type and
would provide that such commitment would be subject to (i) approval of Merrill
Lynch's acting as sole underwriter, placement agent or initial purchaser in
connection with the Senior Subordinated Notes in accordance with Merrill Lynch's
internal commitment committee, credit policies and approvals and (ii)
satisfactory market conditions and conditions customary for transactions of this
type and to conditions appropriate for this transaction in particular,
including, but not limited to, satisfactory completion of business, accounting
and legal due diligence, absence of a material adverse change and execution and
delivery of definitive documentation, in a form reasonably satisfactory to us.
This letter, the contents hereof and Merrill Lynch's and/or its
affiliates' activities pursuant hereto are confidential and shall not be
disclosed by or on behalf of you or any of your affiliates to any person without
our prior written consent, except that you may disclose this letter (i) to your,
Purchaser's and Target's officers, directors, employees and advisors, and then
only in connection with the Transactions and on a confidential basis and (ii)
following your acceptance hereof, as you are required to make by applicable law
(including pursuant to the Securities Act of 1933, as amended and the rules
promulgated thereunder and the Securities Exchange Act of 1934, as amended and
the rules promulgated thereunder (collectively, the "Securities Acts")) or
compulsory legal process (based on the advice of legal counsel); provided,
however, that in such event you agree, by your acceptance hereof, to give us
prompt notice thereof and to cooperate with us in securing a protective order in
the event of compulsory disclosure (other than with regard to compulsory
disclosure required by the Securities Acts). You agree that you will permit us
to review and (other than in respect of any disclosure required by the
Securities Acts) approve any reference to Merrill Lynch or any of its affiliates
in connection with this letter or the transactions contemplated hereby contained
in any press release or similar public disclosure prior to public release. You
agree that we and our affiliates in the finance industry may share information
concerning Sponsor, Purchaser, Target and their respective subsidiaries and
affiliates among ourselves for purposes of evaluating and completing the
transactions contemplated hereby.
This letter shall be governed by, and construed in accordance with,
the laws of the State of New York (without regard to principles of conflicts of
law). This letter will expire and have no effect 90 days after the date hereof.
We are excited about the opportunity to work with you.
Very truly yours,
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:/s/ CHRISTOPHER BIROSAK
--------------------------
Name: Christopher Birosak
Title: Managing Director
<PAGE>
Annex I
Sources and Uses of Funds
(in millions)
Sources
Excess Cash $56.4
Revolving Facility<F1> 24.2
Term Loan A 50.0
Senior Subordinated Notes 150.0
Rolled Equity 198.0
Total Sources $478.6
Uses
Purchase Price of Public
Shares $228.0
Rolled Equity 198.0
Estimated Fees and
Related Transaction
Expenses and Purchaser
Related Transaction Expenses 52.6
Total Uses $478.6
========
- ----------------------------------
<F1> $50.0 million of availability; approximately $24.2 million drawn at
closing
