SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 4)*
THE SOLOMON-PAGE GROUP LTD.
--------------------------------------------------------------------------------
(Name of issuer)
Common Stock, $.001 par value
--------------------------------------------------------------------------------
(Title of class of securities)
83427A 10 8
--------------------------------------------------------------------------------
(CUSIP Number)
Lloyd Solomon
c/o The Solomon-Page Group Ltd.
1140 Avenue of the Americas, 9th Floor
New York, New York 10036
(212) 403-6100
--------------------------------------------------------------------------------
(Name, address and telephone number of person
authorized to receive notices and communications)
June 28, 2000
--------------------------------------------------------------------------------
(Date of event which requires filing
of this statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1 (b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement / /. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7)
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
(Continued on following page(s))
Page 1 of 6 Pages
--------
*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 disclosure 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, as amended (the "Act") 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).
<PAGE>
------------------------------ --------------------------------
CUSIP No. 83427A 10 8 13D Page 2 of 6 Pages
------------------------------ --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
LLOYD SOLOMON
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF/BK
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 985,000
OWNED BY
EACH
REPORTING -----------------------------------------------------------------
PERSON WITH
8 SHARED VOTING POWER
-0-
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
985,000
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
985,000
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.6%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------ --------------------------------
CUSIP No. 83427A 10 8 13D Page 3 of 6 Pages
------------------------------ --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
SCOTT PAGE
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF/BK
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 801,900
OWNED BY
EACH
REPORTING -----------------------------------------------------------------
PERSON WITH
8 SHARED VOTING POWER
-0-
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
801,900
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
801,900
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.4%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------ --------------------------------
CUSIP No. 83427A 10 8 13D Page 4 of 6 Pages
------------------------------ --------------------------------
================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
HERBERT SOLOMON
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF/BK
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 707,600
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON WITH
8 SHARED VOTING POWER
-0-
-----------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
707,600
-----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
707,600
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.3%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
------------------------------ --------------------------------
CUSIP No. 83427A 10 8 13D Page 5 of 6 Pages
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================================================================================
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
TSPGL MERGER CORP.
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/
(b) / /
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
BK
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) / /
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
--------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY
EACH -----------------------------------------------------------------
REPORTING
PERSON 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*
CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
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CUSIP No. 83427A 10 8 13D Page 6 of 6 Pages
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SCHEDULE 13D
(AMENDMENT NO. 4)
RELATING TO THE
COMMON STOCK, $.001 PAR VALUE
OF
THE SOLOMON-PAGE GROUP LTD.
This Amendment No. 4 amends the Schedule 13D dated November 18, 1994
(the "Schedule 13D"), jointly filed by Lloyd Solomon, Herbert Solomon, and Scott
Page (collectively, the "Reporting Persons") relating to the beneficial
ownership of the Common Stock, par value $.001 per share (the "Common Stock"),
of The Solomon-Page Group Ltd. (the "Company"). All capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the
Schedule 13D.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Item 7 of the Schedule 13D is hereby amended and supplemented by the
following:
2. Commitment Letter, dated June 27, 2000, by and between The
Bank of New York and The Solomon- Page Group Ltd.*
-------------------
* Filed herewith.
SIGNATURES
After reasonable inquiry and to the best of my knowledge, I certify
that the information set forth in this statement is true, complete and correct.
DATED: July 10, 2000
/s/ Lloyd Solomon
----------------------------------------
Lloyd Solomon
/s/ Scott Page
----------------------------------------
Scott Page
/s/ Herbert Solomon
----------------------------------------
Herbert Solomon
TSPGL MERGER CORP.
By: /s/ Lloyd Solomon
------------------------------------
Name: Lloyd Solomon
Title: Chief Executive Officer
<PAGE>
EXHIBIT 2
THE BANK OF NEW YORK
1290 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10104
June 27 2000
Solomon-Page Group Ltd.
1140 Avenue of the Americas
New York, New York 10036
Attention: Lloyd Solomon
Chief Executive Officer
Gentlemen/Ladies:
Based upon recent discussions between The Bank of New York (the "Bank")
and you, and relying upon the information which you have previously provided to
the Bank, the Bank is pleased to confirm its willingness to extend a $19.0
million senior secured revolving credit ($11.5 million) and term loan ($7.5
million) facility (the "Facilities") for Solomon-Page Group Ltd. (the "Company")
subject to the conditions set forth in this letter. The Facilities would be (a)
provided pursuant to a credit agreement that would contain terms, conditions of
lending, funding and yield protections, representations and warranties,
covenants, events of default and other provisions customary for facilities of
this size, type and purpose, including, without limitation, the terms and
conditions set forth in the Summary of Principal Terms and Conditions attached
hereto (the "Term Sheet"), and (b) subject to (i) the negotiation and execution
of the credit agreement (as described above) and related documents that are
satisfactory in form and substance to the Bank, the Company and their respective
counsel, (ii) the absence of any material adverse change in the condition
(financial or otherwise), business, assets, properties, prospects, operations,
performance or current capital structure of the Company or of Information
Technology Partners, Inc. ("ITP") from that described to the Bank in the
information previously delivered to the Bank, (iii) verification by the Bank of
the information you have previously provided to the Bank, and (iv) the Bank's
satisfaction with its due diligence concerning the Company and ITP as provided
in the Summary of Principal Terms and Conditions. This Letter and the Term Sheet
are collectively referred to herein as the "Commitment Documents."
By executing this letter, you agree to indemnify and hold harmless the
Bank and each of its officers, directors, employees, affiliates, agents and
controlling persons (each, an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities to which any such Indemnified Party may
become subject arising out of or in connection with any claim, litigation,
investigation or proceeding relating to this letter, the Facilities (including
the use of the proceeds thereof), or any related transaction, whether or not any
Indemnified Party is a party thereto, and to reimburse each Indemnified Party
upon demand for all reasonable legal and 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 arising from the
willful misconduct, gross negligence or bad faith of such Indemnified Party.
<PAGE>
By executing this letter you (a) agree that you will not make any claim
against any Indemnified Party for any special indirect or consequential damages
in respect of any breach or wrongful conduct (whether the claim therefor is
based on contract, tort or duty imposed by law) in connection with, arising out
of or in any way related to the transactions contemplated and the relationship
established by this letter, or any act, omission or event occurring in
connection therewith, and (b) waive, release and agree not to sue upon any such
claim for any such damages, whether or not accrued and whether or not known or
suspected, to exist in your favor.
By executing this letter (a) you also agree to pay the Facility Fee
described in the Term Sheet and (b) you and the Bank agree that in the event the
Buyback occurs and the Company obtains financing for the Transaction from a
source other than the Bank and the Bank remains willing to extend the Facilities
on the terms and conditions set forth in the Term Sheet, the Facility Fee shall
be earned by, and be due and payable to, the Bank upon the closing of the
Transaction, whether or not the Facilities close.
You agree that this letter and the Term Sheet are for your confidential
use only and will not, without the prior consent of the Bank, be disclosed by
you or any of your representatives to any person other than your accountants,
attorneys and other advisors, and to your board of directors (and the Special
Committee thereof) and their respective advisors and then only in connection
with the transactions contemplated hereby and only on a confidential basis,
except that, following your acceptance hereof, you may make such disclosures of
the terms and conditions hereof as you are required by law to make.
This letter and the provisions contained herein shall not be assignable
by you and may not be amended or any provision hereof waived or modified except
by a document in writing signed by you and the Bank.
You hereby knowingly, voluntarily and intentionally waive any right you
may have to a trial by jury in respect of any litigation arising out of, under
or in connection with this letter or the transactions contemplated hereby.
This letter and the annexed Term Sheet set forth the entire
understanding of the parties hereto as to the scope of the obligations of the
parties hereto and supersede all prior agreements, representations and
understandings, relating to the subject matter hereof including, without
limitation, the letter dated March 28, 2000 from the Bank and accepted and
agreed to by the Company (the "Original Letter").
This letter shall be governed by, and construed in accordance with, the
laws of the State of New York.
This letter shall automatically expire if not accepted by you on or
before 5:00 P.M. (New York City time) on June 30, 2000. Please indicate your
acceptance of this letter and your agreement to the terms hereof by signing the
enclosed copy of this letter and returning it to the
<PAGE>
Bank, together with your check in the amount of $25,000 which amount together
with the $25,000 deposit heretofore made by the Company pursuant to the Original
Letter is nonrefundable but will be applied to the Facility Fee described in the
Term Sheet when and if earned under the terms of this letter. By executing this
letter, you will be deemed to have agreed as follows:
You shall and the Bank shall, subject to the terms and conditions set
forth herein, be bound by the terms of this letter;
You will pay on demand all reasonable fees and expenses incurred by the
Bank in connection with the negotiation and preparation of the loan
documentation relating to the Facilities (including, without limitation, third
party costs and expenses in connection with the Bank's due diligence
investigations and reasonable fees and expenses of the Bank's counsel) whether
or not the loan documentation is finalized and whether or not the Facilities are
closed and extended or other financial accommodations are made, and regardless
of the reasons for which such documentation is not finalized or the Facilities
are not closed and extended or other financial accommodations are not made; and
You will fully cooperate with the Bank in connection with the
transactions contemplated hereby.
Even if accepted in accordance with the provisions of the previous
paragraph, the obligations of the Bank under this letter shall expire and
terminate automatically, without further act or condition and regardless of
cause or circumstance, if loan documentation satisfactory in form and substance
to the Bank, the Company and their respective counsel is not executed on or
before September 30, 2000.
Very truly yours,
THE BANK OF NEW YORK
By: /s/ Gregg Scheung
---------------------------------
Name: Gregg Scheung
Title: Vice President
Accepted and agreed:
SOLOMON-PAGE GROUP LTD.
By: /s/ Lloyd B. Solomon
---------------------------
Name: Lloyd B. Solomon
Title: Chief Executive Officer
Date: June 27, 2000
<PAGE>
THE SOLOMON-PAGE GROUP LTD.
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
$19,000,000 SENIOR SECURED FACILITIES
JUNE 27, 2000
This Summary of Principal Terms and Conditions is a confidential proposal. It
sets forth some but not all of the terms on which The Bank of New York (the
"Bank") would consider extending credit pursuant to the annexed Commitment
Letter.
THE TRANSACTION: It is our understanding that a corporation
formed by Herbert Solomon, Lloyd Solomon and
Scott Page (the "Management Group") will be
merged with The Solomon-Page Group Ltd. and
that the holders of all outstanding shares
of common stock other than the Management
Group would receive an amount net of option
proceeds not to exceed $15,757,000 (the
"Buyback"). The Facilities will finance (a)
the Buyback, (b) approximately $765,000 in
transaction costs, (c) the retirement of all
existing bank debt, and (d) the Initial
Management Repurchase.
BORROWER: Solomon-Page Group Ltd. ("SPG" or the
"Borrower")
GUARANTOR: Information Technology Partners, Inc.
("ITP")
FACILITIES: $19,000,000 of senior secured credit
facilities (the "Facilities") comprised of:
(i) an $11,500,000 five year revolving
credit facility (the "R/C") which will
be available to finance the Transaction
and for general corporate purposes
including working capital, and
(ii) a $7,500,000 five year term loan (the
"Term Loan") which will be used to
finance the Transaction.
AVAILABILITY: Advances under the R/C will be made subject
to a borrowing base to be provided to the
Bank monthly. The Borrowing Base is proposed
to be defined as 75% of eligible accounts
receivable of the Borrower's Executive
Search/Full Time Contingency Recruitment
division plus 85% of eligible accounts
receivable of the Borrower's Temporary
Staffing and Consulting division.
Notwithstanding the foregoing, the final
advance rate will be set subject to
completion by the Bank of its due diligence
into accounts receivable.
Availability will be determined monthly for
the following month and will be equal to the
lesser of the R/C amount or the Borrowing
Base.
<PAGE>
FINAL MATURITY: Five years from the closing date of the
Facilities
TERM LOAN
AMORTIZATION: The Term Loan will amortize according to the
amounts and on the dates indicated below:
Year Amortization
1 $1,000,000
2 $1,250,000
3 $1,500,000
4 $1,750,000
5 $2,000,000
----------
$7,500,000
SECURITY: The Facilities will be secured by a first
priority perfected security interest in (i)
substantially all of the assets of the
Borrower and the Guarantor, (ii) insurance
policies maintained by the Borrower, and
(iii) the stock of the Borrower owned by the
Management Group.
MANDATORY COMMITMENT
REDUCTIONS AND R/C AND
TERM LOAN PREPAYMENT: The Term Loan, and after the principal
amount of the Term Loan is reduced to $0,
the principal amount outstanding under the
R/C will be repaid, and the R/C commitments
permanently reduced, in amounts equal to (i)
100% of the net proceeds from any asset
sale, subject to reinvestment provisions to
be negotiated and incorporated in the loan
documents; (ii) 100% of the net proceeds
from any equity issuance, subject to an
exception to be negotiated and incorporated
in the loan documents for the issuance of
stock to employees pursuant to employee
plans, agreements and arrangements; (iii)
100% of the net proceeds from any debt
issuance; (iv) 50% of net income plus
depreciation and amortization minus capital
expenditures, changes in Working Capital [to
be defined] and scheduled principal
repayments ("Excess Cash Flow"), provided
that this clause will not apply in the
fiscal year ending 9/30/00, or when the
Leverage Ratio is less than 2.00X and (v)
100% of the net proceeds of any insurance
reimbursement after giving effect to any
reinvestment of such proceeds on terms to be
agreed upon.
OPTIONAL PREPAYMENT: Permitted at any time in whole or in part,
without premium or penalty (but subject to
payment of break funding costs) upon proper
notice to the Bank, in minimum amounts to be
determined.
APPLICABLE MARGINS: The Applicable Margins and Commitment Fees
(where applicable) for the R/C and the Term
Loan will be determined based upon the
Borrower's ratio of Funded Debt as of any
date to EBITDA for the
<PAGE>
last four reported fiscal quarters (the
"Leverage Ratio") as described in the
Pricing Table below:
PRICING TABLE:
<TABLE>
<CAPTION>
LEVERAGE RATIO R/C R/C ABR TERM LOAN TERM LOAN COMMITMENT FEE ON
LIBOR MARGIN MARGIN LIBOR MARGIN ABR MARGIN UNDRAWN PORTION OF R/C
<S> <C> <C> <C> <C> <C>
X is greater or
equal to 2.5 2.625% 0.750% 3.000% 1.000% 0.40%
2.0 is less than or
equal to x which is
less than 2.5 2.375% 0.500% 2.750% 0.750% 0.35%
1.5 is less than or equal
to X which is less
than 2.0 2.125% 0.250% 2.500% 0.500% 0.30%
1.0 is less than or equal
to X which is less
than 1.5 1.875% 0.000% 2.250% 0.250% 0.25%
X is less than or equal to
1.0 1.625% 0.000% 2.000% 0.000% 0.20%
</TABLE>
Notwithstanding the foregoing, for the
purpose of calculating the Applicable
Margins, the Leverage Ratio will be deemed
to be greater than 2.5 from the closing date
through the first anniversary of the closing
date.
COMMITMENT FEE: The Borrower shall pay to the Bank a per
annum fee on the average amount of the R/C
commitment which is unused. Such fee will be
payable quarterly in arrears at the rate
established in the Pricing Table above.
FACILITY FEE: A facility fee equal to 1.50% on the total
principal amount of the Facilities will be
payable to the Bank at closing, subject to
the terms and conditions set forth in the
Commitment Letter.
DEFAULT RATE OF INTEREST: An additional 2% per annum above the
Applicable Margin.
COMPUTATION OF INTEREST
AND FUNDING AND YIELD
PROTECTIONS: Usual and customary provisions for
facilities of this size, type and purpose.
REPRESENTATIONS AND
WARRANTIES: Usual and customary provisions for
facilities of this size, type and purpose.
CONDITIONS PRECEDENT
TO CLOSING: Such conditions precedent as are customary
for facilities of this size, type and
purpose with respect to the Borrower and its
subsidiaries including, without limitation,
(i) no default or event of default
immediately before or after giving effect to
the Term Loan or loan under the R/C and (ii)
accuracy of representations and warranties
in all material respects. Such conditions
precedent shall also include, without
limitation, the following:
<PAGE>
(1) (a) The simultaneous consummation of the
Transaction on terms and conditions which
are substantially identical to the terms and
conditions described herein; (b) the
proceeds of the Facilities shall be
sufficient to effect the Transaction and to
pay all fees and expenses associated
therewith; and (c) the resulting capital
structure and equity ownership of the
Borrower and Guarantor shall be satisfactory
to the Bank;
(2) Satisfactory completion by the Bank of
its due diligence, including without
limitation, receipt and satisfactory review
of (a) the consolidated and consolidating
financial statements of the Borrower for the
quarter ending June 30, 2000, (b) a pro
forma consolidated and consolidating balance
sheet of the Borrower as of the closing date
of the Transaction, (c) projections covering
the period in which the Facilities will be
outstanding, (d) a field audit of the books
and records of the Borrower by a
representative of the Bank, the reasonable
costs of which will be paid by the Borrower,
(e) any information the Bank may require
regarding the assets of the Borrower and
Guarantor (f) the employment contracts of
the Management Group;
(3) Unused Borrowing Base availability under
the R/C at closing shall not be less than
$1,000,000;
(4) Cash and marketable securities of the
Borrower and the Guarantor at closing shall
not be less than $500,000.
(5) The Bank will have obtained a perfected
first priority security interest in the
Collateral;
(6) No material adverse change in the
business of the Borrower or the Guarantor
and the Bank shall be reasonably satisfied
that (i) there shall be no litigation or
administrative proceeding arising out of or
relating to the Transaction (a) in which the
Bank is named a party that the Bank, after
due diligence and advice of counsel of its
own selection, in its sole, reasonable
discretion determines would materially,
adversely affect the Bank or (b) which would
challenge the validity or enforceability of,
or the obligation of the Borrower and the
Guarantor to pay the indebtedness and
perform their agreements under, the loan
documents, and (ii) there shall be no other
litigation or administrative proceeding
(i.e., not arising out of or relating to the
Transaction), or regulatory changes since
the date of the Commitment Documents that
would reasonably be expected to have a
material adverse effect on the condition
(financial or otherwise), business, assets,
prospects, operations, or performance of the
Borrower or the Guarantor or the capital
structure of the Borrower;
4
<PAGE>
(7) The Bank will have received a solvency
certificate, in form and substance
satisfactory to the Bank and an opinion from
the Borrower's counsel that the Transaction
complies with applicable laws;
(8) A ratio of Funded Debt at closing to the
last four quarters of EBITDA would not
exceed 2.75X; and
(9) The payment of all fees due to the Bank.
CONDITION PRECEDENT
TO EACH BORROWING: Usual and customary provisions for
facilities of this size, type and purpose.
NEGATIVE COVENANTS: Usual and customary for facilities of this
size, type and purpose including, without
limitation:
(1) Limitations (to be negotiated and
incorporated in the loan documents) on
additional indebtedness, sale-leaseback
transactions and the issuance of capital
stock which is subject to mandatory
redemption or redemption at the option of
the holder thereof. Limitations (to be
negotiated and incorporated in the loan
documents) on amendments to permitted
indebtedness and other material instruments.
(2) Prohibitions on liens other than (i)
liens associated with the Facilities, (ii)
liens permitted to exist at closing and
(iii) other specified permitted liens.
(3) Limitations on (i) mergers or
consolidations, (ii) acquisitions and other
investments and (iii) dispositions of
assets.
(4) Limitations on compensation paid to the
Management Group.
(5) Restriction on the ability of members of
the Management Group to compete against the
Borrower.
(6) No cash dividends can be paid.
Notwithstanding the foregoing, if after
giving effect to the Transaction the
Borrower is legally structured as a
Subchapter S Corporation or a Limited
Liability Corporation, cash dividends will
be permissable, but only to the extent that
such dividends offset personal income tax
liabilities of the Management Group members
that result from the flow through of
earnings of the Borrower.
(7) Limitations on other restricted payments
and prepayments of certain other
indebtedness. Notwithstanding the foregoing
if (a)
5
<PAGE>
no litigation is pending with respect to the
Transaction, and (b) no events of default
exist or would be caused to exist from the
repurchase, then the Borrower will be
allowed to repurchase common stock from the
Management Group at any time within one year
of the closing date of the Facilities in an
amount not to exceed the lesser of (i)
$1,500,000 and (ii) $15,757,000 minus the
actual cost of the repurchased shares and
options (the "Initial Management
Repurchase"). In the event that the
conditions allowing for the Initial
Management Repurchase are met, then
additional repurchases of common stock from
the Management Group shall be allowed at any
time during the period commencing 1/1/01 and
ending 12/31/02 ("Secondary Management
Repurchases"), provided that (a) no covenant
violations exist or would be caused to exist
from the Secondary Management Repurchases,
(b) no events of default exist or would be
caused to exist from the Secondary
Management Repurchases, (b) no litigation is
pending with respect to the Transaction and
(c) the sum of the Initial Management
Repurchase and all Secondary Management
Repurchases shall not exceed $1,500,000.
(8) Limitations on transactions with
affiliates and the formation of
subsidiaries, including that any new
subsidiaries become Guarantors and pledge
all of their assets as security for the
Facilities.
FINANCIAL REPORTING: Customary for a transaction of this type,
but to include quarterly compliance
certificates and annual audited consolidated
and unaudited consolidating financial
statements by a Certified Public Accountant
satisfactory to the Bank.
FINANCIAL COVENANTS: (1) Leverage Ratio - The Borrower will be
required to maintain a ratio of total Funded
Debt to the last four quarters of EBITDA of
not greater than:
DATE: RATIO
----- -----
From 09-30-00 to 09-29-02 2.75X
From 09-30-02 to 03-30-03 2.25X
Thereafter 2.00X
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<PAGE>
(2) Fixed Charge Coverage Ratio - The
Borrower will be required to maintain a
ratio of (i) EBITDA less capital
expenditures to (ii) interest expense plus
taxes plus distributions for taxes plus
required Term Loan principal payments of not
less than
YEAR RATIO
---- -----
1 1.15X
2 1.20X
Thereafter 1.25X
(3) Adjusted Fixed Charge Coverage Ratio -
For any rolling four quarter period in which
the Borrower has made or scheduled Secondary
Management Repurchases, the Borrower will be
required to maintain a ratio of (i) EBITDA
less capital expenditures and Secondary
Management Repurchases to (ii) interest
expense plus taxes plus distributions for
taxes plus required Term Loan principal
payments of not less than 1.25X. For the
purpose of clause (3)(i) Secondary
Management Repurchases will be equal to
scheduled Secondary Management Repurchases
for the current quarter plus Secondary
Management Repurchases actually made during
the prior three quarters.
(4) Interest Coverage Ratio - The Borrower
will be required to maintain a ratio of
EBITDA to interest expense of not less than
DATE: RATIO
----- -----
Closing through 09-29-01 3.00X
From 09-30-01 to 09-29-02 3.25X
From 09-30-02 to 09-29-03 4.00X
Thereafter 5.00X
(5) Capital expenditures are not to exceed
$250,000 per annum. Notwithstanding the
foregoing, the Borrower may incur $100,000
in additional capital expenditures over the
term of the facilities, which shall not be
subject to this limitation.
(6) Net income for any four consecutive
fiscal quarter periods shall not be less
than $1.00.
(7) Other reasonable and/or customary
covenants which the Bank, in its sole
discretion, deems appropriate.
AFFIRMATIVE COVENANTS: Usual and customary covenants for facilities
of this size, type and purpose including,
without limitation, a post-closing
requirement for interest rate protection on
a portion of the Facilities on terms which
are satisfactory to the Bank.
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<PAGE>
EVENTS OF DEFAULT: Usual and customary events of default for
facilities of this size, type and purpose,
including without limitation changes of
control and management.
COST AND YIELD PROTECTION: Standard provisions for illegality,
inability to determine rate, indemnification
for break funding and increased costs or
reduced return, including those arising from
reserve requirements, taxes and capital
adequacy.
EXPENSES AND
INDEMNIFICATION: The Borrower will pay the Bank's reasonable
legal and out-of-pocket expenses incurred in
connection with the negotiation, preparation
and execution of the legal documentation of
the Facilities, regardless of whether the
transaction is consummated and whether or
not the Facilities close. Documentation
shall contain expense and indemnification
provisions for the benefit of the Bank
customary for transactions of this type.
GOVERNING LAW: New York
CONSENT TO NEW YORK
JURISDICTION: Required.
WAIVER OF TRIAL
BY JURY: Required.
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