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Comerica Bank
July 7, 2000
Wm. Robert Wright II
Three Cities Research, Inc.
650 Madison Avenue
New York , NY 10022
Re: Loan Facilities ("Faci1ities") to be provided for BR
Acquisition Corp. (a corporation to be formed for the
acquisition of Business Resource Group) by Comerica Bank -
California or its affiliates ("Comerica") as Agent
Dear Mr. Wright:
This letter shall constitute the commitment of Comerica to provide
the loan facilities described in the attached Summary of Terms and Conditions,
subject to the terms and conditions described in the Summary of Terms and
Conditions, the enclosed Agency Fee Letter and the general conditions described
in Exhibit "A" to this letter.
This commitment may be accepted by your execution and return to me of
the enclosed copies of this letter and related Agency Fee Letter, together with
your payment of the initial $150,000 insta1lment on the Arrangement Fee
described in the Agency Fee Letter.
Unless this commitment is so accepted before close of business,
Monday, July 10, 2000, this letter shall (unless extended by Comerica, in its
sole discretion) automatically expire by its terms and shall no longer be
subject to acceptance.
COMERICA BANK - CALIFORNIA
By: /s/Allen G. Williams
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Its: Executive Vice President
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Accepted:
THREE CITIES RESEARCH. Inc.
And
BR ACQUISITION CORP.
By: /s/ Wm. Robert Wright
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Wm. Robert Wright
Its: Authorized Officer of Each of Them
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EXHIBIT "A"
GENERAL CONDITIONS
The following General Conditions are specifically incorporated within
and form a part of the commitment letter to which they are attached.
Fulfillment and discharge of the following General Conditions are preconditions
to Comerica's obligation to consummate the proposed Financing.
1. Co-Ordination with Comerica's Counsel. David K. McLeod of Miller,
Canfield, Paddock and Stone (313-496-7564) will act as our counsel in
connections with this transaction. After your acceptance of this commitment
letter, you are requested to have your counsel contact the attorney for the
purpose of arranging the ordering of Uniform Commercial Code searches, the
preparation of closing documents and the coordination of the respective
obligations.
2. Delivery of Obligor's Documents. All documentation to be provided to
Comerica by you should be provided as soon as possible after the acceptance of
this commitment letter.
3. Conditions to Financing. The willingness of Comerica to provide the
Financing and the closing of the Financing shall be subject to the satisfaction,
on or before the date of closing under this Commitment ("Closing"), of each of
the following conditions.
A. Execution of Loan Documents: The negotiation, execution and
delivery of a loan agreement, promissory notes, guaranties, security agreements,
stock pledges, mortgages and collateral and other documentation reasonably
satisfactory to Comerica and its counsel, containing, subject to the Summary of
Terms and Conditions, customary conditions, covenants, warranties, remedies and
other provisions including, without limitation, the conditions, covenants,
warranties and provisions described herein and in the Summary of Terms and
Conditions.
B. Merger: Comerica's receipt of satisfactory evidence confirming
that concurrently with the initial funding of the Financing, BR Acquisition
Corp. and Business Resource Group will be merged.
C. Pro Forma Financial Information and Projections: Comerica' s
receipt of a pro forma unaudited consolidated balance sheet and statement of the
operations of the Company, the guarantors mentioned in the Summary of Terms and
Conditions ("Guarantors") and their respective subsidiaries as of the Closing,
which shall not differ in any material adverse respect from the information
previously delivered to Comerica and projections in form reasonably acceptable
to Bank ("Projections").
D. Fairness Opinion: Comerica's receipt of a fairness opinion
with respect to BR Acquisition Corp.'s purchase of the stock of Business
Resource Group (the "Stock Purchase"), in form satisfactory to Comerica and
prepared by a reputable firm satisfactory to Comerica and its counsel.
E. Other Closing Documents: Comerica's receipt of satisfactory
evidence of (1) all governmental, third party and/or other approvals, permits,
registrations and the like, necessary or appropriate in connection with the
Financing or any transaction contemplated
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thereby, (2) the corporate approvals by the Company, its subsidiaries and the
Guarantors as applicable, of the loan agreement, guaranties and other loan and
collateral documents, instruments and transactions contemplated hereby, (3)
confirmation that the respective amounts of the sources and uses for the
Financing and the Stock Purchase are substantially consistent with the
information previously provided to Comerica, (4) customary opinions of legal
counsel for Company, the Guarantors and their respective subsidiaries, covering
the Financing, the Stock Purchase and such other matters as reasonably required
by, and otherwise in form and content satisfactory to, Comerica and its counsel
and (5) such additional information, reports and other requirements reasonably
requested by Comerica.
F. Material Adverse Change: There shall have been no material
adverse change in the condition (financial or otherwise), properties, business
results or operations of Company the Guarantors and their respective
subsidiaries from the condition shown in the financial information delivered to
Comerica prior to the date hereof; nor shall any omission, inconsistency,
inaccuracy, or any change in presentation or accounting standards which renders
such financial statements materially misleading have been determined by Comerica
to exist.
G. Material Change in Markets: There shall not have occurred
after the date of this Commitment, a material adverse change in the market for
syndicated bank credit facilities or a material disruption of, or a material
adverse change in, financial, banking or capital market conditions (domestic
or foreign), in each case as determined by Comerica, in its sole discretion.
H. Payment of Fees and Expenses: Company or Three City Research,
Inc. ("Three Cities") shall have paid to Comerica all fees and expenses required
to be paid on or before the Closing under the terms of this Commitment or any
separate agency fee or other fee letter ("Fee Letter") in effect between
Company, Three Cities and Comerica, from time to time.
4. Right to Syndicate: Company Obligations. Comerica reserves the
right, before the Closing under this Commitment (but without reducing its
obligations hereunder) or subsequent to the Closing to syndicate the Financing
by a1lot:ating or assign1ng percentages of the Financing (including its rights
and obligations under this Commitment) thereof to other banks or financial
institutions (collectively, with Comerica, the "Banks") selected by Comerica and
approved by Three Cities and the Company, such approval not to be unreasonably
withheld, conditioned or delayed. Three Cities and the Company agree to exercise
good faith, diligent efforts to cooperate with Comerica in such syndication
efforts, including without limitation providing financial and other information
to prospective Banks, and responding to inquiries and other requests received
from prospective Banks, providing assistance in the preparation of a
confidential information memorandum and other syndication material and hosting,
with Comerica, of one or more meetings with prospective lenders. Company and
Three Cities further agree to refrain from engaging in any additional or other
financing (except as described in this letter or in the Summary of Terms and
Conditions or as specifically identified in any materials previously furnished
to Cormerica) during such syndication process unless otherwise agreed to by
Comerica.
5. Control of Syndication. It is understood and agreed that Comerica,
after consultation with you, will manage and control all aspects of the
syndication, including decisions as to the selection of proposed lenders and any
titles offered to proposed lenders, when commitments will be accepted and the
final allocations of the commitments among the lenders. It is understood that no
other lender participating in the Financing will receive compensation
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from you outside the terms of this letter in order to obtain commitment. It is
also understood and agreed that the amount and distribution of the fees among
the lenders will be at the sole discretion of Comerica, and that any syndication
prior to execution of definitive documentation will reduce the commitment of
Comerica.
6. Successful Syndication. Comerica shall be entitled, after
consultation with you, to change the pricing (subject to the limitations set
forth in the Agency Fee Letter), terms and/or structure of the Financing if
Comerica determines, in its reasonable discretion, that such changes are
necessary or advisable to insure a successful syndication of the Financing;
provided, however, that the total amount of the Financing remains unchanged. It
is understood that Comerica's commitment hereunder is expressly subject to the
agreements in this paragraph, and that such agreements (and any similar
agreements in the Fee Letter) shall survive the Closing.
7. Reliance on Financial Information. Three Cities and the Company
hereby represent and warrant that (a) all information other than the Projections
(the "Information") that has been or will be made available to Comerica by it or
any of its representatives (in each case, with respect to Information furnished
to Comerica prior to the date of commencement of the syndication of the
Financing, as supplemented from time to time prior to such date) is or will be
complete and correct in all material respects and does not or will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make such statements contained therein not materially
misleading in light of the circumstances under which such statements are made
and (b) the Projections that have been or will be made available to Comerica
have been or will be prepared in good faith based upon assumptions you believe
to be reasonable. It is understood that, in arranging and syndicating the
financing, Comerica may use and rely on the information and Projections without
independent verification.
8. Comerica's Fees and Expenses: Whether or not the closing of the
Financing occurs under this Commitment, Three Cities and the Company shall pay
to Comerica, in addition to the fees required under any Fee Letter in effect
from time to time, all of Comerica's costs and expenses, including, by way of
description and not limitation, reasonable attorney fees and advances, appraisal
and accounting fees, lien search fees, environmental audit fees, and required
travel costs, incurred by Comerica in connection with this Commitment, and the
negotiation, consummation and/or closing of the loans contemplated hereby. This
paragraph shall survive the expiration or termination of the Commitment.
9. Indemnification. The Company shall indemnify and hold Comercia, and
its shareholders, directors, agents, officers, employees, attorneys,
subsidiaries and affiliates (collectively, the "Indemnified Parties"), harmless
from and against any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action, and reasonable costs and
expenses (including reasonable attorneys fees) incurred, suffered, sustained or
required to be paid by reason of or resulting from the transactions contemplated
hereby or which otherwise result from the Financing, other than as a result of
Comerica's gross negligence or willful misconduct.
10. Non-assignability; Termination. This Commitment is provided for the
sole benefit of Three Cities and the Company, is not intended to create any
rights in favor of and may not be relied upon by any third party, and shall not
be transferable or assignable by Three Cities or the Company by operation of
law, or otherwise, and may be terminated at the option of Comerica if Three
Cities or the Company shall fail to comply with any of the terms and
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conditions hereof, or in the event at any time prior to the Closing of the
Financing of a filing by or against Three Cities or the Company or any of their
respective subsidiaries, of a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver, trustee or custodian or the
making by Three Cities or the Company or any of their respective subsidiaries,
of an assignment for the benefit of creditors or the filing of a petition for
arrangement, or other similar proceedings.
11. No Effect on Loan Documents. Until the closing hereunder, this
Commitment shall not amend, modify or otherwise affect, in any manner
whatsoever, any existing loan agreements, loan documents, any existing credit
facilities provided by Comerica (with or without any other party) to Three
Cities or the Company (or any of their respective subsidiaries or affiliates),
or any loan, collateral or other document or instrument executed in connection
therewith.
12. Entire Agreement; Amendment. This Commitment (including the Summary
of Terms and Conditions) and the Fee Letter contain the entire agreement of
Comerica as of the date hereof with respect to the Financing and are not subject
to or supplemented by any previous correspondence or communications (verbal or
written) between Three Cities or the Company, and Comerica or any other document
not expressly referenced herein. No change in this Commitment sha11 be binding
upon the parties unless expressed in writing and signed by them.
13. Termination of Commitment. This Commitment may be terminated at
Comerica's option, without further liability by Comerica, upon the failure by
either Borrower, Company or any Guarantor to comply with any of the terms and
conditions of the commitment letter, or if any representation or warranty made
by or on behalf of any of the aforementioned persons should be or become untrue
or misleading in any material respect or if any event occurs which, under the
terms of the commitment letter, would constitute a Default if the transaction
has closed. Upon such termination, any fees paid or to be paid to Comerica under
this Commitment shall constitute liquidated damages. In addition, at Comerica's
election, Three Cities and Company shall pay to Comerica, upon demand, the full
amount of all costs and expenses (including without limit in-house or outside
attorney charges) incurred by the Bank in connection with the Commitment and the
proposed Financing.
14. Cancellation for Failure to Close. This Commitment may, in all events,
be canceled at Comerica's option, communicated to the Borrowers in writing, in
the event that the loan proposed to be made pursuant to the Commitment is not
closed on or before November 6, 2000.
15. Waiver or Modification. The provisions of this Commitment (including
without limit these General Conditions) cannot be waived or modified except in a
further written instrument signed by Comerica.
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CONFIDENTIAL BUSINESS RESOURCE GROUP
SUMMARY OF TERMS AND CONDITIONS
$40,000,000 Secured Revolving Credit Facility
$8,000,000 Secured Term Loan Facility
$8,000,000 Secured Acquisition Term Loan Facility
for
BR Acquisition Corp.
July 7, 2000
I. GENERAL PROVISIONS
Agent and Arranger: Comerica Bank-California or its affiliate(s) ("Comerica"
or "Agent"), to be Structuring, Documentation, and
Administrative Agent.
Commitment Amount: Agent to underwrite and syndicate, as indicated in the
Agency Fee Letter, a $40,000,000 Secured Revolving
Credit Facility, $8,000,000 Secured Term Loan Facility,
and a $8,000,000 Secured Acquisition Term Loan Facility.
Total outstandings under these facilities shall not at
any time exceed $45,000,000 (the "Total Usage
Limitation").
Agency Fee: As set forth in the Agency Fee Letter and Administrative
Agency Fee Letter.
Lenders: Syndicate of Lenders acceptable to Comerica (the "Banks"
or "Bank Group").
Lenders' Minimum
Commitment Amount: $10,000,000
II. LOAN FACILITY; SPECIFIC TERMS
Facility A: $40,000,000 Secured Revolving Credit Facility.
("Revolving Credit Facility")
Borrower: The survivor of the merger of BR Acquisition Corporation
and Business Resource Group ("Company"), or other
corporation acceptable to Comerica Bank in its sole
discretion.
Facility Description: Secured Revolving Credit Facility with advances and
re-advances available based on an Advance Formula which
also allows for the issuance of up to $5,000,000 in
Standby Letters of Credit.
Purpose: Purchase of the stock and options issued by Business
Resource Group, refinance debt, working capital, and
general corporate purposes.
Maturity Date: Five years from date of closing.
Security: First security interest in accounts, notes, contracts
receivable, inventory, general intangibles, machinery
and equipment, and all other tangible and intangible
personal property now owned, and hereafter acquired by
Company and each guarantor. Pledge of 100% of stock of
all Subsidiaries now owned or hereafter acquired.
Advance Formula: Availability for all advances under the Facility shall
under a Borrowing Base which shall be limited to 80% of
Eligible Gross Accounts Receivables aged up to 120 days
from invoice date, and either(a) 30% of Eligible
Inventory or (b) 65% of Billable
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Comerica Bank, as Agent (i) [LOGO]
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CONFIDENTIAL BUSINESS RESOURCE GROUP
Eligible Inventory, (but as yet unbilled inventory),
such advance on unbilled inventory to be limited to a
maximum of $4,000,000 declining to a maximum of
$2,000,000 on July 31, 2001 and $0 on October 31, 2001.
Total inventory reliance limited to 40% of Accounts
Receivable availability. Furthermore, $5,000,000 shall
be reserved (the "Reserve") under this Borrowing Base
(but not the facility) until the amount outstanding
under the $8,000,000 Secured Term Loan (the "Term
Loan"), is reduced to $5,000,000 at which time, the
Reserve reduces to an amount equal to the amount then
outstanding under the Term Loan so long as the Borrower
is in compliance with the loan agreement.
Letters of Credit: Availability under the Revolving Credit Facility to
include up to $5,000,000 in the aggregate in Standby
Letters of Credit issued by the Agent, with pro-rate
risk participation from the Banks. The aggregate amount
of all Letters of Credit issued shall reduce
availability under the Revolving Credit Facility.
Maturity of individual Letters of Credit will not exceed
12 months or, if earlier, the maturity of the Revolving
Credit Facility.
Nonrefundable letter of credit fee (calculated on a per
annum basis) payable quarterly in advance, in accordance
with Applicable Margin Grid I, plus a Facing Fee on each
Letter of Credit, as indicated in the Agency Fee Letter
attached.
Swing Line: Comerica will provide from time-to-time up to $5,000,000
of the Revolving Credit Facility under a Swing Line
available to the Company. The Swing Line is provided as
an accommodation to the Company and the additional Banks
to handle daily activity with minimum draws and payments
of $50,000. Advances under the Swing Line shall be at
the Base Rate plus the Applicable Margin, (See attached
Applicable Margin Grid I for Applicable Margin) and
shall reduce availability under the Revolving Credit
Facility.
Borrowing Options: Borrowing Options to Company for advances under the
Revolving Credit shall include a Eurodollar Rate and a
Base Rate plus the Applicable Margins adjusted
quarterly, but within 5 Business Days upon receipt of
quarterly and annual financial statements and compliance
certificates. (See attached Applicable Margin Grid I for
Applicable Margin).
Base Rate shall refer to the higher of i) Agent's prime
rate, or ii) the federal funds rate plus 100 basis
points.
Eurodollar Rate means Comerica Bank's Eurodollar rate
which will be adjusted for reserves and other regulatory
requirements, plus the Applicable Margin. See attached
Applicable Margin Grid I for Applicable Margin.
Interest Periods Eurodollar Rate - Interest periods of 1, 2, 3 and 6
months.
Interest Payments Interest payable on the first day of each quarter for
Base Rate Advances in respect of the prior quarter's
advances and on the last day of each interest period for
other Advances (and every three months for six month
interest periods).
Customary provisions protecting Banks in the event of
unavailability of funding, illegality, increased costs,
breakage and funding losses and indemnification.
Drawdowns: Base Rate - Minimum draws of $250,000 with same day
notice.
Eurodollar rate - Minimum draws of $1,500,000 with three
(3) business days notice.
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Comerica Bank, as Agent (ii) [LOGO]
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CONFIDENTIAL BUSINESS RESOURCE GROUP
Prepayment: Base Rate loans may be prepaid on same day notice.
Eurodollar Rate loans are subject to prepayment
compensation if repaid before the end of the respective
Interest Period.
Commitment Fee: A Commitment Fee based on the unused portion of the
Revolving Credit Facility as shown on Applicable Margin
Grid I, payable quarterly in arrears.
Termination or
Reduction of
Commitment: The Company may terminate the Revolving Credit
commitment in amounts of at least $1,000,000 at any time
on five (5) business days notice.
Facility B: $8,000,000 Secured Term Loan Facility, ("Term Loan").
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Borrower: Company
Facility Description: Secured Term Loan Facility which amortizes over a five
year period.
Purpose: Purchase of the stock and options issued by Business
Resource Group, refinance debt, working capital, and
general corporate purposes.
Maturity Date: Five years from date of closing.
Amortization Payments: Equal ($400,000) quarterly principal payments due on the
last day of each fiscal quarter end, commencing at the
end of the first full fiscal quarter following the
close.
Security: Same as Facility A.
Reserve: $5,000,000 shall be reserved (the "Reserve") under the
borrowing Base, above, (but not the facility) until the
amount outstanding is reduced $5,000,000 at which time,
the Reserve reduces to an amount equal to the amount
then outstanding under the Term Loan so long as the
Borrower is in compliance with the loan agreements.
Borrowing Options: Same as Facility A
Facility C: $8,000,000 Secured Acquisition Term Loan Facility.
---------- ("Acquisition Facility").
Borrower: Company
Facility Description: Secured Acquisition Term Loan Facility which permanently
reduces with each drawdown for a Permitted Acquisition.
Interest only for the first six months from the drawdown
date, then amortizes in equal quarterly amounts over a
five year period.
Purpose: Finance Permitted Acquisitions.
Availability: The Acquisition Facility shall be available for
permitted Acquisitions for a period up to two years from
the date of close.
Drawdown Conditions: 1. Bank Group approval required for all acquisitions
requiring Borrower's consideration greater than or
equal to $5,000,000.
2. The amount drawn for any acquisition shall not
exceed the lesser of x) 40% of the acquisition
price, or y) Two times the target's most recent four
quarters' adjusted EBITDA.
Maturity Date: Five years from date of Close.
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Comerica Bank, as Agent (iii) [LOGO]
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CONFIDENTIAL BUSINESS RESOURCE GROUP
Amortization Payments: Interest only for the first six months from the
Drawdown date, then amortization at the rate of 5% of
the Drawdown amount in each subsequent quarter with any
remaining amount due at maturity.
Security: Same as Facility A, plus 100% of the stock of the
Acquired Company within 60 days of the close of the
acquisition.
Borrowing Options: Same as Facility A
Drawdowns: Base Rate - Minimum draws of $250,000 with same day
notice.
Eurodollar Rate - Minimum draws of $1,500,000 with
three (3) business days notice.
Commitment Fee: A Commitment Fee based on the remaining commitment
amount of the Acquisition Term Loan Facility after
permanent reductions for each Drawdown as shown on
Applicable Margin Grid I, payable quarterly in arrears.
Termination or Reduction
of Commitments: The Company may terminate any unfunded portion of the
Acquisition Facility in amounts of at least $1,000,000
at any time on five (5) business days notice.
III. OTHER STANDARD PROVISIONS
Guaranties: Indebtedness of the Company shall be guaranteed by OFN
Inc., ReNu Office Systems, Inc., MOI Acquisition Corp.,
Baquet Pastirjak, Team Office, Inc. and any
subsidiaries hereafter formed or acquired by the
Company.
Indebtedness of the Company shall also be guaranteed by
Business Resource Holdings, Inc. ("BRH"), the immediate
parent corporation of the Company and by BR Holdings,
LLC ("LLC"), BRH's controlling owner. It is anticipated
that BRH and LLC shall be single purpose entities.
Total Usage Limitation: Total outstandings under Facility A (including Letters
of Credit), Facility B, and Facility C shall not at any
time exceed $45,000,000.
Subordination
Agreements: Permitted Subordinated Indebtedness shall be defined as
12% fixed interest subordinated debt with no
amortization during the term of this Financing. The
interest will be paid in cash quarterly provided the
Company is in compliance with loan documents and has
provided a pro-forma compliance certificate showing
post payment compliance with the Financial Covenants.
If such compliance is not shown, the interest will be
paid in kind for such quarter. Each quarterly test will
apply to such quarter's interest only and compliance in
a given quarter will not allow prior PIK interest to be
paid. The payment in kind of any or all interest will
not be a cause for default or acceleration of the
Permitted Subordinated Indebtedness. Furthermore,
Permitted Subordinated Indebtedness shall be on terms
and conditions satisfactory to Comerica Bank.
Initial Capitalization: An initial capitalization for Company on a consolidated
basis of $49,900,000 million is to be required of which
up to $15,000,000 million can be in the form of
Permitted Subordinated Indebtedness and the balance in
form of Common Stock and/or preferred stock all on
terms and conditions satisfactory to Comerica Bank.
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Comerica Bank, as Agent (iv) [LOGO]
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CONFIDENTIAL BUSINESS RESOURCE GROUP
Key Management/
Management Compensation: Company agrees to pay compensation to Jack Peth, John
Palmer, Brian McNay and Jeff Tuttle ("Key
Management"), shareholders and affiliates pursuant to
Management Agreements which have terms and conditions
acceptable to Comerica. In addition, Key Management's
initial Equity Contribution must be at least $3.9
million and account for at least 5% of the voting
stock with options for at least an additional 5%
during the next 5 years.
Representations and
Warranties: Customary for credit agreements of this nature, with
respect to BRH, LLC and the Company and its
subsidiaries including but not limited to
1. Corporate existence
2. Corporate and governmental authorization; no
contravention; binding effect
3. No encumbrances except permitted leases
4. Accuracy of information
5. No material adverse change
6. Environmental matters
7. Compliance with laws, including ERISA
8. No material litigation
9. Existence, incorporation, etc. of subsidiaries
10. Payment of taxes
11. Full disclosure
Conditions to Closing: Customary in credit agreements of this name, including
but not limited to:
1. Absence of default
2. Accuracy of representations and warranties
3. Negotiation, execution and delivery of a loan
agreement, promissory notes, guaranties, security
agreements, stock pledged and collateral and other
documentation reasonably satisfactory to Comerica
and its counsel, containing, subject to Summary of
Terms and Conditions, customary conditions,
covenants, warranties, remedies and other
provisions including, without limitation, the
conditions, covenants, warranties and provisions
described herein in the Summary of Terms and
Conditions.
4. Delivery to the Agent of a pro forma Borrowing
Base and Covenant Compliance Certificate as of the
date of close.
5. Comerica's receipt of historical financial
information to include April, May and June 2000
results. Comerica's receipt of a pro forma
unaudited consolidated opening balance sheet,
giving effect to the stock purchase by TCR's
affiliate for $9.25 all of the shares of stock of
Business Resource Group and the closing of any
Permitted Subordinated Indebtedness and/or
Preferred Stock together with projected financial
information acceptable to Comerica Bank.
6. Receipt of Management Agreement(s) between Company
and management, shareholders and affiliates (or
any other Agreement(s) with its affiliates of
officers) which have terms and conditions
acceptable to Comerica.
7. Fairness opinion, and any such other opinions
required that are related to the Facilities and
the transaction, at the discretion of Comerica
Bank to be provided prior to closing by party
acceptable to Comerica Bank.
8. Company (to be renamed Business Resource Group,
Inc.) shall be the surviving entity of the merger
of Business Resource Group and BR Acquisition
Corp. and direct owner of all its subsidiaries.
9. Three Cities Research, Inc., Three Cities Fund
III, L.P., its affiliate(s) (collectively "TCR")
and Key Management shall be direct owners of 100%
of the units of BR Holdings, LLC which shall be
the direct owner of 100% of the capital stock of
Business Resource Holdings, Inc. which shall be
the direct owner of 100% of the capital stock of
the Company.
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Comerica Bank, as Agent (v) [LOGO]
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CONFIDENTIAL BUSINESS RESOURCE GROUP
Collateral Reporting: Company must provide consolidated monthly borrowing
base certificates, monthly accounts receivable agings,
inventory reports, fixed asset reports, and accounts
payable agings report in detail acceptable to Agent
within 20 days of the month end. Additionally, the
Agent will conduct up to two collateral audits
annually, at Company's expense.
Covenants: Customary in credit agreements of this nature, with
respect to the Company and its subsidiaries, including
but not limited to:
1. Annual year end audited (by a CPA firm acceptable
to the Agent) consolidated and consolidating
financial statements providing detail acceptable to
Agent within 90 days of the fiscal year end.
Quarterly (Agent reserves the right to require
monthly) company prepared consolidated and
consolidating financial statements and compliance
certificate, with covenant calculations, providing
detail acceptable to Agent, and quarterly backlog
reports within 45 days of the end of each fiscal
quarter. Annual audited financial statements of BRH
and LLC within 90 days of their fiscal year end.
Additional information including but not limited to
annual financial projections acceptable to the
Agent (to include balance sheets, income
statements, statements of cash flows and underlying
assumptions). The agent reserves the right to
assess a late reporting fee of $500 per day, per
report, including the collateral reports above.
2. Payment of obligations
3. Maintenance of property; insurance coverage
4. Conduct of business; maintenance of existence
5. Compliance with laws, including ERISA and
environmental regulations
6. Inspection of property, books and records at
Company's expense
7. Restrictions on liens and other indebtedness
8. Limitations on Guaranties
9. Limitations on consolidations, mergers, and sales
of assets
10. Limitations on investments, loans and advances
11. Limitations on cash dividends.
12. Limitations on management compensations, fees and
rents per Management Agreements
13. Limitations on use of proceeds
14. Capital Expenditures limited to $2.0 million per
annum, exclusive of acquired companies.
15. Negative pledge of Company capital stock, no
further negative pledges
16. Prohibition on Mergers or Acquisitions, except for
Permitted Acquisitions.
Permitted Acquisitions shall include those which
meet the following requirements: (1) total purchase
price (including seller notes and potential
earnouts, but excluding reasonable transaction
fees) shall not exceed $5,000,000, (ii) immediately
before and after giving effect to such acquisition,
the Pro Forma Total Funded Debt to Pro Forma
Consolidated EBITDA and Pro Forma Senior Funded
Debt to Pro Forma Consolidated EBITDA shall be at
least 0.25 below the level required under the
Agreement on a pro forma basis acceptable to Agent
(iii) both before and after giving effect to such
merger or acquisition, the Company is able to
borrow at least $5,000,000 of availability under
the Revolving Credit Facility, (iv) the target of
such merger or acquisition is in the same line of
business as the Company (v) the target of such
merger or acquisition shall not be or ever have
been in any bankruptcy proceeding.
(vi) No default or Event of Default shall exist
immediately before and after giving effect of such
merger or acquisition (vii) Company shall be the
surviving entity (vii) as soon as available but
prior to the consummation of such merger or
acquisition, the Company shall have provided to the
Agent an opinion of counsel
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Comerica Bank, as Agent (vi) LOGO
<PAGE>
CONFIDENTIAL BUSINESS RESOURCE GROUP
that such merger or acquisition complies with this
Agreement, all laws and regulations and that any other
conditions under this Agreement relating to such
transaction have been satisfied, such certificate shall
contain such other information and certifications as
requested by the Agent and be in form and substance
satisfactory to the Agent (ix) at least 10 Business
days prior to the consummation of such merger or
acquisition, the Company shall have delivered all
acquisition documents and other agreements and documents
or information relating to such merger or acquisition
reasonably requested by Agent in form and substance
satisfactory to Agent, and a certificate of the Chief
Financial Officer or Treasurer of the Company together
with pro forma computations acceptable to Agent which
demonstrate compliance with all financial covenants
hereunder from the consummation date of the acquisition
through expiration of the Credit Facility and the Agent
shall have completed a satisfactory review thereof and
completed such other due diligence satisfactory to the
Agent.
Major Financial Covenants with respect to Company:
1. Minimum Current Ratio of .75:1.0, tested quarterly
2. Maximum Total Funded Debt Ratio, tested quarterly, as
follows:
4.00:1.0 from closing through July 31, 2001
3.50:1.0 from October 31, 2001 through July 31, 2002
3.0:1.0 thereafter
3. Maximum Senior Funded Debt Ratio, tested quarterly,
as follows:
2.75:1.0 from closing through July 31, 2001
2.50:1.0 from October 31, 2001 through July 31, 2002
2.00:1.0 thereafter
4. Minimum Senior Fixed Charge Coverage Ratio, tested
quarterly, as follows:
1.20:1.0 from closing through October 31, 2003
1.40:1.00 thereafter.
5. Minimum Total Fixed Charge Coverage Ratio, tested
quarterly, as follows:
1.25:1.0 from closing and thereafter.
6. Minimum Consolidated Net Worth of $47,400,000
closing, increasing by 75% of Consolidated Net Income
plus 100% of the net proceeds of any sale of equity.
7. Minimum Tangible Effective Net Worth of $3,000,000 at
closing, increasing to $5,000,000 at October 31, 2000
and thereafter, tested quarterly.
8. Total Senior Funded Debt under these Facilities shall
not exceed $45,000,000 at any time.
Definitions Total Funded Debt Ratio is defined as the ratio of Total
Debt to Consolidated EBITDA where Total Debt is defined
as all consolidated interest bearing obligations
including outstandings under the Facility, letters of
credit, seller notes, Permitted Subordinated
Indebtedness, captial lease obligations, any obligation
secured by a lien, guaranties or other contingent
liabilities.
Senior Funded Debt Ratio is defined as the ratio of
Total Senior Debt to Consolidated EBITDA where Senior
Debt is defined as all consolidated interest bearing
obligations including outstandings under the Facility,
letters of credit, seller notes, capital lease
obligations, any obligation secured by a lien,
guaranties or other contingent liabilities.
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Comerica Bank, as Agent (vii) [LOGO]
<PAGE>
CONFIDENTIAL BUSINESS RESOURCE GROUP
Consolidated EBITDA shall be defined as earnings before
interest expense, income tax expense, depreciation
expense and amortization expense on a consolidated basis
calculated for the preceeding four quarters. Prior to
closing, EBITDA shall be 200% of the actual EBITDA for
the previous 6 months. For the quarter ending
October 31, 2000 Consolidated EBITDA shall be 133-1/3%
of actual Consolidated EBITDA for the previous nine
month period.
Solely for the purpose of calculating Senior or Total
Funded Debt Ratios during any four quarter period which
a Permitted Acquisition has occurred (x) EBITDA
determined for the entity or business acquired shall be
included in the calculation hereof, as if such Permitted
Acquisition occurred on the first day of such four
quarter period and (y) any Permitted Adjustments related
to a Permitted Acquisition shall be added back during
the rolling four quarter period which includes the date
of the Permitted Acquisition. Permitted Adjustments
shall be determined by Agent prior to closing of
acquisition.
Senior Fixed Charge Coverage Ratio is defined as the
ratio of Consolidated EBITDA to Consolidated Senior
Fixed Charges.
Total Fixed Charge Coverage Ratio is defined as the
ratio of Consolidated EBITDA to Consolidated Total Fixed
Charges.
Consolidated Senior Fixed Charges shall be defined as
Consolidated Senior Interest Expense plus scheduled
payments of all Debt (including the principal portion
of scheduled payments of Capital Lease obligations),
plus all accrued/paid earnouts plus tax expense, for the
preceding four quarters.
Consolidated Total Fixed Charges shall be defined as
Consolidated Senior Interest Expense plus interest
expense paid on Permitted Subordinated Indebtedness,
scheduled principal payments of all Debt (including the
principal portion of scheduled payments of Capital Lease
obligations), plus all accrued/paid earnouts, plus tax
expense, for the preceding four quarters.
Consolidated Senior Interest Expense is defined as
interest expense on senior credit facilities, plus
interest expense on capital lease obligations,
capitalized interest, and all facility or recurring fees
associated with the Facility for the preceding four
quarters.
Consolidated Net Worth shall be as defined in accordance
with GAAP plus Permitted Subordinated Indebtedness.
Tangible Effective Net Worth is defined as the
consolidated Net Worth (plus Permitted Subordinated
Indebtedness), less all intangibles including, but not
limited to goodwill, capitalized organizational and
financing costs, patants, copyrights, loans to officers
and employees, and investments in businesses not 100%
owned or related to the Borrower's current business
activities.
The Current Ratio is defined as Current Assets divided
by Current Liabilities, where Current Liabilities
include outstandings under the Revolving Credit
Facility, but excluding outstanding Letters of Credit.
Other current assets and liabilities per GAAP.
All loan documents shall be prepared by and satisfactory
in form and substance to Agent and Agent's counsel and
will be consistent with this Term Sheet.
Pricing adjustments (based on grids) will be prospective
only, with no rebate or drawback.
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Comercia Bank, as Agent (viii) [LOGO]
<PAGE>
CONDIDENTIAL BUSINESS RESOURCE GROUP
Events of Default: Customary in credit agreements of this nature, including
but not limited to the following:
1. Failure to pay any interest, fees or principal, under
the Agreement when due
2. Failure to meet covenants
3. Representations or warranties false in any material
respect when made
4. Cross default to other Indebtedness of the Company
5. Change of ownership or control whereby TCR ownership
is less than 51% of the capital or voting stocks, or
TCR does not maintain a majority control of the Board
of Directors.
6. Other usual defaults after applicable grace periods,
with respect to the Company or its subsidiaries,
including but not limited to insolvency, bankruptcy,
ERISA and judgment defaults.
Assignment and
Participation Banks will have the right to sell participations in
their loans or commitments with the transferability of
voting rights limited to changes in principal, rate,
fees and term. Assignments, which must be in amounts of
at least $5,000,000 (or their entire remaining amount),
will be allowed (subject to administrative fee payable
by assigning bank) with the consent of Company and
Agent, such consent not to be unreasonably withheld or
delayed. No consent of the Company will be required
after an Event of Default. Participations and
assignments will also be allowed within the Bank Group
and to a banks' affiliates without Company consent.
Indemnification
and Expenses: Company will idemnify the Banks, including but not
limited to, following any event of default, against all
losses, liabilities, claims and damages relating to
their loans, the Company's use of loan proceeds or the
commitments, including reasonable attorney's fees,
except as such result from the indemnitiees' gross
negligence or willful misconduct.
All fees and costs, including reasonable attorney fees,
incurred by Agent in connection with negotiation of the
credit facility, preparation of loan documents and
closing and funding of the credit facility, and in
connection with any amendments, revisions, consents,
waivers or any enforcement, preservation or protection
of rights will be paid by the Company subject to the
terms outlined in the Agency Fee Letter, and
Administrative Agency Fee Letter.
Majority Banks: Any amendment, consent or waiver will require approval
of 60% of the Banks' aggregate commitments unless the
commitments have been terminated in which case it will
be based on the Bank's aggregate loans outstanding,
except that approval of all Banks shall be required for
changes in the amount of any bank's commitment,
extensions of maturity, reductions of interest,
principal, fees or release of collateral, or any
guaranties and certain specified matters.
Governing Law: State of California or Michigan at sole discretion of
Comerica Bank
Agent reserves right to determine final allocations and when to close syndicate
offering.
Closing on loan facility subject to prior receipt by Agent of all necessary
legal options, and government and third party permits, licenses and approvals.
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Comerica Bank, as Agent (ix) [LOGO]
<PAGE>
CONFIDENTIAL Business Resource Group
BR Acquisition Corp.
APPLICABLE MARGIN GRID
$40,000,000 Revolving Credit Facility
$8,000,000 Term Loan Facility
$8,000,000 Acquisition Term Loan Facility
(basis points per annum)
<TABLE>
<CAPTION>
Basis for Pricing LEVEL I LEVEL II* LEVEL III
----------------- ------- --------- ---------
<S> <C> <C> <C>
Senior Funded Debt Ratio Less than 2.00:1.0 Greater than 2.00:1.0 Greater than 2.50:1.0
But less than 2.50:1.0
Commitment Fee-R/C 37.50 37.50 37.50
Eurodollar Margin-R/C 225.00 275.00 325.00
Commitment Fee-Acquisition T/L 50.00 50.00 50.00
Eurodollar Margin-T/L and
Acquisition T/L 275.00 325.00 375.00
Base Rate Margin-R/C 0.00 0.25 0.50
Base Rate Margin-T/L and
Acquisition T/L 0.50 0.75 1.00
------- ------ ------
Letters of Credit Issuance Fees 225.00 275.00 325.00
======= ====== ======
</TABLE>
* Level II is anticipated to be in effect at closing.
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Comerica Bank, as Agent (x) [LOGO]
