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Title: |
Commitment Letter |
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Date: |
2000 |
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$68 |
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#1281268 |
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CONFORMED COPY
August 1, 2000
Riverside Company LLC
c/o Heartland Industrial Partners, L.P.
320 Park Avenue
33rd Floor
New York, NY 10022
Attention: David A. Stockman
Project Tailor
$1,300,000,000 Senior Secured Credit Facilities
$175,000,000 Receivables Purchase Facility
Commitment Letter
Ladies and Gentlemen:
You have advised The Chase Manhattan Bank ("Chase") and Chase Securities
Inc. ("CSI") that you intend to consummate the Recapitalization and the other
Transactions (such terms and each other capitalized term used but not defined
herein having the meaning given to them in the Term Sheets (as defined below)).
In connection therewith, (a) the Borrower will obtain senior secured credit
facilities (the "Senior Facilities") in an aggregate principal amount of
$1,300,000,000 and (b) one or more newly formed, wholly owned,
bankruptcy-remote, special-purpose subsidiaries or trusts of the Borrower
(collectively, the "Receivables Subsidiary") will obtain an off-balance- sheet
receivables purchase facility (the "Receivables Facility" and, together with
the Senior Facilities, the "Facilities") in an aggregate amount of
$175,000,000.
In connection with the Transactions, Chase is pleased to advise you of (a)
its commitment to provide the entire principal amount of the Senior Facilities,
upon the terms and subject to the conditions set forth or referred to in this
Commitment Letter and in the Summary of Principal Terms and Conditions attached
hereto as Exhibit A (the "Senior Facilities Term Sheet"), and (b) its
commitment to purchase (in the event a commercial paper conduit does not
purchase) the entire amount of the participation interests to be sold under the
Receivables Facility, upon the terms and subject to the conditions set forth in
this Commitment Letter and in the Summary of Principal Terms and Conditions
attached hereto as Exhibit B (the "Receivables Facility Term Sheet" and,
together with the Senior Facilities Term Sheet, the "Term Sheets") to the
extent such terms and conditions are applicable to purchases by an APA Bank.
<PAGE>
-2-
You hereby appoint CSI to act, and CSI hereby agrees to act, as sole and
exclusive advisor, lead arranger and sole book manager for each of the
Facilities on the terms and subject to the conditions set forth or referred to
in this Commitment Letter and in the Term Sheets. You also hereby appoint Chase
to act, and Chase hereby agrees to act, as sole and exclusive administrative
agent and collateral agent for the Facilities on the terms and subject to the
conditions set forth or referred to in this Commitment Letter and in the Term
Sheets. Chase and CSI understand that you propose to appoint other agents and
co-agents and award other titles in connection with the Facilities, but you
agree that no additional agents, co-agents, arrangers, co-arrangers, managers
or co-managers will be appointed and no other titles will be awarded in
connection with the Facilities without the prior approval of Chase and CSI.
Chase reserves the right, prior to or after the execution of definitive
documentation for the Facilities, to syndicate all or a portion of its
commitments hereunder to one or more financial institutions, reasonably
acceptable to Chase and you, that will become parties to such definitive
documentation pursuant to syndications to be managed by CSI in consultation
with you (the financial institutions becoming parties to such definitive
documentation being collectively referred to as the "Lenders"). Upon the
acceptance of the commitment of any Lender reasonably satisfactory to you to
provide a portion of any of the Facilities, Chase shall be released from a
portion of its commitment with respect to such Facility in an amount equal to
such commitment of such Lender (it being understood and agreed that you will
not unreasonably withhold your consent when presented with any proposed
acceptance by Chase of commitments of other Lenders). You understand that the
Senior Facilities and the Receivables Facility will be separately syndicated
and that CSI may commence syndication efforts promptly, and you agree actively
to assist CSI in completing timely and orderly syndications satisfactory to
CSI. Such assistance shall include (a) your using commercially reasonable
efforts to ensure that the syndication efforts benefit materially from the
existing lending relationships of you, Heartland Industrial Partners, L.P.
("Heartland"), the Company and the Borrower, (b) direct contact during the
syndication between senior management, representatives and advisors of you,
Heartland, the Company and the Borrower, on the one hand, and the proposed
Lenders, on the other hand, (c) assistance (including the use of commercially
reasonable efforts to cause Heartland, the Company and the Borrower and your
and their respective affiliates and advisors to assist) in the preparation of
Confidential Information Memoranda for the Facilities and other marketing
materials to be used in connection with the syndications and (d) the hosting,
with CSI, of one or more meetings (to be held at times to be agreed upon
between Chase, CSI and you) of prospective Lenders.
It is understood and agreed that CSI will, in consultation with you,
manage all aspects of the syndications, including selection of Lenders
reasonably acceptable to Chase and you, determination of when CSI will approach
potential Lenders and the time of acceptance of the Lenders' commitments, any
naming rights and the final allocations of the commitments among the Lenders.
It is also understood and agreed that the amount and distribution of fees
<PAGE>
-3-
among the Lenders will be at CSI's discretion, after consultation with you. To
assist CSI in its syndication efforts, you agree promptly to prepare and
provide to CSI and Chase (and to use commercially reasonable efforts to cause
Heartland, the Company and the Borrower to provide) all information with
respect to the Company and its subsidiaries, the Transactions and the other
transactions contemplated hereby, including a business plan in form
satisfactory to Chase and all other financial information and projections (the
"Projections"), as CSI or Chase may reasonably request in connection with the
structuring, arrangement and syndication of the Facilities. You hereby
represent and covenant that (a) all information other than the Projections (the
"Information") that has been or will be made available to Chase or CSI by or on
behalf of you, the Company or its subsidiaries or any of your or their
authorized representatives, when taken as a whole, will be complete and correct
in all material respects (after giving effect to all written updates thereto
delivered to Chase or CSI prior to the closing of the Facilities) and will not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are made
and (b) the Projections that have been or will be made available to Chase or
CSI by or on behalf of you, the Company or its subsidiaries or any of your or
their authorized representatives have been or will be prepared in good faith
based upon assumptions believed by you to be reasonable at the time made and at
the time the related Projections are made available to Chase or CSI. You agree
to supplement the Information and Projections from time to time until the
closing of the Facilities so that the representations and covenants in the
preceding sentence remain correct. In arranging the Facilities, including the
syndications of the Facilities, Chase and CSI will be entitled to use and rely
primarily on the Information and the Projections without responsibility for
independent verification thereof.
As consideration for Chase's commitments hereunder and CSI's agreement to
structure, arrange and syndicate the Facilities and to provide advisory
services in connection therewith, you agree to pay (or to cause the Company or
the Borrower to pay) to Chase the fees as set forth in the Term Sheets and in
the Fee Letter dated the date hereof and delivered herewith with respect to the
Facilities (the "Fee Letter"). Once paid, such fees shall not be refundable
under any circumstances.
Chase's commitments hereunder and CSI's agreement to perform the services
described herein are subject to (a) Chase's not having discovered or otherwise
become aware of information not previously disclosed to Chase that Chase
believes to be inconsistent, in a manner that is material and adverse, with its
understanding, based on information provided to Chase prior to the date hereof,
of the business, operations, properties, assets, financial condition,
contingent liabilities and material agreements of the Company and its
subsidiaries, taken as a whole, (b) there not having occurred any material
adverse change in the business, operations, properties, assets, financial
condition, contingent liabilities or material agreements of the Company and its
subsidiaries, taken as a whole, since December 31, 1999 (it being understood
<PAGE>
-4-
that any change in the business, operations, properties, assets, financial
condition, contingent liabilities or material agreements of the Company and its
subsidiaries resulting from the Asset Dropdown will not constitute a material
adverse change specified in this clause (b)), (c) there not having occurred and
being continuing a material disruption of or material adverse change in
financial, banking or capital market conditions that, in Chase's reasonable
judgment, could materially impair the syndication of any of the Facilities, (d)
Chase's satisfaction that, prior to and during the syndication of the
Facilities, there shall be no competing issues of debt securities or commercial
bank or other credit facilities of the Company and its subsidiaries being
offered, placed or arranged, (e) the negotiation, execution and delivery of
definitive documentation with respect to the Facilities reasonably satisfactory
to Chase and its counsel, (f) CSI's having been afforded a period of not less
than 60 days following the date hereof to syndicate the Facilities, (g) your
agreement that, in connection with any syndication of any credit facility for,
or offering or placing of debt securities of, any entity sponsored or
controlled by you or any of your affiliates, you will coordinate such
syndication or offering with CSI in order to ensure that such syndication or
offering does not disrupt or otherwise interfere with the orderly syndication
of the Facilities and (i) the other conditions set forth in the Term Sheets.
Those matters that are not covered by or made clear under the provisions hereof
and of the Term Sheets are subject to the approval and agreement of Chase, CSI
and you.
By executing this Commitment Letter, you agree (a) to indemnify and hold
harmless CSI, Chase and their respective officers, directors, employees,
affiliates, agents and controlling persons from and against any and all losses,
claims, damages, liabilities and expenses, joint or several, to which any such
persons may become subject arising out of or in connection with this Commitment
Letter, the Fee Letter, the Term Sheets, the Transactions, the Facilities or
any related document or transaction or any claim, litigation, investigation or
proceeding relating to any of the foregoing, regardless of whether any of such
indemnified parties is a party thereto, and to reimburse each of such
indemnified parties upon demand for any reasonable legal or other expenses
incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any indemnified party,
apply to losses, claims, damages, liabilities or related expenses to the extent
they are found in a final judgment of a court to have resulted from the willful
misconduct or gross negligence of such indemnified party, and (b) to reimburse
CSI and Chase from time to time, upon presentation of a summary statement, for
(i) all reasonable out-of-pocket expenses (including but not limited to
reasonable expenses of Chase's due diligence investigation, consultants' fees,
syndication expenses, travel expenses and reasonable fees, disbursements and
other charges of counsel) and (ii) internally allocated charges and expenses
related to Chase's initial and ongoing examination of the assets underlying the
Receivables Facility, in each case incurred in connection with the Facilities
and the preparation of this Commitment Letter, the Term Sheets, the Fee Letter,
the definitive and all other documentation for the Facilities and any security
arrangements in connection therewith. No indemnified person shall be liable for
any damages arising from the use by others of information or other materials
obtained through electronic,
<PAGE>
-5-
telecommunications or other information transmission systems or for any
special, indirect, consequential or punitive damages in connection with its
activities related to the Facilities.
You acknowledge that Chase, CSI and their affiliates may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. Neither
Chase, CSI nor any of their affiliates will use confidential information
obtained from you by virtue of the transactions contemplated by this Commitment
Letter or its other relationships with you in connection with the performance
by Chase, CSI or any of their affiliates of services for other companies, and
neither Chase, CSI nor any of their affiliates will furnish any such
information to other companies. You also acknowledge that neither Chase, CSI
nor any of their affiliates has any obligation to use in connection with the
transactions contemplated by this Commitment Letter, or to furnish to you, the
Company or its subsidiaries confidential information obtained by Chase or CSI
or any of their affiliates from other companies.
This Commitment Letter and Chase's commitments hereunder shall not be
assignable by you without the prior written consent of Chase, and any attempted
assignment without such consent shall be void; provided, however, that this
Commitment Letter, Chase's commitments hereunder and the Fee Letter may be
assigned by you to the Company or the Borrower pursuant to an instrument in
writing reasonably satisfactory to Chase, so long as you remain liable for all
your obligations hereunder and thereunder. This Commitment Letter may not be
amended or any provision hereof waived or modified except by an instrument in
writing signed by Chase, CSI and you. This Commitment Letter may be executed in
any number of counterparts, each of which shall be an original and all of
which, when taken together, shall constitute one agreement. Delivery of an
executed counterpart of a signature page of this Commitment Letter by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Commitment Letter. This Commitment Letter is intended to be solely for
the benefit of the parties hereto and is not intended to confer any benefits
upon, or create any rights in favor of, any person other than the parties
hereto. This Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheets or the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person without the prior approval of Chase except (a) to your affiliates
and Heartland's limited partners, together with your and their respective
officers, agents and advisors, in each case who are directly involved in the
consideration of this matter, (b) as may be compelled in a judicial or
administrative proceeding or as otherwise required by law (in which case you
agree to inform us promptly thereof) and (c) after your acceptance of the terms
of this Commitment Letter and of the Fee Letter, you may disclose the existence
of this Commitment Letter and a summary of the principal
<PAGE>
-6-
terms and conditions of Chase's commitments hereunder in any public filings to
be made in connection with the Company's solicitation of proxies from its
stockholders for purposes of obtaining the approval of such stockholders for
the Transactions, provided that any such disclosure that is in writing shall be
subject to Chase's prior review and approval (such approval not to be
unreasonably withheld), and provided further that you may disclose this
Commitment Letter and the Term Sheets, and their terms and substance, and the
fifth paragraph of the Fee Letter (but not the remainder of the Fee Letter or
the remainder of its terms and substance), on a confidential and need-to-know
basis, to MCorp and the Company and their respective officers, employees,
attorneys, accountants and advisors and to prospective Investors.
Please indicate your acceptance of the terms hereof by signing in the
appropriate space below and returning to Chase the enclosed duplicate originals
(or facsimiles) of this Commitment Letter not later than 5:00 p.m., New York
City time, on August 3, 2000. Chase's commitments under this Commitment Letter
will expire at such time in the event that Chase has not received such executed
duplicate originals (or facsimiles) in accordance with the immediately
preceding sentence. In the event that the initial borrowing under the Senior
Facilities does not occur on or before December 20, 2000, then this Commitment
Letter and Chase's commitments hereunder shall automatically terminate unless
Chase and CSI shall, in their discretion, agree to an extension. The
compensation, reimbursement, indemnification and confidentiality provisions
contained herein, in the Fee Letter and in any related documentation shall
remain in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or Chase's commitments hereunder.
Chase and CSI are pleased to have been given the opportunity to assist you
in connection with the financing for the Transactions.
Very truly yours,
THE CHASE MANHATTAN BANK,
By: /s/ Deborah J. Davey
-------------------------
Name: Deborah J. Davey
Title: Managing Director
<PAGE>
-7-
CHASE SECURITIES INC.,
By: /s/ Nga Tran-Pedretti
-------------------------
Name: Nga Tran-Pedretti
Title: Vice President
Accepted and agreed to as of the date first above written:
RIVERSIDE COMPANY LLC,
By: /s/ Daniel P. Tredwell
-------------------------
Name: Daniel P. Tredwell
Title: Senior Managing Director
<PAGE>
CONFIDENTIAL
August 1, 2000
EXHIBIT A
Project Tailor
$1,300,000,000 Senior Secured Credit Facilities
Summary of Principal Terms and Conditions
Borrower: A newly formed Delaware corporation (the "Borrower")
that will be a wholly owned subsidiary of a Delaware
corporation identified to The Chase Manhattan Bank
("Chase") as "Tailor" (the "Company").
Recapitalization: Pursuant to or in connection with the Recapitalization
Agreement (the "Recapitalization Agreement") to be
entered into between the Company and Riverside Company
LLC, a newly formed Delaware limited liability company
("Merger Subsidiary") all the outstanding equity
interests of which will be owned by Heartland
Industrial Partners, L.P. ("Heartland"), certain of its
affiliates (including investors in Heartland) and
certain other investors reasonably satisfactory to
Chase (collectively, the "Investors"), (a) the
Investors will contribute (the "Equity Contribution")
an aggregate amount of not less than $433,200,000 in
cash to Merger Subsidiary as common equity, (b) the
Company will sell (the "Specified Asset Sales"), and
will receive not less than $125,000,000 in cash
proceeds (the "Specified Asset Sale Proceeds") from the
sale of, its existing equity investments in certain
entities set forth on Annex IV hereto, (c)(i) the
Company will sell its equity investment (the "Saturn
Sale") in Saturn Electronics and Engineering Inc.
("Saturn") and (ii) pending the completion of the
Saturn Sale, the equity investment in Saturn will be
held by a newly formed, special purpose wholly owned
subsidiary of the Company (the "Saturn Subsidiary"),
(d) as soon as reasonably practicable and in any event
within six months after the Closing Date (as defined
below), the Company will contribute to the Borrower
(the "Asset Dropdown") all or a substantial majority of
the Company's remaining assets (other than any Cash (as
defined below)) and certain other assets to be agreed
upon by the Borrower and Chase, (e) in connection with
the Merger, new restricted stock awards (including
phantom restricted stock awards) of the Company having
the terms set forth in the Recapitalization Agreement
will be substituted for certain existing restricted
<PAGE>
stock awards (including phantom restricted stock
awards) of the Company, and pursuant to the terms of
such new restricted stock awards the Company will
become obligated to make deferred cash payments or
common stock issuances in an aggregate amount not to
exceed $54,400,000 (the "Restricted Stock Award") over
a three-year period (including the accretion thereof)
following the Closing Date, (f) Merger Subsidiary will
merge with and into the Company (the "Merger"), with
the Company being the surviving corporation in the
Merger, and (g) pursuant to the Merger, (i) the
pre-Merger common stockholders (and holders of options
to acquire common stock) of the Company will receive
(A) on the Closing Date, in the aggregate $609,200,000
in cash (the "Merger Consideration") (and all such
options will be extinguished) and (B) following the
Saturn Sale, an amount based upon the net proceeds from
the disposition of Saturn and determined in accordance
with and pursuant to the Recapitalization Agreement
(the "Saturn Proceeds Distribution"), (ii) the Company
will issue on the Closing Date $36,100,000 in
liquidation preference of its preferred stock (the
"Preferred Stock") to a corporation identified to Chase
as "Mcorp" ("MCorp"), (iii) the Investors will receive
on the Closing Date not less than 75% of the post-
Merger common stock of the Company, of which Heartland
will beneficially own not less than a percentage to be
agreed upon, and (iv) MCorp and certain other
shareholders of the Company will receive on the Closing
Date the remainder of the post- Merger common stock of
the Company (collectively, the "Rollover Equity"). The
Merger is intended to be structured as a
recapitalization for accounting purposes, and the
foregoing transactions are collectively referred to
herein as the "Recapitalization".
In addition, in connection with the Recapitalization,
(a) immediately after the Asset Dropdown, the Borrower
will become a co-obligor (together with the Company)
under the Indenture dated as of November 1, 1986 (as
in effect on the date hereof, the "Existing
Indenture"), relating to the $305,000,000 in aggregate
face amount of 4 1/2% Convertible Subordinated
Debentures due December 15, 2003 (the "Debenture
Maturity Date"), issued by the Company (the
"Convertible Subordinated Debentures"), (b) following
the Merger, the Convertible Subordinated Debentures
will remain outstanding and will be convertible at any
time
2
<PAGE>
on and after the Closing Date (as defined below), at
the option of the holders of such Convertible
Subordinated Debentures (the "Debenture Holders"), into
the amount of cash that the Debenture Holders would
have received pursuant to the Merger if the Convertible
Subordinated Debentures had been converted into common
stock of the Company immediately prior to the Merger
(as provided in Section 3.06 of the Existing Indenture,
the "Conversion Right"), and (c) immediately prior to
or concurrent with the Merger, MCorp will enter into an
agreement (the "Shareholder Subordinated Loan
Agreement"), in the form attached as an exhibit to the
Recapitalization Agreement, pursuant to which MCorp
will agree to make senior subordinated, unsecured,
unguaranteed loans (the "Shareholder Subordinated
Loans") to the Company in an aggregate principal amount
of not less than $100,000,000 on the terms set forth in
the Shareholder Subordinated Loan Agreement.
In connection with the Recapitalization, (a) the
Borrower will obtain the senior secured credit
facilities (the "Senior Facilities") described below
under the caption "Senior Facilities" on the date on
which the Recapitalization is consummated (the
"Closing Date"), (b) one or more newly formed, wholly
owned, bankruptcy-remote, special-purpose subsidiaries
or trusts of the Borrower (collectively, the
"Receivables Subsidiary") will obtain an
off-balance-sheet receivables purchase facility (the
"Receivables Facility") in an aggregate amount of
$175,000,000, of which at least $120,000,000 is
expected to be funded on the Closing Date (the
"Receivables Facility Proceeds"), (c) the Company and
each of its subsidiaries will repay in full all their
existing indebtedness other than (i) the Convertible
Subordinated Debentures, (ii) $21,500,000 in aggregate
face amount of Industrial Revenue Bonds (the
"Industrial Revenue Bonds") and (iii) other limited
indebtedness to be agreed upon (such repaid
indebtedness, the "Repaid Indebtedness"), and all
documentation evidencing such Repaid Indebtedness and
any related guarantee or collateral documents will be
terminated, (d) immediately prior to the consummation
of the Recapitalization on the Closing Date, the
Company will hold cash (the "Cash") from various
sources in an amount of not less than $3,700,000 and
(e) costs and expenses (the "Transaction Costs")
incurred in connection with the Transactions will be
paid. The transactions de-
3
<PAGE>
scribed in this paragraph and the immediately preceding
paragraph, together with the Recapitalization and the
other transactions contemplated hereby, are collectively
referred to herein as the "Transactions".
Agent: Chase will act as sole and exclusive administrative
agent and collateral agent (collectively, the "Agent")
for a syndicate of financial institutions reasonably
satisfactory to Chase and the Borrower (the "Lenders"),
and will perform the duties customarily associated with
such roles.
Advisor, Arranger
and Book Manager: Chase Securities Inc. ("CSI") will act as sole and
exclusive advisor, lead arranger and sole book manager
for the Senior Facilities (the "Arranger"), will perform
the duties customarily associated with such roles and
will manage the syndication of the Senior Facilities.
Senior Facilities: (A) Two Senior Secured Term Loan Facilities in an
aggregate principal amount of up to $1,000,000,000
(the "Term Loan Facilities"), consisting of (a) a
Tranche A Term Loan Facility in an aggregate
principal amount of $550,000,000 (the "Tranche A
Facility") to be made available to the Borrower on
the Closing Date and (b) a Tranche B Term Loan
Facility in an aggregate principal amount of
$450,000,000 (the "Tranche B Facility") to be made
available to the Borrower on the Closing Date. (B)
A Senior Secured Revolving Credit Facility in an
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