This letter supersedes our prior letter dated September 19, 1995
January 2, 1996
FOOTHILL.
Xx. Xxxxx Xxxxxxxx
President
BFMA HOLDING CORPORATION
701 S.E. Sixth Ave
Delrey Beach, FL 33483
Re: Acquisition Financing
---------------------
Dear Xxxxx:
In accordance with our recent discussions, Foothill Capital Corporation
("Lender") is pleased to issue this financing commitment to BFMA Acquisition
Corporation and, as appropriate, affiliates (collectively "Borrower") including
Marietta Corporation upon the completion of the contemplated acquisition by
Borrower of a11 of the common stock (including all related stock options and
warrants) of Marietta Corporation. Subject to satisfactory completion of each of
the conditions contained herein, the financing would be as follows:
1. Maximum Amount: $25,000,000. Subject to credit committee approval, the
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Maximum Amount would be increased to $28,500,000.
a. Accounts Receivable Line of Credit (the "Line"): Lender would extend
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credit to Borrower up to the lesser of (i) the Maximum Amount minus the
amount outstanding on the Term Loan set forth in l(d) below, or (ii)
up to 85% of accounts receivable net of ineligible accounts and
reserves as customarily defined by Lender. The credit extended against
accounts receivable would be limited to an amount equal to Xxxxxxxx's
cash collections for the immediately preceding period of days to be
determined based upon Borrower's historically and seasonal cash
collection pattern.
b. Inventory Subline: Leader would extend credit to Borrower under the
-----------------
Line up to the lesser of (i) $8,500,000, and (ii) up to 50% of the
lower of cost or market value of eligible inventory, and (iii) the
amount of credit availability created by clause a. above. Eligible
Inventory would be as customarily defined by Xxxxxx and would exclude
slow moving goods or obsolete items, restrictive or custom items, work-
in-process, packaging and shipping material (used to ship finished
product to customers), bill and hold goods, returned or defective
goods, "seconds," Inventory acquired on consignment, and such other
inventory or reserves as Lender shall deem appropriate.
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
BFMA Holding Corporation
January 2, 1996
Page 2
c. Letter of Credit Facility: Under the Line, Borrower would be entitled
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to request that Lender issue letters of credit for the account of
Borrower ("L/Cs") or issue guarantees ("L/C Guarantees") of payment
with respect to letters of credit issued by one or more issuing banks
in an aggregate amount not to exceed five million dollars
($5,000,000). The aggregate issued and undrawn amount of outstanding
L/Cs and L/C Guarantees would be reserved against the credit
availability created under clauses (a) and (b) above. All L/Cs and L/C
Guarantees would be in form and substance acceptable to Lender in its
sole discretion.
d. Term Loan: $8,500,000, payable in fifty-nine (59) monthly principal
---------
installments equal $100,000 each, plus interest. All remaining
principal and interest would be payable at maturity. Lender will
request permission from its credit committee to have amortization
payments due quarterly.
2. Interest Rate:
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Interest and letter of credit fees would be calculated on the basis of a
three hundred sixty (360) day year and actual days elapsed and would be
payable monthly in arrears. In no event would the rate of interest charged
be less than six percent (6.0%) per annum.
a. Revolving Advances: The rate of interest charged with respect to the
------------------
accounts receivable and inventory portions of the line would be one and
three quarters percentage points (1.75%) above the reference rate or
prime rate publicly announced from time to time by Norwest Bank,
Minnesota, N.A.
b. Term Loan: The rate of interest charged with respect to the Term Loan
---------
would be at Borrower's option prior to the Closing Date twelve and one-
half percent (12.5%) fixed or two and three quarters percentage points
(2.75%) above the reference rate or prime rate publicly announced from
time to time by Norwest Bank, Minnesota, N.A.
c. Letters of Credit: Xxxxxxxx would be charged a letter of credit fee
-----------------
of two and one quarter percent (2.25%) per annum times the issued and
undrawn amount of L/Cs and/or L/C Guarantees. If L/C Guarantees are
used to induce a commercial bank to issue letters of credit, Xxxxxxxx
also would be responsible for all related bank charges for the
underlying letter of credit.
6:10 PM, 1/2/96
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
BFMA Holding Corporation
January 2, 1996
Page 3
3. Collection:
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Borrower and Xxxxxx would establish one or more lock boxes and depositary
accounts at financial institutions acceptable to Lender. Borrower would
direct customers to remit all payments to the lock boxes and would be
required immediately to remit any payments received by it to the lock boxes.
All collections received in such lock boxes would be subject to a three
business day clearance charge. The terms and conditions of the agreements
relative to such lock boxes and depositary accounts would need to be
acceptable to Lender and would need to provide Lender with dominion and
control over any funds deposited into such deposit accounts.
4. Fees and Expenses:
-----------------
a. Commitment Fee: On the Closing Date, Borrower shall pay to Lender a fee
--------------
(the "Commitment Fee") in an amount of two hundred fifty thousand
dollars. The Commitment Fee shall be fully earned upon execution of
this Commitment Letter and payable on the Closing Date;
b. Annual Fee: [Deleted].
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c. Unused Line Fee: Borrower would be obligated to pay Lender a fee (the
---------------
"Unused Line Fee") in an amount equal to one-half percent (0.50%) per
annum times the unused portion of the Line. The Unused Line Fee would be
due and payable monthly in arrears;
d. Servicing Fee: Borrower would be obligated to pay to Lender a fee (the
-------------
"Servicing Fee") equal to the lesser of one and one quarter percent per
annum times the average amount outstanding on the line and $10,000. The
Servicing Fee would be due and payable monthly in arrears; and
e. Foothill Expenses: Borrower would agree to reimburse Lender for all of
-----------------
Lender's out-of-pocket costs and expenses relating to this financing
transaction, including, but not limited to, search fees, title search
and insurance fees, filing and recording fees, reasonable attorneys fees
and expenses (including the fees and expenses of local counsel to
Lender), and examination and appraisal fees (collectively, "Foothill
Expenses").
6:10 PM, 1/2/96
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
BFMA Holding Corporation
January 2, 1996
Page 4
5. Loan Maturity and Prepayment:
----------------------------
The loan would mature in five years. Termination of the Line, prior to
maturity, would result in an early termination premium equal to the greater
of total interest accrued with respect to the Line (excluding the Term Loan)
to Lender by Borrower during the prior six month period and five thousand
dollars ($5,000) times the number of months remaining until maturity. There
would be no prepayment penalty or early termination premium associated with
any partial or full prepayment of the Term Loan.
6. Purpose:
-------
The purpose of this financing would be to provide for the transactions
contemplated and for the general corporate purposes of Borrower.
7. Financial Examination and Appraisal Fees:
----------------------------------------
Borrower would be obligated to pay to Lender a fee of $650 per day per
examiner and $1,000 per day per appraiser for financial analyses and
examinations and collateral appraisals, plus out-of pocket expenses for each
such analysis, examination, and appraisal performed by Lender or its agents,
and Borrower would be obligated to pay Lender an annual legal loan document
review charge of $5,000. Prior to an event of default, financial examination
fees and appraisal fees would be limited to $10,000 per annum.
8. Collateral:
----------
As collateral for all of Borrower's present and future obligations to
Lender, including those arising under the Line, the L/Cs and L/C Guarantees,
Lender would be granted a first priority perfected lien or security
interest in and to Borrower's now owned or hereafter acquired accounts,
chattel paper, machinery and equipment, real estate, contract rights,
documents, general intangibles (including, without limitation, all
copyrights, deposit accounts, licensing agreements, patents, trademarks,
and trade names), instruments, inventory, securities (including the stock
of subsidiaries but not including the stock of BFMA Acquisition
Corporation), and the proceeds of all of the foregoing, wherever located;
provided however, that Borrower shall still have the ability to utilize
purchase money financing to acquire equipment. The foregoing is
collectively referred to as the "Collateral."
6:10 PM, 1/2/96
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
BFMA Holding Corporation
January 2, 1996
Page 5
9. Financial Covenants:
-------------------
Borrower would be required to maintain minimum levels of tangible net worth
and working capital, a maximum indebtedness to tangible net worth ratio, a
minimum current ratio, and a limitation on annual capital expenditures. The
levels for each of the foregoing would be based upon Xxxxxxxx's historic
and projected operating performance.
10. Conditions Precedent:
--------------------
The following would be conditions precedent to Xxxxxx's obligation to extend
credit to Borrower:
a. Borrower, including each of the entities composing Borrower, would need
to be a corporation in good standing in the jurisdiction of its
incorporation and qualified to do business in any other jurisdiction
where such qualification is necessary or appropriate to its business;
b. The Line would need to be made pursuant to, and subject to, the terms
of loan agreements, notes, and other financing documents (the "Loan
Documents") executed and delivered by Borrower on or prior to the
Closing Date. The Loan Documents would contain such representations,
warranties, and covenants (affirmative and negative) as are customary,
in Lender's experience, for a transaction of this type.
c. Borrower would need to have execued and/or delivered, or caused to be
delivered, to Lender prior to the Closing Date, such security
agreements, financing statements, fixture filings, deeds of trust,
mortgages, and chattel mortgages, title insurance policies and
endorsements, lock box and depositary account agreements, copies of
leases, landlord waivers, bailee agreements, and other agreements
affecting the Collateral, insurance certificates and endorsements, and
other documentation relative to the liens and security interest in the
Collateral as Lender may reasonably request (the "Security Documents").
Each of the Loan Documents and the Security Documents (the "Documents")
would be governed by the law of the State of New York (except to the
extent that real property is located in another jurisdiction in which
case the real property Security Document would be governed by the laws
of such jurisdiction) and would need to be in form and substance
reasonably satisfactory to Lender and its counsel;
6:10 PM, 1/2/96
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
BFMA Holding Corporation
January 2, 1996
Page 6
d. The financing statements, fixture filings, deeds of trust, mortgages,
and other Documents related to perfection of Xxxxxx's interests in the
Collateral would need to have been filed or recorded in all appropriate
jurisdictions and, with respect to financing statements, Xxxxxx would
need to have received searches reflecting its filings of record;
e. Xxxxxx would need to have received ALTA Lender's Policies of Title
Insurance, or a commitment therefor, from a title company satisfactory
to Lender, in an amount satisfactory to Lender, insuring its first
priority lien upon each parcel of real property composing the
Collateral. Such policies would need to contain such endorsements as
would be required by Lender, would contain only those exceptions
acceptable to Lender, and would need to be in form reasonably
satisfactory to Lender;
f. A phase-1 environmental report and real estate survey would need to
have been completed on each of the parcels of real property composing
the Collateral. The environmental consultants retained for the
environmental reports, the scope of the reports, and the results of the
reports would need to be acceptable to Lender and its counsel, in their
sole discretion;
g. No material adverse change would have occurred in Borrower's condition
or any material adverse change in the value of the Collateral;
h. Xxxxxx would need to have received such opinions of Xxxxxxxx's counsel
and such advice of Xxxxxx's local counsel as Xxxxxx would reasonably
require, which opinions and/or advice would need to be in form and
substance satisfactory to Lender and its counsel. Such opinions of
Xxxxxxxx's counsel would include, but not be limited to, opinions as to
Xxxxxxxx's corporate existence, Xxxxxxxx's power and authority to enter
into the Documents, the validity, binding effect, and enforceability of
each of the Documents, and the perfection of Xxxxxx's liens and
security interest in the Collateral (other than with respect to title
related issues relative to the real estate);
i. Deleted;
j. Payment of all accrued and unpaid Foothill Expenses;
k. Completion of a field survey by Xxxxxx's examiners updating the results
of Xxxxxx's prior field survey, the results of which are acceptable to
Lender;
6:10 PM, 1/2/96
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
BFMA Holding Corporation
January 2, 1996
Page 7
l. Receipt of acceptable fixed asset appraisals by Xxxxxx's appraisal
department;
m. Xxxxxx's senior credit committee's review and approval of the final
terms and structure of the Line and Term Loan and any changes thereto;
n. Xxxxxx's receipt of reference checks regarding Xxxxxxxx's senior
management, the results of which are satisfactory to Lender;
o. Receipt of acceptable commitments from participants for all amounts in
excess of $20,000,000. Xxxxxx agrees to use its reasonable best efforts
to syndicate the loan prior to the Closing Date and would agree to
close the transaction on a lesser amount (and make appropriate
adjustment in Condition Precedent 10(p)) if not syndicated prior to
closing. Xxxxxx also agrees to consider obtaining permission from
Norwest Corporation to underwrite the full amount of the Line;
p. Borrower shall have, after giving effect to the transactions taking
place at loan closing, a minimum of $8,000,000 in the aggregate of
available cash on hand and/or borrowing capacity under the credit
facility herein proposed less any amounts previously paid to Xxxxxxx
Sachs (up to $1,250,000), to settle the Xxxx litigation (up to
$750,000), pursuant to executive severance agreements (up to
$1,000,000);
q. Borrower's post closing capital structure would include a minimum
$15,000,000 in subordinated debt, the terms and conditions of which
shall be satisfactory to lender in its reasonable discretion;
r. At loan closing, Xxxxxxxx would have a minimum net worth of $7,500,000
of which at least $6,000,000 shall have been contributed by Xx. Xxxxx
Xxxxxxxxx in the form of cash and pre-merger Marietta Corporation
common stock.
11. Brokers' Fees:
-------------
Any brokerage commission or finder's fees payable in connection with the
financing arrangement (including any investment banking fee payable to
Xxxxxx/Xxxxxxx) outlined herein would be payable by Borrower and not by
Xxxxxx. Xxxxxxxx agrees to indemnify, defend, and hold Xxxxxx harmless from
and against any claim of any broker or finder arising out of the financing
arrangement outlined herein.
6:10 PM, 1/2/96
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
BFMA Holding Corporation
January 2, 1996
Page 8
12. Closing Date:
------------
If the financing arrangement contemplated by this letter is not consummated
on or before February 15, 1996, then, without any requirement of notice or
other formality, no party hereto would have any obligation to pursue the
financing arrangement outlined in this letter; provided, however, that prior
-------- -------
thereto Borrower and Lender agree to use their respective reasonable best
efforts to cause the financing to be consummated on or before such date. The
date on which the first advance (or L/C or L/C Guarantee) is made under the
Line would be deemed the "Closing Date."
13. Complete Agreement: No Oral Modifications.
-----------------------------------------
This commitment letter embodies the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
proposals, negotiations, or agreements whether written or oral, relating to
the subject matter hereof including any letter of intent. This letter may
not be modified, amended, supplemented, or otherwise changed, except by a
document in writing signed by the parties hereto.
14. GOVERNING LAW: JURY WAIVER.
--------------------------
THIS LETTER SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK AND
THE VALIDITY OF THIS LETTER, AND THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO RELATING TO CLAIMS
OR CAUSES OF ACTION ARISING IN CONNECTION HEREWITH SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. XXXXXXXX AND XXXXXX XXXXXX EXPRESSLY WAIVE ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING
UNDER OR WITH RESPECT TO THIS LETTER, OR IN ANY WAY RELATED OR INCIDENTAL TO
THE DEALING OF THE PARTIES HERETO WITH RESPECT TO THIS LETTER, OR THE
TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW OR HEREAFTER
ARISING, IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE.
XXXXXXXX AND XXXXXX XXXXXX AGREE THAT ANY
6:10 PM, 1/2/96
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
BFMA Holding Corporation
January 2, 1996
Page 9
SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED
BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE OTHER PARTY HERETO TO WAIVE ITS RIGHT TO
TRIAL BY JURY.
15. Expense Deposit
---------------
In connection with the requested financing, Xxxxxxxx understands that it
will be necessary for Lender to make certain financial, legal, and
collateral investigations and determinations. Xxxxxxxx has previously paid
Lender the sum $40,000 as an initial deposit against the Foothill Expenses
that may be incurred by Xxxxxx. Concurrent with the execution of this
letter, an additional deposit of $40,000 shall be due and payable. This
Expense Deposit will be applied to Foothill Expenses as and when they are
incurred. If Xxxxxx concludes for any reason, that it will not make the
financing outlined herein available to Borrower, it will return the unused
balance of the Expense Deposit. As an illustration, the amount to be
deducted from the Expense Deposit may include costs and expenses incurred by
auditors and appraisers and in verifying Borrower's records, Xxxxxx's legal
expenses in connection with advice concerning the subject financing or with
the preparation of the Documents, and any filing and search fees. If, on the
other hand, Xxxxxx continues to be prepared to extend the credit described
herein to Borrower and Borrower declines for any reason, to accept such
financial accommodations from Lender, Lender shall be entitled to retain the
full amount of the Expense Deposit, irrespective of the amount of the
Foothill Expenses incurred. Xxxxxx's retention of the balance of the Expense
Deposit results from its reasonable endeavor to estimate the added
administrative costs incurred and the amount of damage sustained by Xxxxxx
as a result of Xxxxxxxx's decision to decline to accept the financing. If
the financing is funded, the Expense Deposit will be returned to Borrower
after deducting all Foothill Expenses actually incurred by Xxxxxx. Lender
shall not be obligated to segregate the Expense Deposit from its other funds
and Borrower is not entitled to receive interest on any portion of the
Expense Deposit. Xxxxxxxx hereby agrees to pay the Lender the amount of
Lender Expenses incurred in connection with the transaction contemplated
hereby, irrespective of the amount of the Expense Deposit and whether the
transaction actually is consummated. Sections 13, 14 and 15 shall survive
the expiration or the termination hereof.
6:10 PM, 1/2/96
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
BFMA Holding Corporation
January 2, 1996
Page 10
16. Confidentiality, Exclusivity:
----------------------------
This letter is being provided exclusively for the benefit of Borrower for
such uses as it may deem appropriate including disclosure to various third
parties and/or regulatory filings. Nothing in this letter or its use or
disclosure to any third party shall create any contractual relationship or
privity between Lender and any third party.
We are very enthusiastic about the opportunity to finance the acquisition
and subsequent operations of Marietta Corporation and believe that we can
proceed very quickly to the signing of the Documents and subsequent closing of
the financing. If you wish to proceed on the basis outlined above, please
execute this letter in the space provided below and return it to the undersigned
together with the $40,000 additional Expense Deposit no later than 5:00 p.m.,
California time, on or before January 3, 1996. If you fail to do so, this
letter shall expire automatically without any further act. This letter is being
provided to Borrower on a confidential basis and is not for the benefit of, nor
should it be relied upon by, any third party.
Very truly your,
FOOTHILL CAPITAL CORPORATION,
By ________________________
Title: _____________________
The foregoing terms and conditions are hereby accepted and agreed to as of
January __, 1996.
BFMA HOLDING CORPORATION
By ________________________
Title: _____________________
6:10 PM, 1/2/96
Foothill Capital Corporation / 000-000-0000
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
A NORWEST Company
