NationsBank Corporation Exhibit 2
NationsBank Corporation Center
Charlotte, NC 28255
[NationsBank logo appears here]
CONFIDENTIAL
November 15, 1994
Delcor, Inc.
1110 East Morehead Street
Charlotte, NC 28204
Attention: Mr. W. D. Cornwell, Jr.
President
Gentlemen:
NationsBank of North Carolina, N.A., and NationsBank Corporation
or an affiliate thereof (collectively, "NationsBank") are pleased
to confirm to Delcor, Inc. ("Delcor"), their commitment to
provide to Newco or its successor pursuant to the Merger
described herein (the "Company"), a company to be formed by
Delcor, on the terms, for the purposes and subject to the
conditions set forth below and in the summary of certain terms
attached hereto (the "Term Sheets") the following: (i) senior
debt facilities (the "Senior Debt Facilities") in an aggregate
amount of up to $187,500,000, (ii) a subscription to purchase
Cumulative Redeemable Payment-In-Kind Preferred Stock (the
"Preferred Stock") in an aggregate amount of $100,000,000 and
related detachable warrants (the "Warrants") and (iii) the
purchase of 784,999 shares of Non-Voting Common Stock of the
Company for a cash purchase price per share equal to the Merger
Price (as defined below), (the "Common Equity") of a company
which has been described to us under a code name "Canoe" in
connection with the Company's acquisition of Canoe. As
NationsBank understands the proposed transaction (the
"Transaction"), Delcor will organize the Company, a single
purpose, wholly owned subsidiary that will enter into a merger
agreement (the "Merger Agreement") with Canoe, pursuant to which
the Company will merge with Canoe (the "Merger"), with Canoe
being the surviving corporation. In the Merger, each of the
issued and outstanding shares of Canoe's common stock, par value
$.01 per share, excluding any treasury shares, Common Equity
shares or other contributed shares, will be converted into the
right to receive an aggregate amount in cash consideration per
share not to exceed the amount discussed between NationsBank and
the Company (the "Merger Price"). The Senior Debt Facilities,
the Preferred Stock and the Common Equity (collectively, the
"NationsBank Financing") are being provided to enable the Company
to (i) complete the Merger, (ii) provide for the ongoing working
capital and capital spending needs of the Company, and (iii) pay
certain fees and expenses related to the Merger. If the
Transaction is structured as a merger of a wholly owned
subsidiary of the Company into Canoe, this commitment letter and
the Term Sheets shall be modified to reflect the revised
structure.
Delcor, Inc.
November 15, 1994
Page 2
_________________________
NationsBank's commitment is to provide 50% of $375,000,000 of
Senior Debt Facilities that will be co-agented by NationsBank and
First Union National Bank of North Carolina, or an affiliate
thereof (collectively, "First Union"). First Union will also
(i) purchase $100,000,000 of Preferred Stock and Warrants and
(ii) contribute 784,999 shares of common stock of Canoe in
exchange for 784,999 shares of Non-Voting Common Stock of the
Company.
Our commitment to provide the NationsBank Financing will be
funded upon the effectiveness of the Merger and is subject to the
conditions set forth herein and in the attached Term Sheets,
including the right to assign or transfer all or part of this
commitment for the NationsBank Financing to any of our affiliated
corporations or banks and to any third parties.
Our commitment to provide the NationsBank Financing will
terminate (i) on July 31, 1995 if the Merger shall not have
closed on or prior to such date, or (ii) at any time prior to the
Merger and the funding of the NationsBank Financing if (a) there
shall have been any material adverse change in the business,
assets, financial condition or results of operations of Canoe and
its subsidiaries, taken as a whole, or (b) there shall exist any
condition, event or occurrence which, individually or in the
aggregate, could reasonably be expected to have a material
adverse effect on the business, assets, financial condition or
results of operations of Canoe and its subsidiaries, taken as a
whole, in either case, since September 30, 1994, except as
disclosed in documents filed prior to the date hereof with the
Securities and Exchange Commission.
The business and financial terms set forth in the attached Term
Sheets have been established as a result of a review of Canoe's
publicly available information (including public filings with the
Securities and Exchange Commission). NationsBank believes that
the closing conditions and other terms contained in the attached
Term Sheets are customary for comparable financings.
You agree that this Commitment Letter is for your confidential
use only and will not be disclosed by you to any person other
than your accountants, attorneys and other advisors and the
Company and Canoe and such of their respective officers,
directors, agents, accountants, attorneys and other advisors as
need to be provided therewith, and only then in connection with
the Transaction and on a confidential basis, except that you may
make public disclosure of the existence and amount of
NationsBank's commitment and undertaking hereunder, you may file
a copy of the Commitment Letter in any public record in which it
is required by law to be filed, and you may make such other
public disclosure of the terms and conditions hereof as you are
required by law, in the reasonable opinion of your counsel, to
make.
Delcor agrees to indemnify each of NationsBank and its affiliates
and their respective directors, officers, employees, agents and
controlling persons (each, an "Indemnified Party") from and
against any and all losses, claims (whether valid or not),
damages and liabilities, joint or several, to which such
Indemnified Party may become subject related to or arising out of
the Transaction and will reimburse each Indemnified Party for all
expenses (including reasonable attorneys' fees and expenses) as
they are incurred in connection with the investigation of,
preparation for or
Delcor, Inc.
November 15, 1994
Page 3
_________________________
defense of any pending or threatened claim or any action or
proceeding arising therefrom. Notwithstanding the
foregoing, the obligation to indemnify any Indemnified Party
hereunder shall not apply in respect of any loss, claim, damage
or liability to the extent that a court of competent jurisdiction
shall have determined by final judgment that such loss, claim,
damage or liability resulted from such Indemnified Party's
willful malfeasance, gross negligence or bad faith. In the event
that the foregoing indemnity is unavailable or insufficient to
hold an Indemnified Party harmless, then Delcor will contribute
to amounts paid or payable by such Indemnified Party in respect
of such Indemnified Party's losses, claims, damages or
liabilities in such proportions as appropriately reflect the
relative benefits received by and fault of Delcor and such
Indemnified Party in connection with the matters as to which such
losses, claims, damages or liabilities relate and other equitable
considerations.
If any action, proceeding, or investigation is commenced, as to
which any Indemnified Party proposes to demand such
indemnification, it shall notify Delcor with reasonable
promptness; provided, however, that any failure by such
Indemnified Party to notify Delcor shall not relieve Delcor from
its obligations hereunder except to the extent Delcor is
prejudiced thereby. Delcor shall be entitled to assume the
defense of any such action, proceeding, or investigation,
including the employment of counsel and the payment of all fees
and expenses. The Indemnified Party shall have the right to
employ separate counsel in connection with any such action,
proceeding, or investigation and to participate in the defense
thereof, but the fees and expenses of such counsel shall be paid
by the Indemnified Party, unless (a) Delcor has failed to assume
the defense and employ counsel as provided herein, (b) Delcor has
agreed in writing to pay such fees and expenses of separate
counsel, or (c) an action, proceeding, or investigation has been
commenced against the Indemnified Party and Delcor and
representation of both Delcor and the Indemnified Party by the
same counsel would be inappropriate because of actual or
potential conflicts of interest between the parties (in the case
of NationsBank, the existence of any such actual or potential
conflict of interest to be determined by NationsBank, taking into
account, among other things, any relevant regulatory concerns).
In the case of any circumstance described in clauses (a), (b), or
(c) of the immediately preceding sentence, Delcor shall be
responsible for the reasonable fees and expenses of such separate
counsel; provided, however, that Delcor shall not in any event be
required to pay the fees and expenses of more than one separate
counsel for all Indemnified Parties. Delcor shall be liable only
for settlement of any claim against an Indemnified Party made
with Delcor's written consent.
Delcor agrees to pay to us the fees for the Senior Debt
Facilities outlined in the fee letter and supplemental fee
letter, each dated the date hereof (the "Fee Letters"). Delcor
also agrees to reimburse us for all of our out-of-pocket expenses
(including the reasonable fees and disbursements of our counsel)
in connection with the Merger and the NationsBank Financing,
described herein.
The provisions of the three immediately preceding paragraphs
shall survive any termination of this letter.
Delcor, Inc.
November 15, 1994
Page 4
_________________________
Delcor acknowledges that NationsBank has advised Delcor that the
services to be provided hereunder and the amount of fees and the
obligation to reimburse expenses are in no way conditioned upon
Delcor's obtaining from NationsBank or any affiliate of
NationsBank any other service or any loan or other financial
product.
If you are in agreement with the foregoing, please sign and
return the enclosed copy of this letter and the Fee Letters to
NationsBank no later than 5:00 p.m. Eastern Standard Time, on or
before November 15, 1994. This commitment shall terminate at
such time unless a signed copy of this letter and the Fee Letters
have been delivered to us.
Very Truly Yours,
NATIONSBANK CORPORATION
By: /s/ Edward J. Brown, III
Edward J. Brown, III
President, Corporate Bank
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Edward J. Brown, III
Edward J. Brown, III
President, Corporate Bank
Agreed to and accepted this
15th day of November, 1994
DELCOR, INC.
By: /s/ W. D. Cornwell, Jr.
W. D. Cornwell, Jr.
President
Confidential
November 15, 1994
PROJECT CANOE
Summary of Certain Terms
Senior Debt Facilities
Borrower: Newco and, following the Merger, Canoe (the "Company").
Facilities: Will include a six year Revolving Credit Facility (the "Revolver") and
a six year Term Loan (the "Term Loan") (together, the "Senior Debt
Facilities").
Amount: Revolver: Up to $75,000,000
Term Loan: $300,000,000
The aggregate amount available under the Revolver will be based on the
lesser of $75,000,000 or the aggregate of certain percentages of the
Company's eligible accounts receivable and eligible inventory (as
defined in the Company's existing senior credit agreement), subject to
reasonable reserves.
Maturity Dates: The later of June 30, 2001 or six years from the Closing Date.
Agents: NationsBank of North Carolina, N.A. ("NationsBank") and First Union
National Bank of North Carolina ("First Union") (collectively, the
"Agents").
Administrative Agent: NationsBank
Lenders: NationsBank and First Union, and a group of other financial
institutions reasonably acceptable to the Agents and the Company (the
"Lenders").
Use of Proceeds: To consummate the Merger described in the Commitment Letter, to pay
certain fees and expenses related to the Merger and to provide for the
Company's ongoing working capital and capital spending requirements.
Interest Rates: The interest rates on the Senior Debt Facilities will be a function of
the Company's Total Funded Debt to Operating Cash Flow ("Leverage
Ratio") as determined quarterly on a
rolling four quarters basis. Operating Cash Flow will equal the
Company's earnings before interest, taxes, depreciation and
amortization ("EBITDA"). The Company will have the option of
borrowing at a spread over the Base Rate (defined as the higher of
the Administrative Agent's Prime Rate, the Three Month CD Rate
plus .50%, and the Federal Funds Rate plus .50%) or the Adjusted
London Interbank Offered Rate ("LIBOR"). The applicable rates will be
based on the following table
Revolver Term Loan
Spread Over Spread Over Spread Over Spread Over
Leverage Base LIBOR Base LIBOR
Ratio
> 2.0x 1.25% 2.75% 1.50% 3.00%
1.50x - 1.99x 0.75% 2.25% 1.00% 2.50%
1.00x - 1.49x 0.25% 1.75% 0.50% 2.00%
0.50x - .99x 0.00% 1.25% 0.00% 1.50%
< .50x 0.00% 1.00% 0.00% 1.00%
The interest rates on the Senior Debt Facilities will increase by two
(2) percentage points per annum upon the occurrence and during the
continuance of any payment default under the Loan Agreement.
The Loan Agreement shall include the Agents' standard protective
provisions for such matters as increased costs, funding losses,
illegality and withholding taxes.
Interest Payments: At the end of each applicable Interest Period or quarterly, if earlier,
calculated on an actual 360 day basis for both Base Rate and LIBOR
Loans.
Interest Periods: LIBOR interest period: 30, 60, or 90 days, subject to availability.
Interest Rate Protection: Within 90 days following the closing, the Company must obtain
reasonably acceptable interest rate protection through interest rate
swaps, caps or other instruments reasonably satisfactory to the Agents,
against increases in interest rates for a minimum of 50% of the Term
Loan or such lesser amount as the Agents may agree, for a period of at
least three years. In the event the Company obtains Interest Rate
Protection from any Lender, then such Lender may secure the Company's
obligations there under on a pari-passu basis with the Senior Debt
Facilities.
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Confidential
November 15, 1994
Facility Fees: 1/2 of 1% per annum, on the unutilized portion of the Revolver
commitment, payable quarterly in arrears.
Security: A perfected first priority security interest in all of the post-Merger
Company's assets, including the pledge of the stock of all the
Company's subsidiaries.
Mandatory Payments: Revolver: Payable in full at maturity.
Term Loan: Payable quarterly beginning September 30, 1995 in
the following amounts:
Fiscal year Number
Ended Quarterly of Annual
Dec. 31 Amortization Payments Amortization
1995 $10,000,000 2 $20,000,000
1996 10,000,000 4 40,000,000
1997 10,000,000 4 40,000,000
1998 12,500,000 4 50,000,000
1999 15,000,000 4 60,000,000
2000 15,000,000 4 60,000,000
2001 15,000,000 2 30,000,000
$300,000,000
The principal amount of the Term Loan shall be repaid in quarterly
installments beginning on September 30, 1995 and ending June 30, 2001.
In addition to the required amortization, the Company will be required
to make repayments on the Term Loan on an annual basis in an amount
equal to 75% of the Company's Excess Cash Flow (defined as net income
plus depreciation, amortization and all other non-cash charges,
adjusted for changes in working capital, minus capital expenditures,
principal payments and permitted dividends) for such period, beginning
with the period ending December 31, 1995.
The Company will be required to make prepayments with the net cash
proceeds in excess of $5,000,000 from the sale of any of the Company's
assets outside the normal course of business. In addition, the Company
will be required to prepay the Senior Debt Facilities upon any change
of control which results in Delcor, Inc. or its affiliates owning less
than 51% of the voting
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Common Stock of the Company. The Company will also be required to make
prepayments in an amount equal to the net proceeds of any additional
issuance of equity.
Mandatory Prepayments shall be applied in inverse order of maturity.
Voluntary Prepayments: The Company may reduce the amount outstanding under the Revolver at any
time and thereafter reborrow. In addition, the Company may, at its
option, upon five business days' notice to the Agents, permanently
reduce the unutilized portion of the Revolver in part (in principal
amounts of at least $1,000,000 or, if greater, an integral multiple
thereof) or in whole.
The Company may, at its option, upon five business days' notice to the
Agents, prepay the Term Loan in part (in principal amounts of at least
$1,000,000 or, if greater, an integral multiple thereof) or in whole,
without premium or penalty, with interest accrued through the date of
prepayment. Any voluntary prepayments above and beyond those required
under the Excess Cash Flow provision shall be applied in the manner
designated by the Company. All other prepayments shall be applied in
inverse order of maturity.
Conditions Precedent
to Closing: The funding of the Senior Debt Facilities will be subject to
satisfaction of customary conditions precedent for similar financings
and for this transaction in particular, including but not limited to
each of the following:
(i) All documentation relating to the Senior Debt Facilities
shall have been completed and reviewed to the Agents' and
their counsels' satisfaction (including with respect to
bankruptcy, environmental and asbestos matters);
(ii) The Company and Canoe shall have entered into a definitive
merger agreement (the "Merger Agreement"), on terms
acceptable to the Agents in their sole discretion and the
Merger contemplated thereby shall be consummated
simultaneously with the funding of the Senior Debt
Facilities;
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(iii) The Agents shall have determined to their satisfaction and in
their sole discretion that the possible financial impact on
Canoe of the administration of the NGC Settlement Trust, and
Canoe's actual or potential liabilities with respect to
property damage and bodily injury asbestos claims, will not
have a material adverse effect on the prospective business,
assets, financial condition or results of operations of Canoe
and its subsidiaries, taken as a whole;
(iv) The Agents shall have received an environmental survey (or
audit if so requested) prepared by the Company (or an
environmental assessment firm acceptable to the Agents)
addressing the Company's compliance with, and liability
under, all related environmental laws, rules and regulations,
and the Agents shall have determined to their satisfaction
and in their sole discretion that the possible financial
impact on Canoe of environmental matters will not have a
material adverse effect on the prospective business, assets,
financial condition or results of operations of Canoe and its
subsidiaries, taken as a whole;
(v) The Company shall have received commitments for $187,500,000
of Senior Debt Facilities from First Union on the same terms
and conditions as outlined herein;
(vi) The Company shall have received a minimum of $300,000,000 in
cash proceeds from the issuance of Cumulative Redeemable
Payment-In-Kind Preferred Stock and Warrants on terms and
conditions reasonably acceptable to the Agents;
(vii) The Company shall have received $50,000,000 in cash proceeds
from the issuance of voting Common Stock to Delcor, Inc. on
terms and conditions reasonably acceptable to the Agents;
(viii) The Company shall have received cash proceeds from the
issuance of Non-Voting Common Stock to NationsBank in an
amount equal to the Merger Price
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Confidential
November 15, 1994
multiplied by 784,999 shares
on terms and conditions reasonably acceptable to the Agents;
(ix) The Company shall have received a minimum of 3,872,235 shares
of Canoe Common Stock from Delcor, Inc. and 784,999 shares of
Canoe Common Stock from First Union as "contributed" equity
to Newco;
(x) All governmental, regulatory, shareholder and third party
consents and approvals, if any, necessary to effect the
Merger and related financing shall have been obtained and
remain in effect;
(xi) No material adverse change shall have occurred in the
business, assets, financial condition or results of
operations of Canoe and its subsidiaries, taken as a whole,
and there shall exist no condition, event or occurrence
which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the business,
assets, financial condition or results of operations of Canoe
and its subsidiaries, taken as a whole, since September 30,
1994, except as disclosed in documents filed prior to the
date hereof with the Securities and Exchange Commission;
(xii) All of the Company's existing senior indebtedness shall be
repaid in full at closing;
(xiii) There shall not be any material pending litigation,
injunction, order or claim with respect to the Merger or the
NationsBank Financing;
(xiv) The final order of the bankruptcy court entered in March 1993
in connection with Canoe's emergence from its Chapter 11
reorganization shall remain in full force and effect; Canoe
shall be in compliance with each of its continuing
obligations specified therein; and no proceedings shall be
pending or threatened that in any manner challenges such
final bankruptcy court order;
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Confidential
November 15, 1994
(xv) If requested, the Agents shall have received appraisals in
satisfactory form on certain of the Company's fixed assets
prepared by an independent valuation firm acceptable to the
Agents; and
(xvi) The Agents shall have received such other documents,
opinions, certificates and agreements in connection with the
Merger and the Senior Debt Facilities, all in form and
substance satisfactory to the Agents as they shall reasonably
request.
Representations
and Warranties: The Loan Agreement will include representations and warranties
customarily found in the Agents' loan agreements for similar financings
and any additional representations and warranties appropriate in the
context of the proposed Merger (including with respect to bankruptcy,
environmental and asbestos matters).
Covenants: The Loan Agreement will include covenants customarily found in the
Agents' loan agreements for similar financings and any additional
covenants appropriate in the context of the proposed Merger. Such
covenants shall in any event include:
(1) Limitations on Liens;
(2) Limitations on Cash Dividends, Distributions and Stock
Repurchases;
(3) Limitations on Additional Indebtedness;
(4) Limitations on Transactions with Shareholders and Affiliates;
(5) Limitations on Capital Expenditures and Cash Acquisitions;
and
(6) Certain other covenants, including financial covenants (such
as fixed charge and interest coverage ratio tests, leverage
tests, and minimum current ratio tests) acceptable to the
Agents.
Permitted Dividends: So long as no Event of Default has occurred and is continuing, the
Company will be permitted to pay cash dividends on the
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Confidential
November 15, 1994
Preferred Stock and Common Stock in amounts of up to 75% of the
Company's net income calculated prior to giving effect to the dividend
for such period (the "Permitted Dividends") after such time as (i)
the Senior Debt Facilities have been paid down below $200,000,000
and (ii) the Company's ratio of Total Funded Debt to Operating Cash
Flow on a trailing four quarters basis is less than 1.0x. Permitted
Dividends may be paid on a quarterly basis no sooner than 15 days after
receipt by the Lenders of the Company's quarterly financial statements
confirming compliance with the above conditions. Cash dividends shall
not be permitted if after giving effect to such payment, the Company
would be in default of the Senior Debt Facilities or the conditions
outlined above.
Events of Default: Those customarily found in the Agents' loan agreements for similar
financings and any additional events of default appropriate in the
context of the proposed Merger.
Syndication: Following the signing of a definitive Merger Agreement between the
Company and Canoe, the Company shall use its best efforts to assist the
Agents in syndicating the Senior Debt Facilities. The initial
syndication shall be a coordinated process under which both Agents
shall reduce their commitments on a pro-rata basis until such time as
they reach their desired hold level or mutually agree to terminate the
joint syndication process.
Assignments
and Participation: After completion of the initial syndication process, any Lender may
participate or assign its interest in the Senior Debt Facilities in
minimum amounts of at least $5,000,000 subject to the approval of the
Company and the Agents, which shall not be unreasonably withheld. In
addition, at any time, any Lender may transfer all or part of its
commitment under the Senior Debt Facilities to an affiliate.
Miscellaneous: (1) North Carolina state law to govern;
(2) All terms and conditions contained in the Agreements to be
reasonably satisfactory to the Agents and to their counsel.
The Company shall reimburse the Agents for all reasonable
out-of pocket expenses including, but not limited to, the
reasonable fees and disbursements of their counsel
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Confidential
November 15, 1994
in connection with the preparation and execution of the
Agreements and the reasonable fees and expenses of any
third party consultants retained to assist the Agents in
analyzing any environmental or asbestos related issues, in
each case whether or not the transactions herein
contemplated shall be consummated or the Senior Debt
Facilities shall be executed or closed;
(3) Usual provisions regarding survival of Agreements, waiver
and delay, extensions of maturity, modifications of
agreements, severability, counterparts and enforcements,
headings, definition of accounting terms in accordance with
GAAP, waiver of jury trial; and
(4) The Loan Agreement shall contain voting requirements that
shall allow 66 2/3% in principal amount to approve certain
waivers, modifications and amendments subject to customary
unanimity requirements.
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Confidential
November 15, 1994
Cumulative Pay-In-Kind (PIK) Preferred Stock
Issuer: Newco and, following the Merger, Canoe (the
"Company").
Facility: Cumulative Redeemable Pay-In-Kind (PIK)
Preferred Stock (the "Preferred Stock").
Amount: $100,000,000 (the "Purchase Price").
Shares Issued: 100,000.
Price Per Share: $1,000 (the "Purchase Price Per Share").
Purchaser: NationsBank Corporation or an affiliate
thereof ("NationsBank").
Use of Proceeds: To facilitate the consummation of the
Merger as described in the Commitment
Letter.
Redemption Date: 8 years from closing.
Dividend Rate: 10.0%
Dividend Payments: Semi-annual; to be paid in cash or in-kind
for the first three years at the option of
the Company; thereafter, dividends will be
payable in cash, subject to the terms of the
Senior Debt Facilities.
Call Protection: None.
Warrants: The Preferred Stock will carry detachable
warrants exercisable into Non-Voting Common
Stock of the Company, which represents
5.1337% of all Common Stock on a fully-
diluted basis.
Conditions
Precedent: The purchase of the Preferred Stock will
be subject to the execution of a
satisfactory Preferred Stock and Warrant
Purchase Agreement, and any necessary
related documents; as well as the
satisfaction of conditions precedent as
outlined in the Senior Debt Facilities,
which are hereby incorporated by
reference, and any other conditions
deemed appropriate by the Purchaser for
similar financings and for this
transaction in particular.
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Confidential
November 15, 1994
Protective
Provisions: The Company shall not, without first
obtaining consent or approval of the
holders of at least two-thirds of the
Preferred Stock, do any of the
following:
(i) Create any senior stock having
preference or priority over the
Preferred Stock as to dividends or upon
redemption, liquidation, winding up or
dissolution;
(ii) Adversely amend or alter any
preferences, rights or powers of the
Preferred Stock;
(iii) Pay other than Permitted Dividends,
provided, however, that once all
dividends have been paid on the
Preferred Stock in cash and the
Company has redeemed all prior in-
kind dividends, the Company may pay
cash dividends on the Common Stock
in an annual amount not to exceed
(i) 2.5% multiplied by (ii) an
amount equal to (x) the Merger
Price Per Share multiplied by (y)
the total Shares of voting and Non-
Voting Common Stock outstanding
and
(iv) Except as contemplated by the Merger
Agreement, redeem or repurchase any
junior stock, warrants or other parity
stock.
Certain Events: The following shall constitute an Event:
(i) Failure to declare and pay semi-annual
dividends on the Preferred Stock in
full;
(ii) Failure to redeem or pay the Redemption
Price in full when required;
(iii) Certain events of bankruptcy,
receivership or similar
proceedings; and
(iv) Failure to observe any Protective
Provisions.
Rights Upon
an Event: Upon and during the continuance of an Event,
the Purchaser may elect one representative to
the Board of Directors of the Company.
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Confidential
November 15, 1994
Change in Control/
Sale of Assets: In the event there occurs a Change of
Control (an event which results in
Delcor, Inc. or its affiliates owning
less than 51% of the voting Common Stock
of the Company) or sale of substantially
all of the Company's assets, any holder
of Preferred Stock may require the
Company to redeem all of the shares of
Preferred Stock held by such holder at a
price equal to the Purchase Price per
share plus all Accrued Dividends thereon
to the date of redemption.
Transfer Rights: Beginning eighteen months after the
consummation of the Merger, any holder
of the Preferred Stock may sell or
transfer in whole or in part, any shares
of Preferred Stock held by such holder
subject to (i) the Company's consent,
which shall not be unreasonably withheld
and (ii) the Company's first right of
refusal.
Attendance Rights: Following the Merger, the Company will
permit a representative of the Purchaser
to attend all meetings of the Company's
Board of Directors or committees.
Reimbursement
of Expenses: The Purchaser shall be reimbursed for
reasonable out-of-pocket expenses
(including fees and disbursements for
counsel) incurred in connection with the
issuance of the Preferred Stock and the
Warrants.
Information
Requirements: The Company will provide the Purchaser
with: (i) annual financial statements
audited by a nationally recognized "Big
Six" independent accounting firm, (ii)
monthly internal financial statements,
(iii) an annual budget for the next
fiscal year prior to the end of the
previous fiscal year, and (iv) any other
information as reasonably requested by
such Purchaser.
Representations
and
Warranties: Those customarily found in purchase
agreements for similar financings and
any additional representations and
warranties appropriate in the context of
the proposed financing.
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Confidential
November 15, 1994
Warrants
Issuer: Newco and, following the Merger, Canoe (the
"Company").
Facility: Warrants.
Purchaser: NationsBank Corporation or an affiliate
thereof ("NationsBank").
Amount: In conjunction with the Cumulative Redeemable
Payment-In-Kind (PIK) Preferred Stock (the
"Preferred Stock"), detachable Warrants will
be issued sufficient to provide the Purchaser
with 5.1337% of the Common Stock of the
Company on a fully-diluted basis (subject
only to dilution by management options in an
amount to be mutually agreed upon).
Exercise Price: Nominal.
Exercise Period: At any time.
Maturity: Ten years from the date of issuance.
Put Provisions: Subject to the terms of the Senior Debt
Facilities and the Preferred Stock, the
Purchaser shall have the right to sell
all or part of the Warrants to the
Company at a cash price (the "Put
Price") as described below at any time
after the earliest to occur of the
following:
(i) Six years after the closing date;
(ii) An event which results in Delcor, Inc.
or its affiliates owning less than 51%
of the voting Common Stock of the
Company;
(iii) Any merger in which the Company is
not the surviving corporation, or
sale or other transfer of
substantially all of the Company's
assets;
(iv) Acceleration of any outstanding credit
facility of the Company; and
(v) A qualified public equity offering by
the Company;
-13-
Confidential
November 15, 1994
provided, however, that if not exercised upon
the occurrence of the event described in
Section (v), the put right of the Purchaser
shall terminate.
The Put Price shall be the fair market value
as mutually agreed upon by the Company and
the Purchaser. For the purposes of this
paragraph, fair market value will not include
any discount for minority interest or lack of
liquidity. If the parties are not able to
agree on a fair market value, they will agree
to engage a mutually acceptable investment
banker to determine the fair market value of
the Warrants.
Transfer Rights: Beginning eighteen months after consummation
of the Merger, any holder of the Warrants may
sell or transfer in whole or in part, any
Warrant shares held by such holder subject to
(i) the Company's consent, which shall not be
unreasonably withheld and (ii) the Company's
first right of refusal. If necessary to
facilitate the sale of the Warrants, the
Company will amend its charter provisions to
make the Warrants exercisable into voting
Common Stock of the Company. Any change in
the Warrant shares from non-voting to voting
will be subject to Federal Reserve guidelines.
Call Provisions: Subject to the terms of the Senior Debt
Facilities and the Preferred Stock and
beginning seven years after the closing date,
the Company shall have the right to purchase
for cash all or part of the Warrants, on a
pro-rata basis with all other Warrant holders,
at a price equal to 100% of the Put Price
determined at that time.
Other Rights: In addition to the above rights, the Warrants
will provide for:
(i) Customary anti-dilution provisions;
(ii) Piggyback rights for the Warrant shares
on any public or private sale of the
Company's equity securities;
(iii) Two demand registration rights for the
Warrant shares (taken together with
Purchaser's demand registration rights
for Non-Voting Common Stock) beginning
January 1, 1999 or at any earlier time
that the Put Provision is exercisable;
and
(iv) 30 days' prior notice of the record date
of any cash dividend on the Common
Stock.
-14-
Confidential
November 15, 1994
Non-Voting Common Stock
Issuer: Newco and, following the Merger, Canoe (the
"Company").
Facility: Non-Voting Common Stock (the "Non-Voting
Common Stock").
Purchase Price: $34,147,456.50, assuming the Merger
Price Per Share shown below.
Shares Issued: 784,999
Merger Price Per Share: $43.50 (the "Merger Price Per Share").
Purchaser: NationsBank Corporation or an affiliate
thereof ("NationsBank").
Use of Proceeds: To facilitate the consummation of the
Merger as described in the Commitment
Letter.
Dividend Rights: To the extent cash dividends on Common
Stock are permitted by the Senior Debt
Facilities and the Preferred Stock, each
holder of voting Common Stock and Non-
Voting Common Stock shall share ratably
in any such dividends.
Put Provisions: Subject to the terms of the Senior Debt
Facilities and the Preferred Stock, the
Purchaser shall have the right to sell
all or part of the Non-Voting Common
Stock to the Company at a cash price
(the "Put Price") as described below at
any time after the earliest to occur of
the following:
(i) Six years after the closing date;
(ii) An event which results in Delcor, Inc.
or its affiliates ("Delcor") owning less
than 51% of the voting Common Stock of
the Company;
(iii) Any merger in which the Company is
not the surviving corporation, or
any sale or other transfer of
substantially all of the Company's
assets;
(iv) Acceleration of any outstanding credit
facility of the Company; and
-15-
Confidential
November 15, 1994
(v) A qualified public equity offering by
the Company;
provided, however, that if not exercised upon
the occurrence of the event described in
Section (v), the put right of the Purchaser
shall terminate.
The Put Price shall be the fair market value
as mutually agreed upon by the Company and
the Purchaser. For the purposes of this
paragraph, fair market value will not include
any discount for minority interest, lack of
liquidity or lack of voting rights. If the
parties are not able to agree on a fair
market value, they will agree to engage a
mutually acceptable investment banker to
determine the fair market value of the Non-
Voting Common Stock.
Transfer Rights: Beginning eighteen months after consummation
of the Merger, any holder of the Non-Voting
Common Stock may sell or transfer, in whole
or in part, any Non-Voting Common Stock held
by such holder subject to (i) the Company's
consent, which shall not be unreasonably
withheld and (ii) the Company's first right
of refusal. If necessary to facilitate the
sale of the Non-Voting Common Stock, the
Company will amend its charter provisions to
make the Non-Voting Common Stock exchangeable
into voting Common Stock of the Company. Any
such right to have the Company's charter
amended shall be subject to Federal Reserve
guidelines.
Call Provisions: Subject to the terms of the Senior Debt
Facilities and the Preferred Stock and
beginning seven years after the closing
date, the Company shall have the right
to purchase for cash all or part of the
Non-Voting Common Stock, on a pro-rata
basis with all other Non-Voting Common
Stock holders, at a price equal to 100% of the
Put Price determined at that time.
Conditions Precedent: The purchase of the Non-Voting Common Stock will
be subject to the execution of a satisfactory
Non-Voting Common Stock Purchase Agreement, and
any necessary related documents; as well as the
satisfaction of conditions precedent as outlined
in the Senior Debt Facilities, which are hereby
incorporated by reference, and any other
conditions deemed appropriate by the Purchaser
for similar financings and for this transaction
in particular.
Attendance Rights: Following the Merger, and provided that the
Preferred Stock has been redeemed in full,
the Company will permit a representative
-16-
Confidential
November 15, 1994
of the Purchaser to attend all meetings of the
Company's Board of Directors or committees.
Other Rights: In addition to the above rights, the Non-
Voting Common Stock will provide for:
(i) Customary anti-dilution provisions;
(ii) Piggyback rights on any public or
private sale of the Company's equity
securities; and
(iii) Two demand registration rights (taken
together with Purchaser's demand
registration rights for Warrant shares)
beginning January 1, 1999 or at any
earlier time that the Put Provision is
exercisable.
Reimbursement
of Expenses: The Purchaser shall be reimbursed for
reasonable out-of-pocket expenses
(including fees and disbursements for
counsel) incurred in connection with the
issuance of the Non-Voting Common Stock.
Information
Requirements: The Company will provide the Purchaser with:
(i) annual financial statements audited by a
nationally recognized "Big Six" independent
accounting firm, (ii) monthly internal
financial statements, (iii) an annual budget
for the next fiscal year prior to the end of
the previous fiscal year, and (iv) any other
information as reasonably requested by such
Purchaser.
Representations
and Warranties: Those customarily found in purchase agreements
for similar financings and any additional
representations and warranties appropriate in
the context of the proposed financing.
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/TABLE