EXHIBIT A
SUMMARY OF TERMS AND CONDITIONS
The terms and conditions contained in this Summary of Terms and
Conditions (this “Term Sheet”) are in addition to those set
forth in the accompanying commitment letter (the “Commitment
Letter”) from Cape Ann Investors LLC, Peritus Capital Partners LLC and
Mr. Bernard J. Korman (each an “Investor” and, collectively,
the “Investors”) to NutraMax Products, Inc. Capitalized terms
used in this Term Sheet and not otherwise defined have the meaning set forth for
such terms in the Commitment Letter.
Borrowers
NutraMax Products, Inc., a Delaware corporation (the "Parent"), and each of the
Parent's subsidiaries (collectively, the "Borrowers" and each, a "Borrower"), jointly and
severally, each as debtors and debtors-in-possession in cases (collectively, the "Cases" and
each, a "Case") pending under chapter 11 of the United States Bankruptcy Code, 11 U.S.C.
ss.ss.101-1330 (the "Bankruptcy Code"), in the United States Bankruptcy Court for the District of
Delaware (the "Court").
Investors
Cape Ann Investors LLC, Peritus Capital Partners LLC, and Mr. Bernard J. Korman (each
an "Investor" and, collectively, the "Investors"). The Investors have each committed the
following (such Investor's "Share"):
Cape Ann Investors LLC $ 8,100,000
Peritus Capital Partners LLC 8,100,000
Bernard J. Korman 1,800,000
--------------
Total $18,000,000
Term Loan
The Investors shall provide the Borrowers with a term loan (the "Term Loan") in the
amount of $18,000,000. The Term Loan shall be due and payable in full upon any termination of
that certain $30,000,000 senior secured superpriority debtor-in-possession credit facility
provided by The CIT Group/Business Credit, Inc., as agent (the "Senior Subsequent DIP
Agreement" and, together with the Junior Subsequent DIP Agreement, the "Subsequent DIP
Agreements").
Closing Date
The date for the Closing of the Junior Subsequent DIP Agreement (the "Closing Date")
will occur promptly upon the entry of the Final Order (as defined below) approving the
Subsequent DIP Agreements and related documents but in no event later than (a) 60 days after
the commencement of the Cases (the "Petition Date") or (b) two days after the entry of the
Final Order.
Term
The Junior Subsequent DIP Agreement will terminate upon the earliest to occur of (a)
the second anniversary of the Petition Date, (b) the substantial consummation (as defined in
the Bankruptcy Code and for which for purposes of the Junior Subsequent DIP Agreement shall be
no later than the effective date thereof, the "Effective Date") of a plan of reorganization
(the "Plan") that is confirmed pursuant to an order entered by the Court or any other court
having jurisdiction in the Cases and (c) the acceleration of the Senior Subsequent DIP
Agreement and/or the termination of the Senior Subsequent DIP Agreement in accordance with its
terms.
Use of Proceeds
Proceeds of the Junior Subsequent DIP Agreement (along with the proceeds from the
Senior Subsequent DIP Agreement) will be used for (i) repayment in full of outstanding
borrowings under that certain $5,000,000 senior secured superpriority debtor-in-possession
credit facility provided by Fleet National Bank (the "Interim DIP Agreement") provided to the
Borrowers on or about the Petition Date, (ii) a $32,000,000 partial repayment of outstanding
obligations owing to the lenders (the "Existing Lenders") under the Borrower's existing
revolving credit facility (the "Existing Facility") plus any excess over $3,000,000 under the
overdraft component thereof, (iii) working capital requirements of the Borrowers during the
term of the Subsequent DIP Agreements and (iv) fees and expenses related to the Subsequent DIP
Agreements.
Interest Rate and Fees
Interest will be computed monthly on the Term Loan at a rate equivalent to the Chase
Manhattan Bank Rate plus 2.00% per annum or, at the Borrowers' option, LIBOR plus 4.50% per
annum.
”Chase Manhattan Bank Rate” means the rate of interest per annum announced by The
Chase Manhattan Bank from time to time as its prime rate in effect at its principal office
in the City of New York. Such rate is not intended to be the lowest rate charged by Chase
Manhattan Bank to its borrowers.
A $360,000 loan facility fee earned on the Closing Date.
Such other fees and expenses as are set forth in the Junior Subsequent DIP Agreement.
Payment of the loan facility fee, interest due and other fees and expenses shall be deferred
until the earlier to occur of (a) the Effective Date and (b) the date on which the principal
balance of the Term Loan becomes due pursuant to its terms or an event of default.
Superpriority
All direct borrowings shall have the highest available priority under section 364(c)
of the Bankruptcy Code with priority over all other costs and expenses of the kind specified
in, or ordered pursuant to, any provision of the Bankruptcy Code (the "Superpriority Claim")
except for claims pursuant to the Senior Subsequent DIP Agreement and the Retained Claim (as
defined in the Letter Agreement) to which such borrowings shall be expressly subordinated
pursuant to an agreement among the lender(s) under the Senior Subsequent DIP Agreement, the
lender(s) under the Initial DIP Agreement and the Investors (the "Intercreditor Agreement").
Except for the Carve-Out and as provided in the Intercreditor Agreement, no other claim of any
other creditor shall be senior, or equal in priority to the Junior Subsequent DIP Agreement.
In addition, the Junior Subsequent DIP Agreement shall at all times be senior to the rights of
the Borrowers, their respective estates and any successor trustee or estate representative in
any bankruptcy case or proceeding of the Borrowers under the Bankruptcy Code.
Collateral
All direct borrowings shall be secured (a) pursuant to section 364(d) of the
Bankruptcy Code by a perfected priority, senior, priming lien on all of the Borrowers' present
and future assets, including, without limitation, accounts receivable, instruments, contract
rights, chattel paper, general intangibles (including, without limitation, causes of action),
inventory, equipment, fixtures, documents of title, trademarks, patents, trade names, real
estate (whether owned or leased), claims against and recoveries from any person whatsoever,
including, without limitation, avoidance claims under sections 544, 545, 547, 548 and 553 of
the Bankruptcy Code, and all proceeds of the foregoing (collectively, the "Collateral") that is
subject to a validly perfected security interest or lien in existence as of the Petition Date
in favor of the Existing Lenders under the Existing Facility, (b) pursuant to section 364(c)(2)
of the Bankruptcy Code by a perfected first priority lien on all of the Collateral that is
otherwise not encumbered by a valid and perfected lien as of the date the Petition Date and (c)
pursuant to section 364(c)(3) of the Bankruptcy Code by a perfected junior lien on all of the
Collateral that (i) is subject to a validly perfected security interest or lien in existence on
the Petition Date (other than as described in clause (a) above), (ii) is subject to valid liens
on the Petition Date that are perfected after the Petition Date as permitted by section 346(b)
of the Bankruptcy Code and (iii) is subject to a lien permitted by the Agreement.
The security interests in and liens on the Collateral with respect to the Junior
Subsequent DIP Agreement shall be senior in rank and priority to all other liens on and
security interests in the Collateral, subject only to (a) the claims under the Senior
Subsequent DIP Agreement, (b) the Retained Claim, (c) any other valid, perfected and
enforceable security interests and liens that are expressly permitted by the Junior Subsequent
DIP Agreement and (d) the Carve-Out.
The liens and security interests with respect to the Junior Subsequent DIP Agreement
shall at all times be senior to the rights of the Borrowers and any successor trustee or estate
representative in the Cases or proceeding under the Bankruptcy Code and any lien or security
interest in the Collateral that is avoided or otherwise preserved for the benefit of the
Borrowers' estate shall be subordinate to these liens and security interests. No liens or
security interests granted in the Collateral with respect to the Junior Subsequent DIP
Agreement, and no claim of the Agent or the Investors shall be subject to subordination to any
other lien or security interest or claim under section 510 of the Bankruptcy Code or to
surcharge under section 506 of the Bankruptcy Code or otherwise.
The security interests and liens granted in the Collateral with respect to the Junior
Subsequent DIP Agreement shall be perfected by operation of law upon execution by the Court of
the Final Order.
Carve-Out
The liens and security interests on the Collateral and the Superpriority Claim granted
to the Investors will be subject to (a) following the occurrence and during the continuance of
an Event of Default (as defined below), the payment (as the same may be due and payable) of
professional fees and disbursements allowed by order of the Court and incurred by the Borrowers
and any statutory committee of unsecured creditors appointed in the Cases and any disbursements
of any member of such committee in an aggregate amount not to exceed $1,000,000 (in addition to
compensation previously awarded, whether or not paid) and (b) the payment of unpaid fees
pursuant to 28 U.S.C. Section 1930 and any fees payable to the Clerk of the Court
(collectively, the "Carve-Out").The Investors agree that so long as no Event of Default or an
event that would constitute an Event of Default with the giving of notice or lapse of time or
both, shall have occurred and be continuing, the Borrowers shall be permitted to pay
compensation and reimbursement of expenses allowed and payable under sections 330 and 331 of
the Bankruptcy Code, as the same may be payable, and the amounts so paid shall not reduce the
Carve-Out.
Representations, Warranties and Covenants
The Junior Subsequent DIP Agreement will contain such representations, warranties and
covenants as are customary for financing transactions of this type, including, without
limitation, the following:
(a) the Borrowers will deliver to the Investors all pleadings, motions, applications,
judicial information, financial information and other documents filed by or on behalf
of the Borrowers with the Court or distributed by the Borrowers to the lenders under
the Senior Subsequent DIP Agreement and/or any official committee appointed in the
Cases;
(b) as soon as possible, the Borrower will deliver to the Investors, and the Investors
must be satisfied with, the Borrowers' re-stated financial statements for the fiscal
year ended September 30, 1999;
(c) as soon as possible, the Borrower will deliver to the Investors, and the Investors
must be satisfied with, the "reviewed" financial statements of the Borrowers for the
period from October 1, 1999, through January 31, 2000;
(d) the Borrowers will provide to the Investors, among other things, monthly interim
financial statements and fiscal year end statements, commencing with the first fiscal
year end subsequent to the Closing Date (such fiscal year end statements to be
certified by an independent public accountant mutually acceptable to the Borrowers and
the Investors); and
(e) the Borrowers will provide the Investors with weekly accounts receivable reports and
weekly inventory reports, along with such supporting documentation as is requested by
the Investors, all as specified in the Junior Subsequent DIP Agreement;
Events of Default
The Junior Subsequent DIP Agreement will contain such events of default ("Events of
Default") as are customary for financing transactions of this type, including, without
limitation, the following:
(a) entry of an order converting any Case to a case under chapter 7 of the Bankruptcy
Code;
(b) entry of an order dismissing or suspending any Case;
(c) entry of an order confirming a plan of reorganization or liquidation in any Case other
than one which provides a plan substantially identical to that contemplated by the
Letter Agreement;
(d) entry of an order in any Case appointing a trustee under section 1104 of the
Bankruptcy Code without consent of the Investors;
(e) entry of an order granting another Superpriority Claim pari passu with or senior to
that granted to the Investors pursuant to the Junior Subsequent DIP Agreement (other
than the Senior Subsequent DIP Agreement, the Retained Claim or the Carve Out), in the
Final Order;
(f) the Final Order is reversed, stayed, vacated or rescinded without consent of the
Investors;
(g) the Final Order is amended, supplemented or otherwise modified;
(h) the Court enters an order in any Case appointing an examiner having enlarged powers
relating to the operation of the Borrowers' businesses (powers beyond those set forth
under sections 1106(a)(3) and (4) of the Bankruptcy Code) under section 1106(b) of the
Bankruptcy Code without consent of the Investors; or
(i) the Borrowers shall make any payment on account of any material pre-petition
indebtedness or payables other than as permitted by the Court, the Junior Subsequent
DIP Agreement, the Letter Agreement or the Final Order.
Remedies
Upon the occurrence and continuance of any Event of Default, the Investors will have
such remedies as are customary for financing transactions of this type. Without limiting the
foregoing, the Investors may take all or any of the following actions without further order of
or application to the Court; provided that with respect to clause (b) below, the Investors
shall provide the Borrowers (with a copy to counsel for any statutory committee of unsecured
creditors appointed in the Cases and to the United States Trustee for the District of Delaware)
with five business days' prior written notice;
(a) declare the principal of and accrued interest on the outstanding borrowings to be
immediately due and payable; or
(b) take any other action or exercise any other right or remedy permitted under the
Agreements or by applicable law.
Conditions of Closing
The several obligation of each Investor to provide such Investor's Share of the Term
Loan shall be subject to the following additional conditions:
(a) the execution and delivery of appropriate legal documentation in form and substance
satisfactory to the Borrowers and the Investors;
(b) the absence of any material adverse change in the financial condition, business,
prospects, profitability, assets or operations of the Borrowers, including the
resignation of the Chief Executive Officer of the Borrowers;
(c) all conditions to the Senior Subsequent DIP Agreement shall have been met or waived
and the Borrowers shall have borrowed on the Closing Date under the Senior Subsequent
DIP Agreement an amount equal to (i) $32,000,000 plus (a) the excess, if any, of the
outstanding balance of the Overdraft Facility above $3,000,000 plus (b) the
outstanding balance of the Interim DIP Agreement (including any letters of credit
issued thereunder) less (ii) $18,000,000 (the amount of the loans under the Junior
Subsequent DIP Agreement);
(d) The execution by the Existing Lenders of all documentation necessary to effect the
transactions contemplated by the Letter Agreement which shall be reasonably
satisfactory to the Investors;
(e) the concurrent funding by the other Investors of their Shares;
(f) the repayment in full and termination of the Interim DIP Agreement;
(g) not later than 60 days following the commencement of the Cases, entry of an order of
the Court in form and substance satisfactory to the Investors (the "Final Order") on
an application or motion by the Borrowers that is satisfactory in form and substance
to the Investors, which Final Order shall have been entered on such notice to such
parties as may be satisfactory to the Investors, approving the transactions
contemplated herein and granting the Superpriority Claim and liens and security
interests referred to above, which Final Order, among other things, shall (i)
authorize extensions of credit in amounts satisfactory to the Investors, (ii) treat
any adequate protection claims with respect to the Existing Facility in a manner
satisfactory to the Investors (which shall be so deemed if consistent with the Letter
Agreement) and (iii) not have been reversed, modified, amended or stayed; and
(h) the Final Order shall find and conclude that the Junior Subsequent DIP Agreement was
negotiated in good faith and that the Investors are entitled to the protections of
section 364(e) of the Bankruptcy Code.
Covenant of the Investors
On a weekly basis, each Investor hereby agrees to provide notice to the Company (with
a copy to the Existing Lenders, through Fleet Bank, as agent therefor) that if all conditions
to closing were met as of the date thereof, such Investor would be in a position to fund its
entire Share hereunder.
Miscellaneous
If any of the instruments evidencing or agreements governing or order authorizing the
Junior Subsequent DIP Agreement are modified, stayed or vacated by subsequent order, such
modification, stay or vacating will not affect the validity of and indebtedness owed to the
Agent or the Lenders or the priority authorized by such order.
Governing Law
Illinois, except as governed by the Bankruptcy Code.
Out-of-Pocket-Expenses
The Borrowers shall reimburse the Investors (whether or not this transaction is
consummated) for out-of-pocket costs and expenses (including fees and expenses of outside legal
counsel) incurred in connection with the Junior Subsequent DIP Agreement, including, but not
limited to, those incurred by the Investors in connection with the preparation, execution and
closing of this financing transaction and the perfection of liens and security interests.