TERM SHEETS, PROPOSAL LETTERS AND COMMITMENT LETTERS:

LENDERS BEWARE
Bobbi Acord Noland
Parker, Hudson, Rainer & Dobbs LLP
Atlanta, Georgia
American Bar Association Annual Meeting
Subcommittee on Loan Documentation
San Francisco, California
August 2010

2010 Parker, Hudson, Rainer & Dobbs LLP, All rights reserved,

TERM SHEETS, PROPOSAL LETTERS AND COMMITMENT LETTERS:

LENDERS BEWARE
Bobbi Acord Noland
Parker, Hudson, Rainer & Dobbs LLP
Atlanta, Georgia
TABLE OF CONTENTS

Pre-Loan Agreement - How to Evidence the Parties' Understanding

I.

-1-

A.

Term Sheet

-1-

B.

Proposal Letter

-1-

C.

Commitment Letter

-2-

D.

Determining the "Market"

-2-

Components of a Commitment

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A.

Requirement of a "Writing"

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B.

Requirement of Agreement on Basic Terms

-3-

C.

Requirement of Intent to be Bound

-5-

II.

III. Purposes of Commitment Letters

-5-

A.

From the Borrower's Perspective

-5-

B.

From the Lender's Perspective

-6-

IV. Potential Lender Liability Concerns

-6-

A.

Potential Pitfalls

-6-

B.

Avoiding Liability

-7-

C.

Express Conditions Precedent to Lender's Obligations

-7-

Annex I - Checklist of Provisions for Commitment Letters

Annex II - Summary of Select Cases
Annex III - Form of Commitment Letter

I.

Pre-Loan Agreement - How to Evidence the Parties' Understanding

A.

B.

Term Sheet
1.

Used to clarify each party's preliminary understanding of possible financing

2.

Summarizes for further discussion salient business terms

3.

States that it is non-binding and for discussion purposes only

4.

States that it may be withdrawn at any time

5.

Used as a tool to reach a basic understanding of deal terms, with further

negotiation contemplated

6.

No fee or expense deposit required by lender

Proposal Letter
1.

A more formal document than term sheet

2.

A more complete statement of business terms that are tentatively agreed upon,
subject to reconsideration atfer lender's audit and credit approval

3.

Usually issued prior to audit of borrower and credit committee consideration

4.

States that it is not a commitment and is the subject of ongoing dialogue

I
1

"This letter is not a contract to extend financing nor an offer to enter into a
contract for such financing nor a commitment to obligate lender in any way with
respect to any financing proposal summarized herein, and you should not rely
upon it as such."
1 800 Plan, LLC v. Eastern Say. Bank, F.S.B., 2008 U.S. Dist.
LEXIS 20779 (E.D.N.Y. 2008) (express disclaimer of intent to
be bound in letter of intent dispositive and no commitment to
lend found by court)
Trade & Industry Corporation (USA), Inc. v. Euro Broker
Investment Corporation, 222 A.D.2d 364 (N.Y. App. Div.
1995) (court refused to enforce as a commitment a letter of intent
that stated it was not intended to be a binding agreement)
5.

Borrower not required to pay any fee for letter of intent

6.

Borrower often required to make deposit for expenses, with balance to be

returned to borrower if deal not approved by lender's credit committee and to be
forfeited to lender if deal approved by lender's credit committee but rejected by
borrower

-1-

C.

Commitment Letter
1.

D.

II.

A "Commitment" is
a.

a written undertaking by a lender,

b.

to provide a credit accommodation to a borrower,

c.

on mutually agreed upon terms,

d.

by which the parties "manifest an intent to be bound."

2.

A commitment is a contract that can be sued upon if breached by a lender.

3.

See Annex III for an illustrative form of Commitment Letter.

Determining the "Market"

1.

Single lender versus syndicated transactions

2.

Sponsor transactions

3.

Acquisition financings

4.

Asset-based transactions versus cash flow deals

Components of a Commitment
A.

Requirement of a "Writing"
1.

Many states require a commitment to lend to be in writing to be enforceable.

a.

For example, loan commitments governed by Georgia law are covered

by Georgia's statue of frauds. See O.C.G.A. 13-5-30(7). See also Neb.
Rev. Stat. 45-1, 112 to 45-1, 113 (1998).

b.

There are exceptions to the writing requirement when a borrower can

prove partial performance, fraud or promissory estoppel.
Fortress Sys., L.L.C. v. Bank of the W., 559 F.3d 848 (8th Cir.
2009) (promissory estoppel finding at trial level based upon
defendant's promise to fund if lawsuit was settled reversed due to
lack of signed writing evidencing the conversation)
Rhode Island Hospital Trust National Bank v. Varadian,
647 N.E.2d 1174 (Mass. 1995) (alleged oral commitment to
make a $43,500,000 construction loan not enforceable under the
doctrine of promissory estoppel because no reliance on the part
of experienced businessmen, such as the borrowers, would be
reasonable absent a written agreement to govern the intricacies
of such a loan)

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Frutico S.A. De C.V. v. Banker's Trust Co., 833 F. Supp. 288

(S.D.N.Y. 1993) (fact that lender made a series of short-term
loans during course of discussions and negotiation of documents
for longer term loan relationship did not constitute "part
performance" of the commitment, as the short-term loans were
independent transactions)
c.
2.

The writing requirement may be satisfied by informal documents, such

as confirming correspondence.

Some states do not require a commitment to lend to be in writing, with the result
that verbal commitments or assurances may be enforced.
Landes Construction Company v. Royal Bank of Canada,
833 F.2d 1365 (9th Cir. 1987) (alleged oral commitment to lend
$10,000,000 for downpayment in purchase of real property held
enforceable under California law)
Coast Land Corporation v. Third National Mortgage
Company, 611 F.2d 969 (4th Cir. 1979) (court enforced oral
commitment to provide financing for construction of
condominiums)

B.

Requirement of Agreement on Basic Terms

1.

To be binding, the commitment must relfect a mutual agreement by the parties on

basic terms.
McClellan v. Banc Midwest, 517 N.E.2d 762 (Ill. App. Ct.
1987) (alleged oral commitment to lend borrowers $760,000
over a 7-year period at 6-1/4% interest per annum not
enforceable as essential terms of the financing not agreed upon,
including repayment terms and frequency of interest payment on
loans)
Austin v. BVA Credit Corp., No. 485-373 (S.D. Ga. July 2,
1986), af d. 818 F.2d 873 (11th Cir.), cert. denied 108 S.Ct. 345
(1987) (alleged oral agreement to lend borrower "not less than
$4,250,000" in connection with proposed purchase of company
not enforceable, even though lender subsequently made a
$4,000,000 loan on different terms than allegedly agreed upon,
because there was no agreement as to interest rate or maturity
date of loans)
Willow Wood Condominium Association, Inc. v. HNC Realty
Company, 531 F.2d 1249 (5th Cir. 1976) (two letters from a
lender regarding terms of a proposed loan, when read together,
failed to cover essentials terms that were left open for future
negotiations, including when interest would be adjusted or paid
and the repayment of principal, and suggested that a future
commitment letter would be issued)

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New York Life Insurance Co. v. K N Energy, Inc., 80 F.3d

405 (10th Cir. 1996) (letter was insufficient to constitute a
commitment as letter did not form a binding and fully integrated
agreement, leaving many terms to be resolved by further
negotiations and actions, including interest rate and maturity date
of loan)
DeMaine v. Bank One, Akron, N.A., 904 F.2d 219 (4th Cir.
1990) (no contract found when parties had not agreed on
"material" terms, including amount of loan, repayment schedule
and date of funding)
Wachovia Bank of Georgia, N.A. v. Mothershed, 437 S.E.2d
852 (Ga. App. 1993) (alleged loan commitment was not
enforceable because it letf open several essential terms,
including the term of the line of credit, the maturity date for the
loans and the rate of interest)
2.

Absence of agreement on certain terms, or notations that certain items are "to be
negotiated", will not necessarily destroy the enforceability of the commitments,
as parties may have duty to negotiate in good faith to resolve open terms.
National Farmer's Organization, Inc. v. The Kinsley Bank,
731 F.2d 1464 (10th Cir. 1984) (court found enforceable
commitment existed even though the parties had not agreed on
the exact amount of the loan, the date of the loan, the rate of
interest or the terms of repayment, as the terms left open could
be adequately determined by standard commercial practice and
by customary practice between the bank and the borrower)

3.

Requirement that documentation be "satisfactory" to the parties will not negate

the existence of a commitment.
Sterling Faucet Co. v. First Municipal Leasing Corp.,
(No. LR-C-80-276) (W.D. Ark. July 30, 1982), affd. 716 F.2d
543 (8th Cir. 1983) (a letter, which the lender claimed was a
mere invitation to negotiate, was held to be a binding
commitment even though it stated that any financing
arrangements were conditioned on documentation being
"satisfactory in substance and form to all parties" because the
lender was obligated to act in good faith in determining whether
the loan documents were satisfactory)

4.

Leaving certain matters to the "discretion" of one party likely will not vest that
party with absolute discretion due to overriding doctrine of "good faith" and "fair
dealing"
Carrico v. Delp, 490 N.E.2d 972, 141 Ill. App. 3d 684 (1986)
(credit agreement with no termination date that provided
advances would be made "at bank's discretion" required bank to
exercise such discretion in good faith)

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But see In re General Plastics Corp., 158 B.R. 258 (Bankr.

S.D. Fla. 1993) (factor's reduction of advance rates pursuant to
absolute discretion contained in factoring agreement did not
constitute a breach of obligation of good faith, as factor was
explicitly authorized to reduce advance rates at any time under
the agreement)
5.

Lender's failure to address key business issues in commitment may leave lender
incapable of insisting upon those terms in final documentation.
999 v. CIT Corporation, 776 F.2d 866 (9th Cir. 1985) (lender
lost $925,000 for breach of a commitment letter contained in a
letter setting forth the terms of "proposed financing" because the
lender insisted upon adding a condition to the loan in the nature
of a $25,000 per month prepayment penalty)

C.

Requirement of Intent to be Bound

1.

The courts will attempt to ascertain whether or not the parties "manifested an
intent to be bound".

2.

An intent to be bound is not manifested where the letter openly contemplates a

more definitive document or expressly states the absence of any intent to
constitute a commitment.
Frutico S.A. De C.V. v. Banker's Trust Co., 833 F. Supp. 288
(S.D.N.Y. 1993) (the parties did not intend to be bound prior to
the execution and delivery of definitive documentation, as
evidenced by fact that drafts of loan documents for loan
arrangement discussed by parties contained as a condition
precedent to the effectiveness of the documents the due
execution by all parties, which never occurred)

3.

An oral contract may be enforceable based upon the conduct of the parties after
the expiration of a letter of intent.
Turner Broadcasting Sys., Inc. v. McDavid, 693 S.E.2d 873
(Ga. Ct. App. 2010) (affirming jury verdict of $281 million for
breach of an oral contract in connection with a sale of two spotrs
teams)

III.

Purposes of Commitment Letters

A.

From the Borrower's Perspective

1.

Lock-in a favorable interest rate

2.

Settle all of basic terms of the deal

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B.

3.

Enable borrower to "shop" lender's deal for more favorable terms from another
lender

4.

Provide comfort to borrower before borrower commits itself to another contract,

such as construction contract or acquisition of a company or specific assets

5.

Provide assurances to borrower that take out financing is available before

borrower terminates an existing line of credit

From the Lender's Perspective

1.

Settle all of basic terms of the deal (in part as a "shield" against later claim that
different terms were agreed to)

2.

Obtain borrower's commitment to accept lender's financing and thereby put an

end to borrower's "shopping the deal" with other financing sources
Teachers' Insurance & Annuity Association of America v.
Butler, 626 F. Supp. 1229 (S.D.N.Y. 1986) (borrower breached
duty of good faith and fair dealing in failing to negotiate and
consummate a takeout loan, by virtue of borrower's conduct
designed to thwart efforts to close the loan on the terms specified
in the commitment letter)

IV.

3.

Obtain fee income from issuance of binding commitment

4.

Accommodate wishes and expectations of potential customer

Potential Lender Liability Concerns

A.

Potential Pitfalls
1.

Lender's failure to include all conditions precedent to obligation of lender to

close

2.

Lender's insistence upon key business terms that were not included in
commitment

3.

Lender's failure through lack of diligence to meet known, critical closing

deadlines for borrower

4.

Lender's omission of requirements due to its lack of familiarity with borrower's

business when commitment letter issued

5.

Lender's liability for consequential damages

Anuhco, Inc. v. Westinghouse Credit Corp., 883 S.W.2d 910 (Mo. App.,
W.D., 1994) (borrower recovered in excess of $70,000,000 in consequential
damages for lender's breach of commitment letter to provide $65,000,000 credit
facility, as damages were reasonably foreseeable at the time that lender issued the
commitment letter)

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B.

Avoiding Liability
1.

Do not provide for later issuance of a commitment if certain conditions are met
But see Clardy Mfg. v. Marine Midland Business Loans,
88 F.3d 347 (5th Cir. 1996) (lender's "letter of intent" to extend
$4,000,000 in financing was a non-binding, preliminary proposal
and did not constitute a commitment despite the fact that the
lender agreed, subject to credit approval, to issue a commitment
letter in the future)

2.

Be aware of duty to process loan application diligently and in good faith

Gilmore v. UTE City Mortgage Co., 660 F. Supp. 437 (D. Col.
1986) (lender has obligation to review loan request in good faith)

3.

Do not "oversell" assurances of credit approval

Frame v. Boatmen's Bank, 782 S.W.2d 117 (Mo. Ct. App.
1989) (court found that a case of negligent misrepresentation
might lie against a bank where, in reliance on a vice president's
assurances, the borrower removed a financing contingency from
a purchase contract, but the vice president did not have authority
to approve the loan as represented)

4.

Always include an expiration date of the commitment

I
I

Penthouse International, Ltd. v. Dominion Federal Savings

and Loan Association, 855 F.2d 963 (2d Cir. 1988)
($137,000,000 judgment against lender for breach of loan
commitment overturned on appeal by reason of borrower's
failure to satisfy conditions precedent before expiration of
commitment)
C.

Express Conditions Precedent to Lender's Obligations

1.

Remember the distinction between conditions precedent and covenants

First Nat'l Bank of DeKalb County v. Nat'l Bank of Georgia,
290 S.E.2d 55 (Ga. 1982) (covenants require substantial
performance while conditions precedent require strict
performance)

2.

Internal credit approval - Generally not a condition in a commitment letter

3.

Accuracy and completeness of borrower's representations

a.

SunGard or "Certain funds" provisions in acquisition financings

b.

The concept of "specified representations" in acquisition financings

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"For purposes hereof, "Specified Representations" means the

representations and warranties set forth in the Term Sheets relating to
corporate power and authority, due authorization, execution and delivery,
in each case as they relate to the entering into and performance of the
definitive documentation for the Closing Date Facilities, the
enforceability of such documentation, Federal Reserve margin
regulations, the Investment Company Act, no conlficts of the definitive
documentation for the Closing Date Facilities and the Senior Secured
Notes with charter documents, status of the Closing Date Facilities as
senior debt, solvency, Patriot Act and creation, perfection and priority
(subject to customary permitted liens) of the liens under the security
documents."
LaPeter 1985 Livin2 Trust v. Canada Life Ins. Co. of Am.,
306 Fed Appx. 401 (9th Cir. 2009) (material misrepresentation
by potential borrower constitutes grounds for termination of
commitment letter)
4.

Execution of loan documentation required by Lender, including loan agreement,

notes and guaranties

5.

Consummation of related transaction

a.
b.
c.

6.

asset acquisition
construction agreement
borrower's issuance of debt securities

Solvency assurances
"The Lenders shall have received certification as to the financial condition and
solvency of [the Company] and its subsidiaries (atfer giving effect to the
Transaction and the incurrence of indebtedness related thereto) from [an
independent firm reasonably acceptable to the Agent and from] the chief
financial officer of the appropriate entities."
Credit Suisse Sec. (USA) LLC and Deutsche Bank Sec., Inc.
v. Huntsman Corp., 269 S.W.3d 722 (Tex. App. 2008)
(solvency certificate as condition precedent)

7.

No material adverse change - Heavily negotiated

a.

Company material adverse change clauses

1. General provision
"There shall not have occurred a material adverse change in the
business, assets, properties, liabilities (actual and contingent),
operations, condition (financial or otherwise) or prospects of the (a)
the Company and its subsidiaries, taken as a whole, or (b) the
Borrower and its subsidiaries, taken as a whole, since
,
201

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Kena Properties, LLC v. Merchants Bank & Trust, 218 Fed.

Appx. 402 (6th cir. 2007) (although undefined, "material adverse
condition" meaning was unambiguous and lawsuit constituted a
material adverse condition)
2.

Merger Agreement - Specific company material adverse effect

clause
"For purposes hereof, "Company Material Adverse Effect" means any
event, circumstance, change, development or effect that, individually
or in the aggregate with all other events, circumstances, changes,
developments or effects, (i) is materially adverse to the business,
results of operations or financial condition of Company and any of its
subsidiaries taken as a whole; provided, however, that none of the
following shall be deemed, either alone or in combination, to
constitute, and none of the following shall be taken into account in
determining whether there has been or will be, a "Company Material
Adverse Effect" for purposes of this clause (i): any event,
circumstance, change, development or effect to the extent arising out
of or resulting from (A) changes in the United States or global
economy or capital, financial, banking, credit or securities markets
generally, (B) any act of war or armed hostilities or the occurrence of
acts of terrorism or sabotage in each case, in the United States, (C) the
announcement of the Merger Agreement or the Transaction (as
defined in the Merger Agreement), (D) changes in applicable law or in
the interpretation thereof, (E) changes in U.S. generally accepted
accounting principles (or in the interpretation thereof) or accounting
principles, practices or policies that are imposed on Company or any
of its subsidiaries, (F) changes in general economic, legal, tax,
regulatory or political conditions in the geographic regions in which
Company and its subsidiaries operate or the market for Company's
products, (G) any failure of Company to meet financial projections or
forecasts (it being understood that the factors giving rise to or
contributing to any such failure that are not otherwise excluded from
the definition of "Company Material Adverse Effect" may be deemed
to constitute, or be taken into account in determining whether there
has been or would be reasonably likely to have been, a Company
Material Adverse Effect); provided, however, that such matters in the
case of clauses (A), (B), (D), (E) and (F) shall be taken into account in
determining whether there has been or will be a "Company Material
Adverse Effect" to the extent, but only to the extent, of any
disproportionate impact on Company and its subsidiaries, taken as a
whole, relative to other participants operating in the same industries
and the geographic markets of Company and its subsidiaries, or (ii)
would have, or be reasonably likely to have, a material adverse effect
on the ability of Company to perform its obligations under the Merger
Agreement or to consummate the Transaction."

b.

Market material adverse change clauses - Not common in syndicated

transactions

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"no material adverse change in or material disruption of conditions in the

market for syndicated bank credit facilities or the financial, banking or
capital markets generally shall have occurred that, in the judgment of
Agent, would impair the syndication of the credit facility"
8.

Lender's successful sale of certain level of participations in, or syndication of,

loans
National Farmer's Organization v. Kinsley Bank, 731 F.2d
1464 (10th Cir. 1984) (a loan commitment can be enforced
against a bank even though the bank has made an agreement to
make a loan above its legal lending limits)
Frame v. Boatmen's Bank of Concord Village, 824 S.W.2d
491 (Mo. Ct. App. 1992) (judgment against lender affirmed for
negligent misrepresentation when lender failed to advise
borrower that participation and approval of affiliated bank was
needed before transaction could be closed)

9.

No Competing Financings
"You hereby agree that, effective upon your acceptance of this Commitment
,,yousanosocy
Letter and continuing through
bank, financial institution, person or entity to provide, structure, arrange or
syndicate any senior credit facility or other senior financing similar to or in lieu
of the Credit Facility."

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Annex I
Checklist of Provisions for Commitment Letters
Identification of all parties
a.
b.
c.
d.
e.
f.
g.
2.

Description of credit facility

a.
b.
c.
d.
e.

3.

Overall line
Borrowing Base, if applicable
Advance rates
(i)
Eligibility criteria
(ii)
(iii)
Availability reserves

Term of facility
a.
b.
c.
d.

6.

Refinance/working capital
Acquisition
Construction

Amount of commitment
a.
b.

5.

Revolving credit facility (discretionary or committed)

Term loan
Letter of credit facility (standby or documentary)
Swingline facility - syndicated transactions
Use of accordions or incremental facilities

Purpose of credit facility and use of proceeds

a.
b.
c.

4.

Lender
Borrower
Guarantor
Participants
Co-lenders
Subordinated parties
Agents

Duration of facility and renewal options

Right of either party to terminate - Borrower at any time upon specified
number of days' notice and lender at any time if an event of default exists
Termination charges payable by borrower
Co-terminus with other facilities

Repayment terms
a.
b.
c.
d.

Demand
Stated maturity
Mandatory prepayments
Prepayment fees

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7.

Interest
a.
b.
c.
d.

8.

Fees and other compensation

a.
b.
c.
d.
e.

9.

Closing fee
Unused line fee
Origination fee
Letter of credit fees
Arrangement fees and agency fees

Description of collateral and priority of liens

a.
b.

10.

Specification of reference rate (e.g., prime, LIBOR, LIBOR index rate)

Calculation (360-day or 365/366-day year)
Default rate
Clearance days

Description of collateral (e.g., personal property, real property, business

interruption insurance)
Intended priority of lien of lender - "first (and only)"

Summary of basic covenants

a.
b.
c.

Affirmative covenants
Negative covenants (e.g., restrictions on dividends, capital expenditures,
indebtedness, liens, affiliate transactions, prepayments of other debt)
Financial covenants - Springing versus at all times

11.

Conditions to lender's commitment (See Section IV above)

12.

Brokers' fees and indemnification of lender

13.

Lender's authority to syndicate or sell participations

14.

Expiration of commitment and closing deadline

15.

Fees for commitment - Earned and payable upon issuance of commitment

16.

Expense reimbursement

17.

Non-assignability of commitment

18.

Confidentiality of commitment

19.

Effective date of commitment (upon acceptance and payment of fee)

20.

Mutuality of commitment, i.e., borrower's obligation to borrow

21.

No amendments to commitment effective unless in writing

22.

Merger clause (commitment letter constitutes entire agreement of parties)

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23.

Equity contribution

24.

Minimum closing availability

25.

No defaults

26.

Delivery of duly executed third party documents, e.g., landlord waivers,

mortgagee waivers, debt subordinations, lien subordinations

27.

Delivery of opinions of counsel

28.

Real estate requirements fulfilled

a.
b.
c.
d.
e.
f.
g.

29.

Survey
Title insurance
Flood insurance
Liability insurance
Zoning letters
Appraisals
Environmental audits

Completion of specified items of due diligence

a.
b.
c.

Field examination
Appraisal of assets
PATRIOT ACT/know your customer diligence

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Annex II
Summary of Select Cases
Turner Broadcasting Sys., Inc. v. McDavid, 693 S.E.2d 873 (Ga. Ct. App. 2010) -- Appellant
owned two professional sports franchises, as well as the operating rights to a sports arena. Concerned
with mounting losses, appellant explored selling the Assets to appellee. Appellant and appellee entered
into a letter of intent, which provided for a 45-day exclusive negotiating period. The letter of intent
expired, but the parties continued to negotiate, with most major issues being resolved. When presented
with the proposed deal, the board of directors of appellant became concerned about the low selling price
(although the transaction was approved) and appellant subsequently entered into talks with a third party.
The assets were eventually sold to the third party on substantially similar terms as those discussed by
appellant and appellee. Appellee sued and won at the trial level, claiming that appellant had breached an
oral contract. Appellant appealed. The appeals court noted that the contract was outside the Statute of
Frauds and could be enforceable as an oral contract. The appeals court subsequently affirmed that the jury
could find that the parties intended to be bound through their conduct, including the letter of intent, oral
communications, lack of survival of the written agreement clause in the letter of intent and league
approvals were a condition subsequent. In addition, the court ruled that it was permissible to find that
there was an agreement on all material terms. The appeals court affirmed the trial court's actions and the
$281 million verdict.
Credit Suisse Sec. (USA) LLC and Deutsche Bank Sec., Inc. v. Huntsman Corp., 269 S.W.3d
722 (Tex. App. 2008) -- Credit Suisse and Deutsche Bank were two members of a syndicate of banks
which had signed a binding commitment letter to finance the merger of a specialty chemical company,
Hexion, with Huntsman. The commitment letter provided that the syndicate would fund the merger on
the occurrence of several conditions, one of which was a signed solvency certificate. Hexion's had
attempted to delay the merger (past the expiration date in the commitment letter) by suing in Delaware
court, claiming that a material adverse condition had occurred that negated Hexion's obligation to close.
The Delaware court found that Hexion had intentionally breached its obligations under the merger
agreement and no material adverse condition existed. Huntsman then filed for an anti-suit injunction
against the syndicate in Texas, claiming the syndicate was tortuously interfering with the merger
agreement by preparing to file suit in New York (the merger agreement was close to expiring). The suit
would seek a declaratory injunction that the merged companies would be unable to issue a solvency
certificate showing that they were actually solvent, negating the syndicate's obligation to fund. The trial
court granted a temporary injunction preventing the filing of the New York action, which the syndicate
appealed. The appeals court ruled that the status quo was maintained by the injunction, that it was
impossible to tell in advance of the merger occurring whether the merged companies could issue the
appropriate solvency certificate and that at least some evidence existed that the syndicate, Hexion and
Hexion's affiliates had conspired to breach the terms of the commitment letter by delaying the closing in
an attempt to prevent the merger from being consummated. The preliminary injunction was affirmed.
Ladco Properties XVII v. Jefferson-Pilot Life Ins. Co., 531 F.3d 718 (8th Cir. 2008) -- Ladco
breached the terms of a commitment letter with Jefferson-Pilot, leading Jefferson-Pilot to retain a
liquidated damages deposit. Ladco sued for return of the deposit, arguing that the liquidated damages
provision was unenforceable. The parties had negotiated the commitment letter, including the provision
stating that 3% of the total loan amount was sufficient to represent Jefferson-Pilot's liquidated damages.
Ladco claimed that this amount was excessive, that any language in the commitment letter stating it was
reasonable was boilerplate and that Jefferson-Pilot had to make a good faith estimation of its actual
damages. Jefferson-Pilot moved for summary judgment. The court found that the 3% amount was within
the industry standard of 2-4% and that both parties were sophisticated businesses negotiating at arms-

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length and granted Jefferson-Pilot's motion for summary judgment. The appeals court afifrmed the trial
court's grant of summary judgment.
Kena Properties, LLC v. Merchants Bank & Trust, 218 Fed. Appx. 402 (6th Cir. 2007) -Kena, some of its affiliates and Merchants entered into two commitment letters providing for the
refinancing of investment properties owned by Kena. The letters were conditioned on no material adverse
events occurring between execution of the letters and the closing of the loans. During that interval, a suit
was filed against Kena and other parties, claiming that they were "lfippers" and engaged in complex
mortgage fraud scheme to defraud purchasers and lenders. Merchants informed Kena that it was
terminating its commitments due to the filing of the lawsuit. Kena filed suit, claiming that the lawsuit
was not a material adverse condition justifying Merchants terminating its commitments and also claiming
promissory estoppel. Merchants moved for summary judgment. The court found that, although "material
adverse condition" was not a defined term in the commitment letters, its meaning is unambiguous and the
lawsuit constituted a material adverse condition. The promissory estoppel claim was dismissed also, with
the court finding that any actions taken by Kena atfer the filing of the lawsuit amounted to unreasonable
reliance. The appeals court affirmed the trial court's grant of summary judgment.
1 800 Plan, LLC v. Eastern Say. Bank. F.S.B., 2008 U.S. Dist. LEXIS 20779 (E.D.N.Y. 2008)
- - The plaintiff and defendant entered into a purported commitment letter, under which defendant would
make five total loans to plaintiff for the acquisition and development of various real estate properties in
New York City. Atfer three of the loans had closed, defendant refused to close the final two loans, citing
plaintiffs lack of funds. Plaintiff sued, claiming breach of the purported commitment letter, and
defendant moved for summary judgment. The court noted that the alleged commitment letter stated that it
"does not constitute a commitment to fund" and instead was an application for loans that required
defendant to do additional due diligence in good faith. As there was no binding commitment to lend,
summary judgment was granted for the defendant.
Boise Tower Associates, LLC v. Washington Capital Joint Master Trust, 2007 U.S. Dist.
LEXIS 24963 (D. Idaho) -- Plaintiff and defendant entered into a commitment letter providing for
defendant's financing of plaintiffs real estate development. The commitment letter provided for various
conditions precedent before the loan would be officially closed. Plaintiff and defendant extended the
deadline to close several times, but defendant ultimately refused to fund the loan, citing plaintiff s failure
to meet four of the conditions precedent. Plaintiff sued, claiming breach of contract. The court looked to
the terms of the commitment letter, which stated that the defendant would be the sole judge to determine
if the various conditions precedent were fulfilled. The court also independently evaluated the conditions
precedent and determined that there was no factual dispute that the plaintiff had failed to satisfy at least
three of the conditions precedent. Summary judgment was granted for the defendant.
Fortress Sys., L.L.C. v. Bank of the W., 559 F.3d 848 (8th Cir. 2009) -- Plaintiff, a creatine
manufacturer, sought financing for a manufacturing facility from defendant. Plaintiff was also being sued
by its minority shareholder atfer a forced buyout of that shareholder's interest. The commitment letter
contained language noting that the letter was only a commitment and that formal loan documentation and
other conditions must be met in order for the loan to close and fund. The defendant was not informed of
the shareholder lawsuit until atfer the signing of the commitment letter and eventually refused to fund the
loan because of the existence of the lawsuit. The plaintiff sued, claiming breach of contract and
promissory estoppel. Both sides moved for summary judgment. The trial court found that there was no
breach of contract because of the nonbinding language in the commitment letter, but did find that there
was promissory estoppel based on a conversation where the defendant had allegedly promised to fund the
loan if the lawsuit was settled on favorable terms. The appeals court affirmed the dismissal of the
contract claim, again on the basis of the nonbinding language, but reversed the promissory estoppel claim
because of the lack of a signed writing memorializing the alleged conversation.
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LaPeter 1985 Living Trust v. Canada Life Ins. Co. of Am., 306 Fed. Appx. 401 (9th Cir.
2009) -- The plaintiff owned a mall in Idaho and applied for a loan to refinance its debt from the
defendant. The parties entered into a commitment letter providing for the requested refinancing. During
the negotiation of the commitment letter, the plaintiff represented that a major tenant would not renew its
lease, significantly lowering the expected amount of rental income. In fact, that tenant decided to extend
its lease, which significantly raised plaintiff s expected rental income and was not reported to the
defendant until significantly later in the loan process, when the defendant terminated its commitment
based on the failure to disclose the lease extension. The trial court ruled that the failure to disclose the
lease extension allowed the defendant to terminate the commitment letter because the plaintiff made a
material misrepresentation which was central to the defendant's decision to enter into the letter. The
appeals court affirmed, noting that material misrepresentations are always grounds for a voidable
contract.
Fairbrook Leasing, Inc. v. Mesaba Aviation, Inc., 519 F.3d 421 (8th Cir. 2008) -- Plaintiff and
defendant entered into a term sheet, along with another party, for the purchase of new airplanes and the
long-term lease of other airplanes. Until the final agreement was signed, the two parties to the immediate
lawsuit operated under short-term leases, expecting the final lease to be signed. However, the
manufacturer of the planes (and the third party to the term sheet) stopped making planes and the final loan
agreement and long-term lease was never signed. In a previous action, plaintiff had sued and won for
enforcement of the long-term lease pursuant to the terms of the term sheet. The immediate action was for
the expected profits from the addition of four one-year extensions to the lease of the planes, which the
term sheet contemplated negotiating. The defendant moved for summary judgment. The court ruled that,
because the term sheet was merely an agreement to agree as it related to the lease extensions and letf a
number of significant terms open, expected profits could not be calculated and that type of damages
would not be available to the plaintiff. The appeals court affirmed the grant of summary judgment.
Mountain W. Bank. N.A. v. W. Skys, Ltd, Co., 2007 Mont. Dist. LEXIS 436 (2007) -- Plaintiff
and defendant entered into a commitment letter providing for construction financing and subsequent
working capital for a real estate project of defendant. Due to subsequent cost overruns, the eventual loan
agreement and notes signed by plaintiff and defendant were of a higher total amount than originally
contemplated in the commitment letter and allocated comparatively little money to working capital. The
project failed and plaintiff foreclosed and sued defendant for payment of the remaining balance on the
notes. Defendant claimed that plaintiff breached the terms of the commitment letter by changing the
structure of the financing. The court granted summary judgment, finding that the terms of the
commitment letter were overridden by the subsequent loan agreement and notes and that defendant was
fully aware of the changes in the loan structure between those contemplated by the commitment letter and
those in the loan agreement and notes.
Pressman v. Franklin National Bank, 384 F.3d 182 (6th Cir. 2004) -- The bank issued a
commitment letter to the plaintiff. One of the conditions to the bank's obligations under the commitment
letter was its identification of a participating lender to fund at least $2,000,000 of the loan. If the bank
was unable to locate a participating lender, it would have no obligation to make the loan to the plaintiff.
The plaintiff argued that the bank waived the condition. Under Tennessee law, the court stated, a party
may waive known rights under a contract by either express declarations or by acts manifesting an intent
not to claim those rights. Here, the purported waiver consisted of the bank president's statement that a
participating lender was ready to close on the loan. That statement, however, predated the bank's
execution of the commitment letter. At the time of the alleged representation, the bank had no rights
under the participating bank condition that it could have waived. In addition, the commitment letter
contained a merger clause, which stated that the letter represented the entire agreement regarding the
bank's commitment to lend money and also required that all waivers be in writing and signed by both
parties. As to the additional argument of the plaintiff that the bank breached its obligation of good faith
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when it submitted loan participation proposals to only two other institutions, the court found that the
bank's small size, and the short time remaining before the loan closing date, rendered the bank's
solicitation of only two lenders a good faith effort by the bank.
Penthouse International, Ltd. v. Dominion Federal Savings and Loan Association, 855 F.2d
963 (2d Cir. 1988) -- This case was tried before the district court, without a jury, and resulted in a
judgment against the defendant savings and loan association in excess of $137,000,000 on a theory of
anticipatory breach of a loan commitment. The plaintiff had sought financing for the construction of a
casino and hotel in Atlantic City, New Jersey. The lead lender arranged for several participants in the
loan transaction, including the defendant, Dominion Federal Savings and Loan Association, which
committed to purchase a $35,000,000 participation. However, because Dominion's legal lending limit
was only $18,500,000, Dominion was required to sell off a significant portion of its participation through
subparticipations to other lenders. Shortly before a scheduled pre-closing of the loan transaction, the
subparticipant obtained by Dominion decided to withdraw from the transaction because it determined that
it was opposed to casino loans for moral reasons. As a result, representatives of Dominion determined to
find a way to back out of their commitment to participate. Dominion hired a law firm to try to delay the
closing beyond the commitment period so that Dominion would have an apparently legitimate basis for
terminating its commitment. The attorney retained by Dominion attended the pre-closing, objected to the
proposed documentation for the loan, insisted that certain conditions precedent to closing which had
previously been waived by the lead lender be reinstated and also insisted that Dominion's legal counsel
redraft all of the loan documents in a manner satisfactory to Dominion. Finally, Dominion's counsel
insisted that he be paid (in addition to his legal fees for handling the transaction) a $150,000 bonus.
Penthouse acceded to all of these demands. Thereafter, Dominion's counsel continued to send numerous
demands for documents and the satisfaction of certain loan requirements, but never generated any loan
documents. When Penthouse finally realized that Dominion was intentionally destroying the deal and
would refuse to close, it sought a replacement for Dominion. After numerous unsuccessful attempts to
locate a replacement for Dominion, Penthouse began seeking a buyer for the property. Those efforts also
failed. The district court ruled that Dominion was liable for anticipatory breach of its participation
commitment and held it and its law firm jointly liable for all out-of-pocket expenses incurred by
Penthouse in the amount of $1,221,000, various accruals for real estate taxes, salaries, consultants,
insurance and other items necessary to preserve and carry the property during the time expended in efforts
to find substitute financing in the aggregate amount of $16,600,000 and loss of anticipated profits in
running the casino over a ten-year period totaling $112,000,000. Moreover, the district court awarded the
lead lender lost interest income from the loan in the amount of $7,652,000. On appeal, the Second Circuit
reversed. It found that no anticipatory breach of contract had occurred. The court reached this conclusion
by finding that all but one of the factors relied upon by the district court, in ruling that an anticipatory
breach had occurred, took place after expiration of the loan commitment. The court ruled that Penthouse
could not recover damages because it was not ready, willing and able to comply with all of the conditions
to lending contained in the commitment.
Clardy Mfg. v. Marine Midland Business Loans, 88 F.3d 347 (5th Cir. 1996) -- The plaintiff
requested a $4,000,000 credit facility from the lender. After discussions between the parties, the lender
issued what it referred to as a proposal letter. The proposal letter summarized the terms of a proposed
credit facility to be provided by the lender to the creditor, subject to the completion of due diligence and
internal credit approval. The proposal letter stated that it was a non-binding proposal only and did not
constitute a commitment to lend. The proposal letter contained a statement to the effect that, prior to the
issuance of any commitment to lend, the lender would perform a field examination of the borrower and
undertake certain due diligence items. The issuance of a commitment letter was subject to, "among other
things," completion of the enumerated items to lender's satisfaction. The plaintiff contended that the
proposal letter constituted a "satisfaction contract" under Texas law pursuant to which the lender was
obligated to issue a commitment upon the satisfaction of the conditions contained in the proposal. The
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trial court ruled in favor of the plaintiff and awarded in excess of $8,000,000 in damages. On appeal, the
Fitfh Circuit Court of Appeals reversed and held that the contract under its plain meaning was not a
satisfaction contract under Texas law. Accordingly, the Fifth Circuit ruled that damages could not be
recovered. The court first determined that the contract was not ambiguous and therefore its interpretation
was a question of law to be reviewed de novo on appeal. In construing an unambiguous contract, the
court's purpose is to ascertain the "objective intent" of the parties, rather than their subjective intent. In
doing so, the court should consider the entire writing and attempt to give effect to all of the provisions of
the contract so that none will be rendered meaningless. Upon these rules of construction, the court found
that the only reasonable reading of the contract was that it did not constitute a commitment nor did it
constitute an agreement to issue a commitment. The language in the proposal letter was couched in
conditional language and did not purport to include all of the conditions that might apply to the extension
of credit to the plaintiff. The court pointed to the provisions in the proposal letter for the retention or
refund of the $25,000 audit deposit paid by the plaintiff as indicative of the reservation by the lender of
the power to decline to close the credit facilities by refunding the deposit. The language in the letter was
reasonably susceptible to only one meaning the court concluded. The court declined to apply the rule of
construction that the contract should be construed most strictly against the drafter, because such rule of
construction had no applicability when the contract is unambiguous. The court also rejected the plaintiffs
claims of negligence, fraud and promissory estoppel primarily for the reason that the plaintiff could not
justifiably have relied upon certain verbal representations alleged to have been made by agents and
representatives of lender regarding the likelihood of the credit facilities being approved. No reasonable
person in the circumstances of the plaintiff would have relied upon verbal assurances, the court indicated,
and representations as to the future outcome of the lender's credit analysis were not misrepresentations of
existing facts but merely predictions about the future.
Trade & Indus. Corp. (USA), Inc. v. Euro Brokers Inv. Corp., 222 A.D.2d 364 (N.Y. App.
Div. 1995) -- This case involved a proposed leveraged buyout of Euro Brokers Investment Corporation by
the plaintiff, Trade & Industry Corporation (USA), Inc. When the leveraged buyout was not
consummated, the plaintiff sued Euro Brokers and GE Capital Corporate Finance Group and its parent
General Electric Capital Corporation (collectively, "GE"). GE had provided a letter of intent to plaintiff
regarding the proposed financing of the transaction and had also entered into a confidentiality agreement
with the plaintiff. Euro Brokers had entered into a preliminary standstill agreement with the plaintiff
whereby Euro Brokers agreed not to enter into negotiations with anyone other than the plaintiff with
respect to the proposed sale of Euro Broker's business. The plaintiff alleged that Euro Brokers and GE
had breached the confidentiality and standstill agreements by holding discussions with each other
regarding changes to the proposed ownership of the corporation to be acquired. Alternatively, the plaintiff
alleged that Euro Brokers and GE had breached their implied obligation of good faith and fair dealing by
failing to consummate the proposed transaction pursuant to the letter of intent. The letter of intent stated
that it was not intended to be a binding agreement. The court dismissed the complaint and found that "the
assetred, obligation to conclude the leveraged buyout upon the terms tentatively proposed is inconsistent
with the express reservation of the right, by both GE and the Euro defendants, to decline to consummate
the transaction." The court further stated that "The result urged by plaintiff would elevate mere
negotiation to the status of contractual obligations, despite obvious indications that the parties did not
intend to be bound and failed to achieve a meeting of the minds."
Teachers Insurance and Annuity Association of America v. Tribune Company, 670 F. Supp.
491 (S.D.N.Y. 1987) -- Teachers issued a commitment letter to Tribune obligating itself to make a $76
million, 14-year loan at 15.25% interest. The commitment was issued as part of an arrangement for the
sale of a building in New York. Pursuant to the arrangement, Tribune would be entitled to repay the loan
to Teachers by putting to Teachers the mortgage installment note which it was to receive as part of its sale
of the building. Tribune intended that the arrangement would permit it to utilize offset accounting and
thus avoid listing the loan as a liability on its balance sheet. Teachers' commitment was evidenced by a
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letter which included a two-page summary of the proposed terms. The letter stated that it was contingent
upon the execution and delivery of documents satisfactory to Teachers and its counsel and that the
transaction would contain the "usual and customary" representations and warranties, closing conditions,
covenants and events of default as Teachers and its counsel deemed necessary. The commitment letter
further stated that, upon acceptance by Tribune, "our agreement to purchase from you and your agreement
to issue, sell and deliver to us . . . the captioned securities, shall become a binding agreement between us."
Tribune accepted the commitment letter and returned it with a letter stating that its acceptance was subject
to (i) the approval of Tribune's board of directors and (ii) the preparation and execution of legal
documents satisfactory to Tribune. Neither the commitment letter nor Tribune's acceptance letter made
mention of Tribune's desire for offset accounting. Tribune's board later adopted resolutions authorizing
the company to enter a loan agreement with the usual terms and conditions but subject to the prior
approval of the board's finance committee. Meetings and discussions began concerning the terms of the
loan and, in particular, Tribune's insistence that the loan be contingent upon the availability of offset
accounting. This condition was not acceptable to Teachers. During this time, interest rates dropped
rapidly. When Tribune showed no further interest in pursuing the transaction, Teachers brought an action
for breach of contract. The trial court entered judgment in favor of Teachers based on the ifnding that the
commitment letter represented a binding commitment that obligated both sides to seek to conclude a final
loan agreement by negotiating in good faith. The court held that the exchange of letters between the
parties expressed their mutual intention to enter into a binding agreement. The court also noted that
contracts of preliminary commitment characteristically contain language reserving rights of approval and
establishing conditions such as the preparation and execution of satisfactory documents. The court
further observed that Tribune wanted to have a firm commitment from a lender to finance the transaction
and was even warned by its own lawyers that the form of the agreement would commit it to a binding
obligation and to negotiate in good faith to close the loan. Although there were many terms letf to be
negotiated, the court noted that the two-page summary included with the commitment letter covered the
important economic terms of the loan. The court was not persuaded that the agreement was rendered
unenforceable because of the relatively conventional minor clauses that still had to be negotiated. While
observing that an $80 million loan would not generally be concluded by means of a four-page letter, the
court referred to expert testimony showing that it is within the recognized practices of financial
institutions to accept preliminary commitments as binding agreements to negotiate in good faith. As to
board approval by Tribune, the court found that such approval had been granted with the actual terms and
conditions letf to approval by the finance committee. In any event, the court concluded, the board
approval condition did not permit Tribune to defeat its obligations under the commitment letter merely by
having its board not act. The court held that Tribune's attempt to condition the loan upon its ability to
maintain offset accounting was improper because the signed agreement did not provide for any such
condition. Finally, the court held that Tribune was not excused by the condition in the commitment letter
requiring the preparation, execution and delivery of final contract documents because Tribune wrongfully
terminated the negotiations and there was no evidence that the numerous open issues would not have been
resolved had Tribune negotiated in good faith.
999 v. C.I.T. Corporation, 776 F.2d 866 (9th Cir. 1985) -- 999, a holding corporation, sought
financing to continue its own credit needs and to complete the acquisition of Bee Cee, a manufacturer of
doors and windows, atfer its principal lender refused. 999 negotiated with CIT for $6,000,000 in
financing. CIT obtained from 999 a deposit of $25,000, pursuant to a letter upon which was handwritten
the terms "proposed financing." Later, CIT informed 999 that it had added the condition of a
$25,000/month prepayment penalty. 999 refused to comply with this new condition, unsuccessfully
sought alternative financing and ultimately brought this suit. The jury entered a verdict against CIT for
the breach of a financing commitment based upon evidence that CIT attempted to add a condition to the
loan in the nature of $25,000 per month prepayment penalty. The verdict was based upon breach of
contract, negligent misrepresentation and the finding that the lender breached the implied covenant of
good faith and fair dealing. The Ninth Circuit affirmed, holding that 999 was not required to mitigate its
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damages by accepting the loan with the prepayment penalty clause and later seek damages from the
lender. The Appeals Court also held that the damages suffered by 999 (loss of a business opportunity)
were foreseeable to CIT at the time that the financing commitment was made. Finally, the court held that
the trial court properly admitted into evidence financial information concerning CIT's net worth on the
plaintiff s tort claim that CIT fraudulently misrepresented to the plaintiff that no prepayment penalty
would be required as a condition to the financing. The jury awarded damages of $1,972,378, but 999
accepted a remittitur reducing the judgment to $925,000.

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Annex III
Form of Commitment Letter
Note: THE FOLLOWING DOCUMENT IS OFFERED FOR ILLUSTRATIVE PURPOSES
ONLY, IS NOT INTENDED FOR GENERAL USE AS A FORM AND SHOULD NOT BE
USED WITHOUT THE ADVICE OF LEGAL COUNSEL.
COMMITMENT LETTER
, 20
[Name and Address of Borrowers]

Ladies and Gentlemen:

("ABC") is pleased to offer to
and
("Borrowers") its commitment to provide a $
senior secured revolving credit facility (the
"Credit Facility") to the Borrowers on the terms and conditions set forth herein and in the Summary of
Terms and Conditions attached hereto (the "Term Sheet"). The Credit Facility is to be used to provide for
Borrowers' ongoing working capital needs, permitted capital expenditures and general corporate
purposes, including fees and expenses related to the Credit Facility. Capitalized terms used but not
defined herein shall have the meanings set forth in the Term Sheet.
("Arranger") will act as sole and exclusive arranger for the Credit Facility.
Arranger will form a syndicate of financial institutions ("Lenders") for the Credit Facility that is
acceptable to ABC, ABC, as collateral and administrative agent ("Agent") and Arranger. Borrowers
acknowledge and agree that ABC and Arranger will manage and control all aspects of the syndication,
including decisions as to the selection of proposed Lenders, the appointment of other agents or co-agents,
the awarding of any titles to proposed Lenders, the timing of acceptance of commitments from Lenders
and final allocations of commitments among Lenders.
ABC and Arranger will commence syndication efforts promptly atfer acceptance by Borrowers of
this commitment. In connection with the formation of such a syndicate of Lenders, ABC and Arranger
will periodically consult with and advise Borrowers as to the progress of the syndication process.
Borrowers agree actively to assist ABC and Arranger in achieving a syndication of the Credit Facility that
is satisfactory to ABC and Arranger. Such assistance shall include Borrowers (a) providing, and causing
their respective advisors to provide, to ABC and Arranger, upon request, all information deemed
necessary by ABC and Arranger to complete the proposed syndication; (b) providing assistance in the
preparation of an Offering Memorandum to be used in connection with the syndication; and (c) otherwise
assisting ABC and Arranger in syndication efforts, including making senior management and advisors of
Borrowers and their subsidiaries available from time to time to attend and make presentations regarding
the business, financial condition, business plan, forecasts and prospects of Borrowers and their
subsidiaries, as appropriate, at one or more meetings of prospective Lenders. ABC and Arranger shall be
entitled, after consultation with Borrowers (which consultation with Borrowers shall not imply any
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required consent), to change the structure, terms, pricing or amount of any portion of the Credit Facility if
either ABC or Arranger determines, in its discretion, that such changes are necessary or advisable to
ensure a successful syndication or an optimal credit structure for the Credit Facility.
Each Borrower represents and warrants to ABC and Arranger, and covenants with ABC and
Arranger, that (a) all information, other than Projections (defined below), which has been or is hereatfer
made available to ABC, Arranger or Lenders by Borrowers or any of their representatives in connection
with the transactions contemplated hereby (the "Information") is and will be complete and correct in all
material respects and does not and will not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements contained therein not misleading, and (b) all financial
projections concerning Borrowers and their subsidiaries that have been or are hereatfer made available to
ABC, Arranger or Lenders by Borrowers or any of their representatives (the "Projections") have been or
will be prepared in good faith based upon assumptions that Borrowers believed or believe to be
reasonable at the time such Projections were or are prepared. Borrowers agree to furnish ABC and
Arranger with such information as ABC and Arranger may request and to supplement the Information and
the Projections from time to time until the Closing Date so that the representation, warranty and covenant
in the preceding sentence is correct on the Closing Date. Borrowers understand that ABC and Arranger
will be using and relying upon the Information and the Projections without independent verification
thereof.
The terms and conditions of the Credit Facility will be further developed and expanded during
ABC's and Arranger's due diligence and the preparation and negotiation of a definitive loan and security
agreement, guaranties, promissory notes and other documents (collectivelythe "Loan Documents"). The
Loan Documents will include, in addition to the provisions summarized in this letter and the Term Sheet,
provisions that, in the opinion of Agent, are customary or typical for this type of financing transaction and
other provisions that Agent may determine to be appropriate in the context of the proposed transaction.
The transactions contemplated by this letter and the Term Sheet are expressly contingent upon
and subject to, among other things, (i) the satisfactory completion of ABC's legal due diligence, (ii) the
negotiation, execution and delivery of Loan Documents that are satisfactory to Agent, (iii) all information
concerning the financial condition and business prospects of Borrowers, each Borrower's subsidiaries and
other affiliates, and the existence, quantity and value of the Collateral that has been or will be made
available to ABC or Arranger by Borrowers or any of Borrowers' representatives in connection with the
transactions contemplated hereby being complete and correct in all material respects and not containing
any untrue statement of a material fact or omitting to state a material fact necessary in order to make the
statements contained therein not misleading, and (iv) the satisfaction of the conditions precedent
contained in the Term Sheet.
Each Borrower agrees to indemnify, defend and hold each of ABC and Arranger, and each of
their respective shareholders, directors, agents, officers, subsidiaries and affiliates (each an "Indemnified
Party"), harmless from and against any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action, and reasonable costs and expenses incurred, suffered,
sustained or required to be paid by an Indemnified Party by reason of or resulting from the transactions
contemplated hereby (including reasonable fees and expenses of legal counsel), except to the extent
directly resulting from the gross negligence or willful misconduct of such Indemnified Party. In all such
litigation, or the preparation therefor, the Indemnified Party shall be entitled to select its own counsel.
This letter and the Term Sheet are confidential and, without the prior written consent of ABC and
Arranger, may not be disclosed to any person or entity other than (i) by a Borrower to its employees,
officers and directors and Borrowers' advisors in connection with this transaction, provided that in each
case such persons also agree to abide by the conifdentiality provisions hereof and (ii) by Borrowers as
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may be required by applicable law (including the rules and regulations of the Securities and Exchange
Commission). Notwithstanding anything herein to the contrary, the parties hereto and any successors and
permitted assigns (and each of their respective employees, representatives or other agents) may disclose
to any and all persons, without limitation of any kind, the tax treatment and tax structure of the
transactions described herein and in the Term Sheet and all materials of any kind (including opinions or
other tax analyses) that are provided to any of the parties hereto, any successors or permitted assigns,
relating to such tax treatment and tax structure.
Neither ABC nor Arranger shall be responsible or liable to Borrowers or any other person
or entity for any punitive, exemplary or consequential damages which may be asserted as a result of
an alleged breach of this letter, the Term Sheet or the Loan Documents or arising out of or related
to any of the transactions contemplated hereby or thereby. Each Borrower and ABC each hereby
irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether
based on contract, tort or otherwise) arising out of or relating to this commitment or the
transactions contemplated hereby, or the actions of ABC or Arranger in the negotiation,
performance or enforcement hereof.
Borrowers agree to (i) pay to Agent, for the exclusive beneift of Agent, an underwriting fee (the
"Underwriting Fee") in the amount set forth in the Fee Letter dated the date hereof (the "Fee Letter"), a
portion of which fee (as set forth in the Fee Letter) shall be deemed fully earned on the date Borrowers
execute and deliver this letter and shall be nonrefundable and a portion of which shall be earned on the
Closing Date and (ii) reimburse ABC and Arranger for all reasonable fees, costs and expenses incurred by
or on behalf of ABC and Arranger in connection with the negotiation, preparation, execution and delivery
of this letter, the Term Sheet and any and all definitive Loan Documents relating hereto and thereto,
including, without limitation, the reasonable fees and expenses of counsel to ABC and Arranger.
Upon acceptance of this commitment letter in writing by Borrowers, Borrowers shall deliver to
(the "Expense Deposit"). The Expense Deposit
ABC a good faith deposit in the amount of $
will be applied to ABC's and Arranger's fees, costs and expenses related to legal, financial, field
examination and appraisal expenditures with respect to the proposed Credit Facility and preparation of the
Loan Documents. The Expense Deposit will not be segregated by ABC and may be commingled with
other funds of ABC, and Borrowers will not be entitled to receive any interest thereon. To the extent not
used, the Expense Deposit will, at Borrowers' election, be credited toward amounts due from Borrowers
to Agent and Lenders on the Closing Date or refunded to Borrowers on the Closing Date. If the Closing
Date does not occur for any reason whatsoever, any unapplied or unused portion of the Expense Deposit
will be retained by ABC as partial liquidated damages. If the costs, fees and expenses of ABC and
Arranger in connection with the transactions contemplated by this letter and the accompanying Term
Sheet and in the preparation, execution and delivery of definitive Loan Documents contemplated by this
letter exceed the balance of the Expense Deposit on any date, Borrowers will, and will cause the other
Borrowers to, provide ABC with an additional deposit for expenses, which additional deposit will be
deemed part of the initial Expense Deposit and applied as provided herein. The obligations of Borrowers
under this paragraph shall remain effective whether or not definitive Loan Documents are executed and
notwithstanding any termination of this commitment.
This letter may be executed in any number of counterparts which, taken together, shall constitute
one original; is solely for the benefit of Borrowers, ABC and Arranger, and no provision hereof shall be
deemed to confer rights on any other person or entity; and shall be governed by and construed in
accordance with the laws of the State of Georgia without regard to principles of conflicts of law. No
portion of this letter shall be construed against or interpreted to the disadvantage of any party hereto by
any court or other governmental or judicial authority by reason of such party having or being deemed to
have dratfed, structured or dictated such provision. This letter, the Term Sheet and the Fee Letter embody
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the entire agreement and understanding between the parties hereto in respect of the transactions
contemplated hereby and supersede all prior negotiations, understandings, commitments and agreements
between such parties in respect of the transactions described herein and in the Term Sheet. This letter, the
Term Sheet and ABC's commitments hereunder are solely for the benefit of Borrowers, and no other
person or entity shall be deemed to be a third party beneficiary hereof and shall not be assignable by
Borrowers without the prior written consent of ABC (which consent may be given or withheld by ABC in
its sole discretion). No condition or other term of this letter, the Term Sheet or the Fee Letter may be
waived or modified, except by a writing signed by Borrowers. The requirement of a writing to waive or
modify provisions of this letter cannot itself be waived or otherwise negated by any agreement or other
conduct of the parties, express or implied, other than by a writing to that effect signed by all parties.
This commitment will be deemed effective upon (i) ABC's receipt of a counterpart of this letter
, 20_,
signed by a authorized officer of Borrowers on or before the close of business on
(ii) receipt by ABC of the Expense Deposit, in immediately available funds, and (iii) receipt by ABC of
the portion of the Underwriting Fee referenced in the Fee Letter as being due upon the acceptance of this
commitment by Borrowers, in immediately available funds. Atfer this commitment becomes effective,
this commitment may be terminated (together with all obligations of ABC and Arranger hereunder) (i)
, 20 _(the "Expiry Date") by mutual written agreement of ABC and Borrowers
prior to
or (ii) at any time by ABC, if any condition precedent contemplated by this letter, the Term Sheet or the
Loan Documents has not been satisfied on or before the Expiry Date. This commitment shall terminate
automatically on the Expiry Date unless otherwise agreed in writing by ABC and Borrowers.
Notwithstanding the foregoing, the reimbursement and indemnification provisions herein and in the Term
Sheet shall survive any termination of this commitment, except to the extent that this letter is superseded
by the duly executed Loan Documents.

[Remainder ofpage intentionally left blank]

I
1

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ABC is pleased to offer the financing contemplated by this letter, and looks forward to working
together in connection with the offered financing.
Very truly yours,
[ABC]

By:
Title:
[ARRANGER]

By:
Title:
Accepted and Agreed to on

, 20

[BORROWER]

By:
Title:
[BORROWER]

By:
Title:

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EXHIBIT A
[NAMES OF BORROWERS]
SUMMARY OF TERMS AND CONDITIONS
fo r
$

SENIOR SECURED REVOLVING CREDIT FACILITY

, 20

The following is a summary of terms and conditions with respect to the establishment of the Credit
Facility referenced in the letter (the "Commitment Letter') accompanying this Summary of Terms and
Conditions ("Term Sheet') and is not intended to set forth all of the provisions that are customarily
required by ABC in transactions of the type described herein and that may be required in the Loan
Documents (as defined in the Commitment Letter). The definitive rights, duties, obligations and liabilities
of Borrowers and ABC will be more particularly described in the Loan Documents. If there is any
conlfict between the provisions of the Commitment Letter or this Term Sheet and the provisions of the
Loan Documents, the provisions of the Loan Documents will control. *

Borrowers:

[NAMES OF BORROWERS]

Guarantors:

The material direct and indirect domestic subsidiaries of Borrowers that are not
Borrowers (collectively, "Guarantors").
("ABC" or "Agent").

Agent:
Arranger:

("Arranger") will syndicate the Credit Facility to a

syndicate of financial institutions (including ABC, collectively, "Lenders")
acceptable to Agent.

Credit Facility:

in a senior secured revolving credit facility, which Credit

Up to $
sub-limit for standby letters of credit and
Facility will include a $
sub-limit for documentary letters of credit ("Letters of Credit")
a$
to be issued for Borrowers' account by ABC, and a facility for inter-Lender
settlement loans ("Settlement Loans"). All loans made under the Credit Facility
(including Settlement Loans) are hereinatfer referred to as "Loans."

Use of Proceeds:

The Credit Facility is to be used as follows: (a) on the Closing Date, the Credit
Facility will be used to pay fees and expenses associated with the Credit Facility;
and (b) after the Closing Date, the Credit Facility may be used to (i) finance
permitted capital expenditures; (ii) issue letters of credit; and (iii) finance
Borrowers' ongoing working capital needs and general corporate purposes. All
issued Letters of Credit and Settlement Loans outstanding on any date will be
considered usage under the Credit Facility.

Capitalized terms used in this Summary of Terms and Conditions that are not defined herein shall
have the meanings ascribed to such terms in the Commitment Letter.

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Scheduled
Final Maturity:

, 20

Termination Date:

The earlier of (i) the Scheduled Final Maturity and (ii) the date the Credit Facility
terminates on or atfer the occurrence of an Event of Default.

Borrowing Base:

Borrowing availability for Loans and Letters of Credit will be limited, on any
date, to the Borrowing Base then in effect. As used herein, "Availability" means,
on any date, the amount available on such date for the borrowing of Loans, which
amount is the excess (if any) of the Borrowing Base on such date over the
aggregate amount of Loans then outstanding. The "Borrowing Base" on any date
will be an amount equal to the lesser of (a) $
minus the LC
Outstandings (as defined below) on such date or (b) the Formula Amount.
"Formula Amount" on any date means an amount equal to (i) the sum of the
Accounts Formula Amount on such date plus the Inventory Formula Amount on
such date, minus (ii) the Availability Reserve on such date. As used herein, the
following terms will have the meanings indicated:
"Accounts Formula Amount" means an amount up to
% of the net
amount of eligible accounts receivable of Borrowers on any date of
determination thereof.
"Inventory Formula Amount" means an amount equal to the lesser of (a)
$
or (b)
% of the net orderly liquidation value of
eligible inventory, on any date of determination thereof.
"Availability Reserve" means an amount equal to the sum of (a)
$
plus (b) such reserves as Agent customarily establishes
for asset-based loan transactions of this type, including, but not limited
to, a reserve (without duplication) for (i) all reimbursement obligations
due and payable on such date by Borrowers by reason of any payment by
ABC with respect to Letters of Credit (to the extent such reimbursement
obligations have not been satisfied from the proceeds of a Loan), (ii)
100% of the undrawn face amount of all outstanding Letters of Credit
(collectively, the "LC Outstandings"), (iii) a dilution reserve, and (iv) the
Rent Reserve (as defined below) plus (c) such other reserves as Agent
otherwise establishes in the exercise of its reasonable credit judgment.
Eligible accounts will include only accounts that arise from the sale and delivery
of goods or rendition of services by a Borrower in the ordinary course of its
business, are subject to Agent's duly perfected, ifrst priority security interest,
have not aged more than 90 days past the original invoice date and are not 60
days or more past due from a Borrower's standard credit terms. Ineligible
accounts will include, without limitation, accounts that are disputed, in whole or
in part (to the extent of the disputed amount), or are owed by a customer that is
not deemed by Agent in its reasonable credit judgment to be creditworthy;
accounts owing by customers if 50% of the accounts of such customer are
otherwise not eligible; accounts that are subject to offset, recoupment or
counterclaim (to the extent of such offset, recoupment or counterclaim); accounts
owing by any individual account debtor representing in excess of 20% of total

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accounts (to the extent of the excess); accounts owing by foreign account debtors
(unless supported by letters of credit acceptable and collaterally assigned to
Agent); accounts arising from bill-and-hold or consignment sales or sales on a
return basis; and accounts owing by governmental entities (other than accounts
owing by the United States of America or any agency thereof which have been
duly assigned to Agent pursuant to the Assignment of Claims Act of 1940).
Eligible inventory will include only inventory owned by and in the possession of
a Borrower that is subject to Agent's duly perfected, first priority security interest
and no other security interest or lien, and is held for sale by a Borrower in the
ordinary course of such Borrower's business. Excluded from eligible inventory,
without limitation, will be inventory that is held by a Borrower as consignee or
inventory that has been consigned by a Borrower; returned, defective, damaged
or slow moving goods or samples; supplies, labels and packaging materials;
inventory located outside of the United States; inventory in transit; and inventory
held subject to a right or obligation of repurchase on terms that are not acceptable
to Agent, including, without limitation, any terms that expressly permit or
require, or by law allow, a right of offset against Borrowers' payables. If and to
the extent that any inventory is sold pursuant to any license, dealer, or
distributorship agreement that limits or restricts any Borrower's right to dispose
of any inventory after termination thereof, Agent may require, as a condition to
treating such inventory as eligible, the consent of the other party to such
agreement to Agent's sale or other disposition of such inventory, notwithstanding
any termination of such agreement.
Agent will have the right at any time, in its reasonable credit judgment, to
reassess and modify eligibility standards and advance rates. A rent reserve will
be established in an amount equal to three months rent for each leased location at
which inventory is located unless the landlord of such leased location executes an
acceptable landlord lien waiver or subordination and access agreement in favor
of Agent (collectively, the "Rent Reserve").
Atfer the Closing Date, Agent will require inventory appraisals quarterly and real
months, at Borrowers' expense.
property appraisals every
After the Closing Date, Agent may conduct, at Borrowers' expense, such field
examinations of Borrowers and Guarantors with such frequency as Agent deems
appropriate in the exercise of its reasonable credit judgment. Borrowers will pay
) for
Agent for the standard amount charged by Agent per day (currently $
each day that an employee or agent of Agent is engaged in a field exam with
respect to any Borrower, together with all reasonable costs and expenses incurred
by Agent in connection therewith.
Letters of Credit:

During the period that the Credit Facility is in effect, ABC will issue one or more
Letters of Credit on Borrowers' request therefor from time to time, subject to
ABC's customary terms and conditions. Each Letter of Credit shall have an
expiry date that is no longer than one year, in the case of a standby Letter of
Credit, or 180 days, in the case of a documentary Letter of Credit, and that
expires no later than 10 days prior to the Scheduled Final Maturity. Drafts drawn
on Letters of Credit shall be reimbursed not later than the first business day
following the day of drawing. If the Credit Facility is terminated prior to the

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expiration of any Letter of Credit, each such Letter of Credit shall be replaced
and returned to ABC undrawn and marked "canceled" on or prior to the
Termination Date, or to the extent that Borrowers are unable to return any of the
Letters of Credit, such Letters of Credit (and fees and expenses payable in
connection therewith) shall be (a) secured by a support letter of credit in an
amount equal to 105% of the outstanding amount of such Letters of Credit and
reasonably satisfactory to Agent and ABC or (b) cash collateralized in an amount
equal to 105% of the outstanding amount of such Letters of Credit by the deposit
of cash into an account established by Borrowers under the sole and exclusive
control of Agent, such cash to be used to satisfy Borrowers' reimbursement
obligations or to be remitted to Borrowers upon the expiration, cancellation or
other termination of such Letters of Credit or if Borrowers' reimbursement
obligations are otherwise satisfied.
Collateral:

The Loans, LC Outstandings, any interest rate/foreign currency swap or similar

agreements, obligations arising from any bank service or product provided to a
Borrower or Guarantor by ABC or any of its affiliates as referred to in, or
contemplated by, the Loan Documents, and all interest, fees and other charges in
connection with any of the foregoing or otherwise provided for under the Loan
Documents will be secured by (a) duly perfected, first priority security interests
in and liens in favor of Agent upon (i) all or substantially all of the personal
property assets of each Borrower and Guarantor, including, without limitation, all
of each Borrower's and each Guarantor's accounts, inventory, equipment, general
intangibles, documents, instruments, chattel paper, deposit accounts, investment
property, letter of credit rights, and all cash and non-cash proceeds (including,
without limitation, insurance proceeds) of the foregoing items, whether any of
the foregoing items are now owned or hereafter created or acquired, (ii) 100% of
the stock of each Guarantor and other domestic subsidiaries of Borrowers, and
(iii) up to 66% of the stock of any foreign subsidiaries of Borrowers in order to
avoid any material adverse tax consequences to Borrowers and (b) duly
perfected, first priority security interests in and liens in favor of Agent upon (i)
all or substantially all of the real property assets of each Borrower and Guarantor
(all of the foregoing, collectively, the "Collateral"). In addition, Borrowers will
enter into negative pledge agreements with respect to any stock of any foreign
subsidiary not pledged to Agent, pursuant to which Borrowers will agree not to
encumber such stock in favor of any other person or entity.

Interest:

Interest will accrue on the outstanding principal balance of Loans, calculated for
the actual number of days elapsed in a year of 360 days, at a per annum rate
equal to, at Borrowers' option, LIBOR or the Base Rate, plus, in each case, the
Applicable Margin (defined below). "Applicable Margin" shall initially mean
% with respect to Base Rate Loans and
% with respect to LIBOR Rate
Loans, which rates will be subject to reduction or increase based on a pricing grid
to be agreed upon among ABC and Borrowers prior to the Closing Date. The
Applicable Margin will be adjusted quarterly (commencing with Borrowers fiscal
quarter ending on or about
, 20 ), on the business day
following Agent's receipt of Borrowers' quarterly financial statements and
accompanying compliance certificate.
As used herein, the term "Base Rate" will be the rate publicly announced from
time to time by ABC as its prime or base rate of interest, whether or not such rate

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is the lowest or best rate at which ABC lends money. It is understood that ABC
lends money at, above and below its publicly announced prime or base rate.
LIBOR will be defined in accordance with Agent's customary definition therefor
in transactions of this type. LIBOR rates may be selected for interest periods of
11-2-1 3 or 6 months, as available. The minimum amount of each LIBOR
borrowing will be $
or any larger amount in increments of
$
, and in each case shall be made on not less than two business
LIBOR
days' notice. Borrowers will not be permitted to have more than
advances outstanding at one time. No Loan may be converted or continued as a
LIBOR Loan at any time when a default or event of default has occurred and is
continuing.
Upon the continuance of an event of default and at the option of Agent or the
Required Lenders, the Applicable Margin on all obligations owing under the
Credit Facility and Loan Documents shall increase by
% per annum over the
rate otherwise applicable.
Unused Line Fee:

An Unused Line Fee of

% will be payable monthly based on the average
daily unused portion of the Credit Facility.

Letter of Credit Fees:

Fees on the face amount of each Letter of Credit will be payable monthly, in
advance, (i) at a per annum rate equal to the Applicable Margin for LIBOR
Loans with respect to standby letters of credit and (ii) at a per annum rate equal
% with respect to
to the Applicable Margin for LIBOR Loans less
documentary letters of credit. In addition, Borrowers will pay to Agent, at
% per
issuance and on each anniversary date, a fronting fee equal to
annum multiplied by the face amount of each Letter of Credit. Finally,
Borrowers will pay all reasonable fees and expenses associated with
amendments, extensions or other modifications of any Letter of Credit.

Other Fees:

As set forth in the Fee Letter.

Cash Management:

Borrowers will maintain throughout the term of the Credit Facility a cash
management system reasonably acceptable to Agent and ABC. From and atfer
the Closing Date, Agent will at all times have sole control over Borrowers' bank
accounts and proceeds of Borrowers' accounts receivable pursuant to account
control agreements and lockbox or blocked account arrangements satisfactory to
Agent. The lockbox and blocked account arrangements shall be for the express
purpose of collecting all of Borrowers' accounts receivable collections, and
collections from such lockbox or blocked account will be applied against
outstandings under the Credit Facility on a daily basis.

Payments Generally:

All Loans outstanding from time to time under the Credit Facility will be repaid
on the sooner to occur of any Borrower's or Agent's receipt of any proceeds of
Collateral, to the extent of such proceeds, and all Loans will be repaid in full on
the Termination Date. Reimbursement for draws made on Letters of Credit will
be due and payable on the first business day following the date on which such
draw is made. Agent will be authorized to charge Borrowers' loan account with
all principal, interest, fees and other charges at any time due in connection with
the Credit Facility. Borrowers will be jointly and severally liable for the
payment and performance of all liabilities and obligations under the Credit

_
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Facility. All amounts will be repaid in U.S. dollars (and, in connection with any
Letter of Credit, denominated in a currency other than U.S. dollars, the
reimbursement obligations in connection therewith will be the U.S. dollar
equivalent of such currency at the time of payment).
Interest Payments:

Mandatory
Prepayments:

Interest on Base Rate Loans will be due and payable monthly, in arrears, on the
first day of each month for the immediately preceding month, and interest on
LIBOR Loans will be due and payable on the first day of each month (for the
immediately preceding month) and the last day of the applicable interest period.
Subject to certain exceptions to be mutually agreed upon, Borrowers will be
required to make prepayments of the Credit Facility as follows:
(i)

100% of any insurance or condemnation proceeds received by any

Borrower or Guarantor, excluding, in the case of insurance proceeds,
certain exceptions for repair, replacement, and reinvestment to be mutually
agreed upon;

(ii)

100% of the net proceeds received from the issuance of equity or debt by
Borrowers or any Guarantor (provided that the issuance of any such equity
or debt shall require the prior written consent of Agent and Lenders); and

(iii)

100% of the net proceeds received from the sale of or disposition of all or
any part of the assets of Borrowers or any Guarantor.

Mandatory prepayments shall be made without any premium or penalty but, in

the case of LIBOR Loans, shall be accompanied by breakage costs, if any
(provided that, at Borrowers' request, Agent will maintain such LIBOR Loan
prepayments in a cash collateral account until the end of the applicable interest
period in order to avoid breakage costs).
Financial Covenants:

Affirmative, Negative
and Other Covenants:

The Loan Documents will include financial covenants that are customary for
asset-based lending transactions of this type and appropriate in the judgment of
Agent. Such financial covenants will include, without limitation, Minimum
Fixed Charge Coverage, Minimum EBIT to Interest, Minimum EBITDA and
Maximum Capital Expenditures (definitions to be agreed upon) at the levels set
forth on Schedule A attached hereto.
The Loan Documents will include affirmative and negative covenants
customary for asset-based lending transactions of this type, subject to specific
limitations and exceptions to be mutually agreed upon, including, but not
limited to, (i) affirmative covenants requiring compliance with applicable law,
periodic financial reporting (see below) and Collateral reporting, the giving of
certain notices and (ii) negative covenants restricting or prohibiting liens,
distributions, dividends, investments, debt incurrence, mergers and
consolidations, acquisitions, capital expenditures and leases, asset dispositions
or transfers, creation of new subsidiaries, affiliate transactions, negative pledges,
restricted payments (including prohibitions on the ability of Borrowers to
repurchase/redeem existing subordinated notes), distributions and dividends.

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Financial Reporting:

Borrowers will be obligated under the Loan Documents to provide the following
reports:
Annual Financial Statements prepared on a consolidated and consolidating
basis in accordance with GAAP, with comparable information for the year to
date and the immediately preceding fiscal year, all certified (as to the
consolidated financial statements) by a nationally recognized firm of certified
public accountants and accompanied by an unqualified opinion of such firm on
the annual financial statements, and accompanied by covenant compliance
calculations and a representation by the chief financial officer or president of
each Borrower that no Event of Default shall have occurred or be continuing, all
submitted to Agent and Lenders within 90 days atfer the end of each ifscal year
of Borrowers.
Monthly Financial Statements prepared on a consolidated and consolidating
basis, with comparable information for the year to date and the immediately
preceding fiscal year, submitted to Agent and Lenders within 30 days atfer the
end of each of month (but within 60 days atfer the last month in a fiscal year),
accompanied by covenant compliance calculations and a representation by the
primary financial ofifcer of each Borrower that no Event of Default shall have
occurred or be continuing.
Financial Projections prepared on a consolidated basis by Borrowers'
management on an annual basis, submitted to Agent and Lenders within 30 days
prior to the beginning of each fiscal year.
Borrowing Base Reports prepared by Borrowers' management and submitted to
Agent with respect to Borrowers' accounts on a daily basis and inventory on a
weekly basis. Borrowing Base reporting will be on forms provided by Agent to
Borrowers.
Such other financial information as may be reasonably requested by Agent and
Lenders.

Representations and
Warranties:

Those customarily found in credit agreements for asset-based lending

transactions of this type and others appropriate to this transaction in the
reasonable credit judgment of Agent, subject to limitations and exceptions to be
agreed upon.

Events of Default:

The Loan Documents will contain Events of Default that are usual and customary
for asset-based lending transactions of this type, subject to limitations and
exceptions to be agreed upon, including, but not limited to, defaults based upon
non-payment of any principal, interest, fees or other charges when due under
terms of the Loan Documents, misrepresentations, breach of covenants,
insolvency or bankruptcy of any Borrower or Guarantor, non-compliance with
law, entry of certain judgments, change of control and cross defaults with respect
to other debt for borrowed money.

Documentation :

The Credit Facility will be subject to the execution and delivery by Borrowers,
Guarantors, Agent and Lenders of documentation on Agent's customary forms

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for asset-based lending transactions of this type, as may be modified to reflect the
terms in this Term Sheet and other agreed upon terms, which will include a loan
and security agreement, guaranties, promissory notes, pledge agreements,
assignments, UCC financing statements and other related documentation.
Conditions
Precedent:

In addition to the usual and customary conditions for asset-based lending

transactions of this type, the obligation of Agent and Lenders to provide the
Credit Facility is subject to satisfaction of the following conditions at or prior to
the Closing Date on a basis satisfactory to Agent:
Agent's satisfactory completion, in all respects, of its business, financial
and collateral due diligence, including, without limitation, a collateral
examination conducted by Agent and/or a third party, inventory and real
estate appraisals acceptable to Agent;
The execution and delivery of the Loan Documents customarily used by
Agent in asset-based lending transactions of this type, as may be
modified to relfect agreed upon terms, and otherwise satisfactory in form
and substance to Borrowers and Agent and their respective counsel, all of
which shall be in full force and effect on the Closing Date;
The establishment with financial institutions acceptable to Agent of
lockbox or blocked accounts approved and controlled by Agent, to which
all remittances from customers of Borrowers will be collected and
credited to Borrowers' account with Agent;
Agent shall have received, reviewed and found acceptable interim
financial statements for the monthly period ending nearest to
, 20
;
Agent shall have determined that Borrowers have Availability on the
, atfer payment of all fees
Closing Date of not less than $
and expenses associated with the Credit Facility and application of the
proceeds of initial Loans and issuance of initial Letters of Credit;
No material adverse change shall have occurred in the business,
properties, results of operations, financial condition or prospects of any
Borrower, or Borrowers and Guarantors, taken as a whole, since the date
of this Commitment Letter and there shall not have occurred any material
disruption or material adverse change in the United States financial or
capital markets;

Agent's receipt of evidence confirming the existence of insurance

coverage acceptable to Agent and, with respect to property insurance,
naming Agent as primary lender's loss payee and mortgagee; with respect
to liability insurance, naming Agent as an additional insured; and with
respect to business interruption insurance, naming Agent as assignee and
loss payee, in each case with such insurance policies to be issued by
insurers, and subject to deductibles and other limitations, acceptable to
Agent;
There exists no default or event of default under the Loan Documents or
under any material contract or agreement of any Borrower; all

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representations and warranties in the Loan Documents are accurate in all

material respects; and all conditions precedent set forth in the Loan
Documents are satisfied;
There shall exist no order or injunction that affects, or other pending or
threatened litigation that reasonably could be expected to materially
adversely affect, the ability of Borrowers to perform under the Loan
Documents, the value of the Collateral or Agent's rights in respect
thereof or its ability to exercise its rights thereunder or with respect
thereto;
The receipt by all parties to the Credit Facility of all necessary
regulatory, creditor and other third-party consents to the Credit Facility;
Agent's receipt of certifications from Borrowers, including supporting
financial information, evidencing that, after giving effect to the initial
Loans, the issuance of Letters of Credit on the Closing Date, and the
consummation of the other transactions contemplated herein, Borrowers
and Guarantors are and will remain solvent, in the sense that the fair
value of their assets exceeds the sum of their liabilities, they are
generally able to pay their debts as they become due and they are not
engaged in a business or transaction for which their capital is
unreasonably small, each determined on a consolidated basis for
Borrowers and Guarantors;
Agent's receipt of evidence that all of the existing indebtedness for
borrowed money of Borrowers and their subsidiaries is satisfied in full
and all liens relating thereto extinguished (or arrangements therefor
satisfactory to Agent and Lenders shall have been made) on or prior to
the Closing Date, except for certain permitted indebtedness to be
defined;
Agent's receipt of and satisfaction with any environmental matters with
respect to Borrowers' real properties;
Agent's receipt of assurances satisfactory to it that the security interests
of Agent with respect to all of the Collateral constitute valid, binding,
enforceable and first priority security interests in the Collateral, except
for permitted liens on the Collateral (to be agreed upon);
Other conditions precedent specific to the transaction and typical of
asset-based lending facilities of this type, including, without limitation,
favorable legal opinions of counsel to Borrowers and Guarantors
(including local counsel opinions in each state in which a Borrower owns
real property over which a mortgage is being taken) satisfactory to Agent
as to, among other matters, valid corporate existence and authority of
each Borrower and Guarantor, legality, validity, form, content, binding
effect and enforceability in accordance with their terms of all Loan
Documents, perfection of security interests, Agent's ability to realize
upon the Collateral in accordance with the Loan Documents and
applicable law, and the absence of any violation of law or regulation or
conlfict with existing material contracts.

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Yield Protection,
Increased Costs
and Taxes:

Standard yield protection and indemnification, including, without limitation,

capital adequacy requirements, will be incorporated that will satisfactorily
compensate Lenders in the event that any changes after the Closing Date in the
Basel Committee regulations or any future law, requirement, guideline or request
of relevant authorities shall increase costs, reduce payments or earnings, or
increase capital requirements.

Expenses:

Borrowers will be responsible for all legal fees of ABC and Arranger actually
incurred in connection with the preparation, negotiation and execution of the
Loan Documents, all reasonable out-of-pocket expenses, including, without
limitation, all business, financial, collateral due diligence and syndication
expenses, and, to the extent provided herein, all appraisal fees and all
examination fees. Payment of these fees and expenses will be required, whether
or not the closing of this transaction occurs, provided that, if the transactions
described herein are closed, then, ABC either will apply the Expense Deposit to
offset the amount of any such fees or expenses or return the same to Borrowers.
Borrowers also shall be responsible for the costs and expenses of Agent and
Lenders in connection with any amendment, modification or waiver of any
provision of, any workout or restructuring relating to, and the enforcement of,
any of the Loan Documents.

Indemnification:

Borrowers and Guarantors jointly and severally will indemnify, defend and hold
Agent, Arranger, each Lender, and each of their affiliates and officers, directors,
employees, agents and advisors (each an "Indemnified Party") harmless from and
against all losses, liabilities, claims, damages or expenses, including, but not
limited to, reasonable attorneys' and other professional fees and settlement costs,
in each case, arising out of or in connection with or by reason of, or in connection
with the preparation for a defense of any investigation, litigation or proceeding
arising out of, related to or in connection with the Credit Facility or any proposed
transaction of Borrowers or any of their subsidiaries or affiliates and any other
transactions contemplated hereby, except to the extent that the same result from
the gross negligence or willful misconduct of such Indemnified Party.

Required Lenders:

51% of Lenders measured in terms of dollar commitments (except for those

provisions which customarily require unanimous Lenders' consent).

Assignments and
Participations:

Agency and
Syndication Matters:

Usual and customary for transactions of this type and size. Each Lender may
assign all or a portion of its loans and commitments under the Credit Facility, or
sell participations therein to another person(s), provided that assignments shall be
in a minimum amount of $
and shall be subject to certain
conditions, including, but not limited to, the approval of Borrowers (so long as no
default or event of default exists) and Agent, such approval in the case of
Borrower not to be unreasonably withheld. The payment of a processing and
recordation fee of $
will be made by the assigning Lender to Agent.
ABC will act as Agent for the Credit Facility, and Arranger will act as exclusive
Arranger, adviser and syndication manager for the Credit Facility, and, in such

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capacities, each of ABC and Arranger will perform the duties and exercise the
authority customarily associated with such roles. The Loan Documents will
contain customary Agency provisions typical of asset-based lending facilities of
this type.
Governing Law:

State of

Closing Date:

Not later than

, 20

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