March 5, 1999
Uniflex, Inc.
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Ladies and Gentlemen:
AlliedSignal Inc. Master Pension Trust ("AlliedSignal") is pleased to provide
its commitment, subject to the terms and conditions herein, to purchase from
Uniflex, Inc. ("Uniflex") up to US$7,000,000 of Senior Subordinated Debentures
of Uniflex (the "Debentures"), terms and conditions of the Debentures to be as
set forth in the attached "Mezzanine Financing Term Sheet" and as to be more
specifically set forth in a detailed purchase agreement and ancillary documents,
including, without limitation, a form of debenture and a form of warrant to
purchase five percent (5%) of the fully diluted outstanding common shares of
Uniflex ("Definitive Documentation").
This commitment is conditional upon (i) completion, with results satisfactory to
AlliedSignal, of our due diligence examination of Uniflex, its operations,
facilities, financial condition and personnel; (ii) execution and delivery of
the Definitive Documentation in form and substance satisfactory to AlliedSignal;
(iii) consummation of the merger between Uniflex and Uniflex Acquisition Corp.,
as contemplated by that certain Agreement and Plan of Merger and
Recapitalization dated March 5, 1999; and (iv) $23,500,000 in funds being
provided to Uniflex by The Chase Manhattan Bank ("Chase") and Fleet Bank,
National Association ("Fleet") pursuant to Senior Secured Credit Facilities as
contemplated by the commitment letter from Chase and Fleet to Uniflex of even
date herewith.
Sincerely,
AlliedSignal Inc. Master Pension Trust
By: The Northern Trust Company as Trustee for
AlliedSignal. Inc. Master Pension Trust
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By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ The Northern Trust Company executes this
--------------------- instrument as Trustee as aforesaid, and is not
to be held liable in its individual capacity
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in any way by reason of this instrument.
---------------------
Title: Second Vice President
---------------------
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MEZZANINE FINANCING TERM SHEET
Description: $7,000,000 principal amount of Senior Subordinated
Debentures of Uniflex, Inc. ("Uniflex" or
"Borrower")
Purchaser: AlliedSignal Inc. Master Pension Trust
Closing: Anticipated June 1999
Debentures:
Maturity: 8 years from date of closing
Interest Rate: 12.75%
Interest Payments: Quarterly
Subordination: The right to certain payments under the Senior
Subordinated Debentures is subordinate to the debt
provided under the Senior Secured Credit Facilities
provided by Fleet Bank, National Association and
The Chase Manhattan Bank, as to be set forth in a
Subordination Agreement .
Structure Fee: 1% of the principal amount ($70,000) for
documentation, to be paid at the closing.
Prepayment: Borrower shall have the right at any time, and in
the event of a change of control of Borrower shall
have the obligation, to purchase all but not less
than all the Senior Subordinated Debentures for the
following amounts relative to par, plus accrued and
unpaid interest:
During the first year after issuance 106.375%
During the second year after issuance 105.464%
During the third year after issuance 104.553%
During the fourth year after issuance 103.642%
During the fifth year after issuance 102.732%
During the sixth year after issuance 101.821%
During the seventh year after issuance 100.911%
During the eighth year after issuance 100.000%
Warrants:
Number of Warrants: Five percent of the fully diluted outstanding
common shares of Uniflex at the time of closing.
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Life: May be exercised at any time until and including
the tenth anniversary of closing
Exercise Price: $.01 per share
Right to Put: Commencing on the day following the eighth
anniversary of closing, if the Senior Subordinated
Debentures have been repaid in full, the
stockholders, including warrant holders, shall have
the right to require Uniflex to purchase the
shares, warrants and shares underlying warrants as
set forth in section 5 of the Stockholders
Agreement to be executed at the time of closing.
Other Conditions: One seat on the Board of Directors of Uniflex
Registration Rights as set forth in the
Registration Rights Agreement to be executed at the
time of closing
This commitment is subject to execution and
delivery of definitive documentation acceptable to
AlliedSignal Inc. Master Pension Trust and Uniflex,
and due diligence including the ability to visit
with the management team and tour the facilities.
Holders of the Senior Subordinated Debentures will
have the right to approve any sale of significant
assets of Borrower.
Financial Covenants:
Note: For the financial covenants, "EBITDA" shall mean
the sum, as of the date of determination, of (a)
the Borrower's net income, plus (b) interest
expense, plus (c) taxes accrued and paid, plus (d)
depreciation expense, plus (e) amortization of
intangible assets, plus (f) "stay" bonuses to be
paid to ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ during
the Borrower's fiscal year ending January 31, 2000
not to exceed $3,400,000 in the aggregate, and (g)
no effect will be given to a one-time expense for
plates and engraving in an amount equal to $514,000
to be incurred in the first quarter following the
closing of the transaction contemplated hereby, in
each case calculated on a rolling four quarter
basis.
Senior Debt to EBITDA The ratio of Senior Debt to EBITDA as of the end of
any fiscal quarter during the period set forth
below shall not be greater than
2
the ratio set forth opposite such period below:
Period Ratio
------ -----
April 30, 2000 through January 30, 2001 3.75:1.00
January 31, 2001 through January 30, 2002 3.25:1.00
January 31, 2002 through January 30, 2003 3.00:1.00
January 31, 2003 through January 30, 2004 2.50:1.00
January 31, 2004 through January 30, 2005 1.95:1.00
January 31, 2005 and thereafter 1.65:1.00
Funded Debt to EBITDA The ratio of Funded Debt to EBITDA as of the end of
any fiscal quarter during the period set forth
below shall not be greater than the ratio set forth
opposite such period below:
Period Ratio
------ -----
April 30, 2000 through January 30, 2001 5.40:1.00
January 31, 2001 through January 30, 2002 4.50:1.00
January 31, 2002 through January 30, 2003 3.80:1.00
January 31, 2003 through January 30, 2004 3.25:1.00
January 31, 2004 through January 30, 2005 2.75:1.00
January 31, 2005 and thereafter 2.50:1.00
Minimum Debt Service The Minimum Debt Service Coverage Ratio as of the
Coverage Ratio end of any fiscal quarter during the period set
forth below shall not be less than the ratio set
forth opposite such period:
Period Ratio
------ -----
July 31, 2000 through January 30, 2001 1.15:1.00
January 31, 2001 and thereafter 1.10:1.00
Debt Service Coverage Ratio shall be defined as
EBITDA less unfinanced capital expenditures, less
dividends/distributions, less cash taxes accrued
and paid divided by the current portion of required
principal payments on long debt plus interest made
during the prior four quarters calculated on a
rolling four quarter basis.
Capital Expenditures. Capital Expenditures shall not exceed $1,325,000 in
any fiscal year ending on or prior to January 31,
2003 or $1,500,000 in any fiscal year thereafter.
Net Worth. Net Worth shall not be less than ($9,250,000) at
any time during
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the period from the Closing Date through January
31, 2000 and, with respect to each fiscal year
thereafter, not less than actual Net Worth as of
the last day of the immediately preceding fiscal
year plus $900,000.
Minimum EBITDA EBITDA (calculated with respect to each fiscal
period set forth below) as of the end of any fiscal
period shall not be less than the amount set forth
opposite such fiscal period below:
Period Amount
------ ------
Nine month period ending October 31, 1999 $3,200,000
Twelve month period ending January 31, 2000 $4,800,000
Three month period ending April 30, 2000 $1,350,000
Minimum EBITDA to The ratio of EBITDA to interest expense, determined
Interest Expense on a rolling four quarter basis, for any period
shall not be less than the ratio set forth below
opposite such period:
Period Ratio
------ -----
April 30, 2000 through January 30, 2001 2.50:1.00
January 31, 2001 through January 30, 2002 3.70:1.00
January 31, 2002 through January 30, 2003 3.25:1.00
January 31, 2003 through January 30, 2004 3.65:1.00
January 31, 2004 and thereafter 4.50:1.00
The financial covenants shall be calculated on a
consolidated basis for the Borrower and its
consolidated subsidiaries.
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