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EXHIBIT 99
June 26, 2001
GC Companies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇ ▇▇▇▇▇▇▇
President and COO
Dear ▇▇. ▇▇▇▇▇▇▇:
Onex Corporation ("Onex") and Oaktree Capital Management, LLC,
on behalf of certain funds and accounts managed by it ("Oaktree", and together
with Onex, "Sponsors" or "we") commit to acquire, through a newly formed
acquisition company or companies, pursuant to a chapter 11 plan of
reorganization (the "Plan") to be proposed by GC Companies, Inc. and its
affiliated debtors and debtors in possession (collectively, "GC"), 100% of the
common stock ("New Common Stock") of GC, as reorganized pursuant to the Plan
("Reorganized GC") for $42.5 million and such additional consideration as set
forth herein, on the terms and conditions described below (the "Sponsors
Investment").(1) The Plan is premised upon, among other things, (i) the Sponsors
Investment, (ii) Reorganized GC's issuance of Term A Notes, Term B Notes, and C
Notes (each as defined below and collectively, the "New Notes") in the amounts
and in accordance with the terms described below, (iii) the raising of New
Financing (as defined below) for Reorganized GC; and (iv) the provision of
overbid/investor protection as described herein.
In determining the price and structure of this transaction
(the "Proposed Transaction"), we have reviewed the business plans for GC
previously provided to us through the date of this letter, met with members of
the management team of GC, reviewed certain documents provided by GC, reviewed
selected financial and operating data provided by GC and analyzed other business
information regarding GC and its industry.
This letter is not an offer with respect to any securities or a
solicitation of acceptances of a chapter 11 plan. Such offer or
solicitation would be made in compliance with the applicable provisions
of the Bankruptcy Code and securities laws.
Sponsors' commitment includes the following:
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(1) As between Onex and Oaktree, Onex would have the controlling interest in the
New Common Stock.
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I. SPONSORS INVESTMENT PRICE AND COMMITMENT. We commit to acquire 100%
of the New Common Stock of Reorganized GC pursuant to the Plan based upon a
$42.5 million purchase price valuation for 100% of the New Common Stock of
Reorganized GC. As provided herein, on the Plan's effective date (the "Effective
Date") we will make the Sponsors Investment and receive 100% of the New Common
Stock, subject to pro rata dilution of such New Common Stock under Section
III.E.(c) below.
II. DEFINITIVE AGREEMENT. The purchase and sale of the New Common Stock
will be effected pursuant to a definitive stock purchase agreement (the
"Definitive Agreement") mutually acceptable to GC and Sponsors. The parties
shall use their reasonable efforts to negotiate the terms of the Definitive
Agreement, which agreement shall include the terms set forth herein and other
usual and customary terms, as promptly as practicable and in any event no later
than 10 days prior to the hearing to consider approval of the disclosure
statement for the Plan (the "Disclosure Statement Hearing"). GC shall continue
to provide Sponsors with information reasonably requested by Sponsors concerning
GC or any subsidiary or affiliate of GC and shall grant representatives of
Sponsors access on a reasonable basis to key employees of GC or any subsidiary
or affiliate of GC as reasonably promptly as practicable.
A. CONDITIONS TO SPONSORS' OBLIGATION TO CLOSE THE PROPOSED
TRANSACTION. The Definitive Agreement will contain the following conditions to
Sponsors' obligation to consummate the Proposed Transaction:
(a) GC shall have filed the Plan and disclosure
statement therefor (the "Disclosure
Statement") in the Bankruptcy Court on or
before July 11, 2001, and the Bankruptcy
Court shall have entered an order approving
the disclosure statement for the Plan on or
before September 11, 2001.
(b) The Plan shall have been confirmed by
October 31, 2001 and shall have become
effective in accordance with its terms; the
material terms of the Plan shall include,
among other terms, substantially the same
terms as the material terms contained in
Section III hereof; and the Plan shall
otherwise be reasonably satisfactory to GC
and Sponsors.
(c) GC shall have maintained its exclusive
period to solicit acceptances of a plan
through October 31, 2001, and GC shall not
have either (i) filed or sought confirmation
of a chapter 11 plan providing for the
acquisition of GC (or a substantial portion
of its ownership or assets) by a person or
entity other than Sponsors, (ii) sought
Bankruptcy Court approval of an acquisition
of GC (or a substantial portion of its
ownership or assets) other than by Sponsors,
or (iii) filed or sought confirmation of a
chapter 11 plan providing for an internal
reorganization of GC.
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(d) Senior management of Reorganized GC shall be
reasonably acceptable to Sponsors (I.E.,
Reorganized GC shall retain at least the
senior management team identified to GC by
Sponsors).(2)
(e) Satisfactory completion, at Sponsors' sole
discretion, of Sponsors' due diligence on
GC, including without limitation GC's
international assets and GC's funding
requirements with respect thereto.
(f) No material adverse change (or event or
condition that could result in a material
adverse change) shall have occurred in the
theatre industry or GC's business, condition
(financial or otherwise), prospects,
operations, assets or liabilities or in
financial markets generally ("Material
Adverse Change") between March 31, 2001 and
the Effective Date. Without limiting the
foregoing, increase in the required amount
of the $21.8 million New Financing or a call
by a third party after the date of this
letter on any international guaranty
provided by GC shall be a Material Adverse
Change.
(g) On or before June 22, 2001, GC shall have
moved for and obtained, on or before July
11, 2001, an order of the Bankruptcy Court
in form acceptable to GC and Sponsors (the
"Overbid Order") that approves, among other
terms and without material modification, the
Overbid Procedures (as defined in Section XI
below) and the obligation of GC to pay the
Expense Reimbursement and the Termination
Fee (each as defined below) on the terms and
conditions described in Section XI hereof.
The Overbid Order shall remain in full force
and effect, and shall not be stayed,
vacated, modified or supplemented without
Sponsors' prior written consent. GC shall
have complied with the terms of the Overbid
Order.
(h) GC shall have operated its business in the
ordinary course and paid ongoing ordinary
course liabilities (including estimated
taxes and assessments) consistent with past
practices and substantially consistent with
its present Debtor in Possession Financing
Budget through the Effective Date, and shall
not have assumed or rejected any theater
lease or associated executory contract after
the date of this letter absent the prior
written consent of Sponsors, which consent
shall not be unreasonably withheld.
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(2) Onex shall use its good faith efforts to agree to mutually acceptable
employment terms with such persons on or before 10 days before the
Disclosure Statement Hearing. Nothing in this letter or any agreement
between Onex and such members of GC's senior management shall prohibit
such persons from serving or not serving, as senior management if the Plan
is not confirmed.
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(i) All conditions precedent to closing the New
Financing (other than the occurrence of the
Effective Date) shall have been satisfied or
waived and the New Financing shall have been
consummated in accordance with the material
terms contained in the Financing Commitment
Letter (as defined below). The final
documentation with respect to the New
Financing shall otherwise be satisfactory to
GC and Sponsors in all material respects.
(j) The final documentation with respect to the
New Notes (as defined below) shall be
satisfactory to GC and Sponsors in all
material respects.
(k) GC shall not have breached individually or
in the aggregate in any material respect any
of the material representations, warranties
or covenants to be given by GC in the
Definitive Agreement.
(l) Receipt of all required third party
approvals (including, but not limited to,
governmental approvals).
(m) The unexpired leases and executory contracts
designated by Sponsors after the date of
this letter for assumption or rejection as
provided herein shall be so assumed or
rejected, as the case may be, by final order
satisfactory to GC and Sponsors. Cure claims
in respect of executory contracts and
unexpired leases designated by Sponsors to
be assumed shall not exceed $4.8 million in
the aggregate.
(n) Such other conditions as may be agreed to
by the parties as set forth in the
Definitive Agreement.
B. REPRESENTATIONS AND WARRANTIES. The Definitive Agreement
will provide that GC will make customary representations and warranties for
transactions of this type, including, without limitation, accuracy of financial
statements provided; no material actions taken or payments received out of the
ordinary course; no Material Adverse Change; ownership of property; accuracy of
disclosure; corporate existence; corporate power and authority; subsidiaries;
compliance with laws; to GC's knowledge, no pending or threatened claims which,
if successful, would result in a Material Adverse Change, including, without
limitation, no pending or threatened claims against GC or, to GC's knowledge,
its affiliates or subsidiaries which if successful would materially interfere
with GC's business or the performance of its obligations under any contract or
agreement; to the knowledge of GC, no pending or threatened claim against any
third party which, if successful, would in the reasonable business judgment of
GC evidence a material risk with respect to GC's business or the performance of
its obligations under any contract or agreement; no conflict with laws or
contractual obligations.
C. EXECUTORY CONTRACTS AND UNEXPIRED LEASES. The Definitive
Agreement will provide that Sponsors will have until 10 days before the hearing
on confirmation of the Plan
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(the "Confirmation Hearing") to designate the previously nonassumed executory
contracts and unexpired leases that it wishes GC to assume and those that it
wishes GC to reject, as well as any modified terms for such contracts and leases
(or proposed determinations of contested issues) upon which it is prepared to
designate that such contracts and leases that otherwise would be rejected should
be assumed. Sponsors will work with GC to review the nonassumed executory
contracts and unexpired leases for the purpose of determining whether such
nonassumed executory contracts and unexpired leases will be assumed or rejected
and/or the proposed modifications thereto, as well as with respect to any
extension of the date pursuant to section 365(d)(1) to assume or reject
unexpired leases.
III. PLAN. Unless GC and Sponsors agree otherwise, the Plan will
include the following terms:
A. Classification and Treatment of Claims and Interests
(a) UNCLASSIFIED CLAIMS (NOT ENTITLED TO VOTE)
Administrative Claims: On the Effective Date, or as
soon thereafter as practicable,
each holder of an Allowed
Administrative Claim will
receive payment in full in cash
of the unpaid portion of such
Allowed Administrative Claim;
PROVIDED, THAT, the aggregate
amount of the Allowed
Administrative Claims for
professional fees, closing
expenses and capital calls (but
exclusive of cure claims and
operating expenses paid in the
ordinary course) shall not
exceed $10 million.
DIP Financing Claims: On the Effective Date, or as
soon thereafter as practicable,
the holders thereof will
receive payment in full in cash
of the Allowed DIP Financing
Claim.
Priority Tax Claims: At the option of GC, each
holder of an Allowed Priority
Tax Claim will receive either
(i) payment in full (in cash)
on the Effective Date or as
soon thereafter as practicable,
or (ii) payment over a six year
period from the date of
assessment as provided in
section 1129(a)(9)(C) of
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the Bankruptcy Code with
interest payable at 7% annual
or at such other rate agreed to
by GC and the holder of such
claim or determined by the
Bankruptcy Court.
(b) UNIMPAIRED CLAIMS (DEEMED TO ACCEPT)
Class 1 - Other Priority
Claims: On the Effective Date, or as
soon thereafter as practicable,
each holder of an Allowed Other
Priority Claim will receive
payment in full in cash of such
Allowed Other Priority Claim.
Class 2 - Secured
Claims (other than
Banks, ▇▇▇▇▇▇ and
GECC Group): AT THE OPTION OF GC, GC WILL
EITHER (1) REINSTATE EACH
ALLOWED SECURED CLAIM (OTHER
THAN BANKS, ▇▇▇▇▇▇ AND GECC
GROUP) BY CURING ALL
OUTSTANDING DEFAULTS WITH ALL
LEGAL, EQUITABLE, AND
CONTRACTUAL RIGHTS REMAINING
UNALTERED, (2) PAY IN FULL SUCH
ALLOWED SECURED CLAIM IN CASH
ON THE EFFECTIVE DATE OR AS
SOON THEREAFTER AS PRACTICABLE
OR (3) SATISFY SUCH ALLOWED
SECURED CLAIM BY DELIVERING TO
THE CLAIMANT THE COLLATERAL
SECURING SUCH CLAIM.
(c) IMPAIRED CLAIMS (ENTITLED TO VOTE)
Class 3 - Secured
Claims (Banks, ▇▇▇▇▇▇
and GECC Group) On the Effective Date, or as
soon thereafter as practicable,
the holders of Class 3 Claims
(Allowed Secured Claims of
Banks, ▇▇▇▇▇▇ and GECC Group)
shall receive their pro rata
share of certain notes in an
amount equal to $109.0 million
the ("Term A Notes"). The Term
A Notes for each holder of a
Class 3 Claim shall be secured
by and share in a pool
consisting of the respective
collateral securing each such
Allowed Secured Claim, junior
to any
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security interest therein
securing the Exit Facility, and
shall otherwise have the basic
terms set forth on Exhibit 1
hereto. We are assuming that as
of June 30, 2001 the Allowed
Secured Claims of the Banks,
▇▇▇▇▇▇ and GECC Group were in
the amount of $15.0 million,
$29.5 million and $64.5
million, respectively. The
allocation among the GECC Group
of its Allowed Secured Claim is
to be determined and the GECC
Group shall receive, in
addition to the Term A Notes,
warrants to be struck at an
agreed upon equity value for
2.4% of the equity of
Reorganized GC.
Class 4 - General
Unsecured Claims
(including deficiency
claims of Banks and
GECC Group): On the Effective Date, or as
soon thereafter as practicable,
the holders of Allowed General
Unsecured Claims (deficiency
claims of Banks and GECC Group
and other unsecured claims,
including the unsecured claim
of Harcourt) will receive a pro
rata share of (1) $27.5 million
of cash from the Sponsors
Investment, (2) certain notes
in an amount equal to $20.0
million (the "Term B Notes");
the Term B Notes of Reorganized
GC, subordinate to the Term A
Notes, and otherwise have the
basic terms set forth on
Exhibit 2 hereto, and (3)
certain notes in an amount
equal to $71.4 million (the "C
Notes").(3)
(3) Notwithstanding anything herein, payments in respect of the C Notes shall
not be made unless aggregate net realizations from GC's Investment Portfolio
(less amounts used to reimburse Reorganized GC for the reasonable and
documented fees and expenses, including professional fees and expenses,
incurred by Reorganized GC in connection with the realization of GC's
Investment Portfolio) exceed $24.8 million and the aggregate net amount of
any such payments shall not exceed $71.4 million (E.G., the aggregate net
amount of realizations between $24.8 million and $96.2 million). Reorganized
GC shall not have, and nothing contained herein shall be interpreted or
construed to impose on Reorganized GC, any obligation or liability of any
kind or nature with respect to the payment of the C Notes except as
expressly provided in the foregoing sentence.
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It is assumed that pursuant to
the Intercreditor Agreement
between the Banks and ▇▇▇▇▇▇▇▇
that all amounts received by
▇▇▇▇▇▇▇▇ for its general
unsecured claim are to be paid
and turned over to the Banks
until the Banks are paid in
full in cash.
Class 5 - Common
Stock Interests
(including any Allowed
Claims subordinated to
the level of common
stock under section
510(b) of the
Bankruptcy Code) On the Effective Date, or as
soon thereafter as practicable,
the holders of Allowed Common
Stock Interests will receive
their pro rata share of any
realizations from GC's
Investment Portfolio in excess
of $96.2 million.
Class 6 - Common Stock
Options The holders of Common Stock
Options shall receive no
distribution. On the Effective
Date all Common Stock Options
and any other equity interests
will be canceled.
B. Conditions to the Confirmation and/or Effective Date of
Plan:
(a) Confirmation of the Plan on or before October
31, 2001
(b) All conditions precedent under the
Definitive Agreement other than the
occurrence of the Effective Date shall have
been satisfied or waived as set forth
therein.
(c) The Confirmation Order shall be in a form
satisfactory to GC and Sponsors, in full
effect, and unstayed.
(d) The Effective Date shall have occurred within
30 days following the Confirmation Date.
(e) All conditions precedent to closing the New
Financing (other than the occurrence of the
Effective Date) shall have been satisfied or
waived and the New Financing shall have been
consummated.
(f) GC and Sponsors shall each have approved the
form and substance of each of the amended
certificate of incorporation, the amended
by-laws, the New Common Stock, the New
Notes, the Management Employment Agreements
(as defined below) and the Management
Incentive Plan (as defined below).
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C. RELEASES, INDEMNIFICATION. The Plan shall provide for
general releases from GC and Reorganized GC for the
benefit of all current directors and officers. In
addition, all indemnification provisions currently in
place for directors and officers (whether in GC's
by-laws, contractual or otherwise) shall survive
confirmation of the Plan and shall not be impaired
thereby.
D. OTHER PLAN PROVISIONS. In addition to the foregoing
provisions relating to classification and treatment of claims and interests, the
Plan shall contain provisions appropriate under the circumstances concerning,
among other things: (i) disputed claims and reserves therefor, (ii) the
assumption or rejection, as the case may be, of executory contracts and
unexpired leases (consistent with this letter), (iii) inability to amend or
modify the Plan's provisions relating to Sponsors or the Proposed Transaction
without Sponsors' consent and (iv) retention of jurisdiction by the Bankruptcy
Court for certain purposes. The Plan shall also contain the conditions to the
Effective Date described in Section III.B., above.
E. Management of Reorganized GC.
(a) BOARD OF DIRECTORS. The Board of Directors of
Reorganized GC shall consist of four persons
appointed by Sponsors and one
member of senior management.
(b) SENIOR MANAGEMENT. Sponsors contemplate that
Reorganized GC will offer employment to
substantially all of GC's present senior
management pursuant to business plan to be
discussed between Sponsors and senior
management. See Section II.A.(d) hereof.
(c) MANAGEMENT EQUITY INCENTIVE PLAN. The Plan
shall provide for the establishment of an
equity incentive plan (the "Management
Equity Incentive Plan") promptly after the
Plan Effective Date for members of
Reorganized GC's management on terms that
are otherwise mutually acceptable to
Reorganized GC and Sponsors. Management
Equity Incentive Plan to be discussed by
Sponsors and management team. It is
contemplated that this plan will provide for
6% dilution of the New Common Stock on the
Effective Date which shall be issued as
options that will vest over time in
accordance with the terms, and subject to
the satisfaction of performance standards,
that are mutually acceptable to Reorganized
GC and Sponsors.
(d) MANAGEMENT FEE: Sponsors contemplate that
Reorganized GC shall pay Sponsors an annual
management fee ("Management Fee") equal to
$1 million in exchange for the performance of
certain management services.
IV. NEW FINANCING. Sponsors and GC shall obtain on or prior to 10 days
prior to the Confirmation Hearing mutually acceptable commitments and/or
agreements (the "Financing
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Commitment Letter") from a financial institution with respect to a
revolver/working capital facility of at least $21.8 million (the "New
Financing") that would be available to Reorganized GC under the Plan. GC will be
responsible for paying the financial institution's reasonable transaction
costs/closing expenses in connection with the New Financing. In addition to the
New Financing, Reorganized GC shall receive $15.0 million of cash from the
Sponsors Investment which shall be held by Reorganized GC in a separate fund to
be used solely to meet future capital expenditure and/or exit financing
requirements.
V. TERMINATION. This letter may be terminated by Sponsors, at Sponsors'
sole discretion, at any time upon written notice to GC if, through no material
fault of Sponsors, (a) the Overbid Order is not entered on or before July 11,
2001 (b) GC shall not have filed the Plan by July 11, 2001 or any of the other
conditions set forth in Section II.A. have not occurred, or (c) the Definitive
Agreement shall has not been executed on or before the date that is 10 days
prior to the Disclosure Statement Hearing. This letter may be terminated by GC
following the entry of the Overbid Order or after July 11, 2001 if the Overbid
Order is not entered on or before such date subject only to GC's obligations
under the Overbid Order, as described herein and Overbid Procedures (defined
below). Upon any such termination, any obligations under this letter will
terminate and no party shall have any liability whatsoever to any other party;
PROVIDED, HOWEVER, that notwithstanding any such termination (i) this Section V
shall remain in full force and effect, and no party shall be relieved of
liability for any breach and (ii) in addition, GC shall remain liable for
payment of the Expense Reimbursement and Termination Fee to the extent required
under the terms of the Overbid Order.
VI. MISCELLANEOUS. The terms set forth in this letter are a part of a
comprehensive agreement, each element of which is an integral aspect of the
Proposed Transaction and, as such, are non-severable.
VII. GOVERNING LAW. This letter shall be governed by and construed in
accordance with the internal laws of the State of New York and any applicable
provision of the Bankruptcy Code, without regard to the principles of conflict
of laws that would provide for application of another law.
VIII. CONCERNING REMEDIES. Each of the parties acknowledges and agrees
that no failure or delay in exercising any right, power or privilege hereunder
will operate as a waiver thereof, nor will any single or partial exercise
thereof preclude any other right, power or privilege hereunder.
IX. PRESS RELEASES. DISCLOSURE. The parties will cooperate in the
issuance of any press releases or otherwise in making any public statements with
respect to the Proposed Transaction. Neither Sponsors nor GC will issue any
press release or other public statement regarding the Proposed Transaction
without the other party's prior written consent, which consent shall not be
unreasonably withheld. Sponsors acknowledge and agree that GC may provide copies
of this letter and attachments to parties in interest in GC's chapter 11 case,
and those parties GC determines it is necessary to provide copies to in
connection with the Auction described Section XI below and in the Overbid Order
or as otherwise necessary in connection
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with its bankruptcy case. GC also shall be entitled to file copies with the
Bankruptcy Court or as otherwise required by law.
X. ENTIRE AGREEMENT. AMENDMENTS. COUNTERPARTS. This letter, including
all Exhibits and Schedules hereto, which are incorporated herein and made a part
hereof by reference, sets forth the entire agreement among the parties with
respect to the subject matter hereof, with the exception of the Overbid
Procedures as approved by the Overbid Order, and may be amended only by a
writing executed by Sponsors and GC. This letter may be executed in
counterparts, each of which when take together shall constitute an original of
this letter.
It is understood that this letter does not contain all matters
upon which agreement must be reached in order for the Proposed Transaction to be
consummated. Notwithstanding the foregoing, the provisions of Section XI of this
letter and the terms of the Overbid Procedures and Overbid Order, as described
hereunder, are acknowledged and agreed to be fully binding on the parties
hereto.
XI. OVERBID PROCEDURES. GC acknowledges that Sponsors have expended and
will continue to expend considerable time and money in developing the Proposed
Transaction, which it is not prepared to continue, however, except upon the
terms hereof. GC and Sponsors therefore agree that the following overbid
procedures (the "Overbid Procedures"), among others, shall be employed with
respect to the Plan or any other chapter 11 plan for GC that incorporates the
Sponsors Investment:
A. NONSOLICITATION. After the execution and delivery of this
letter neither GC nor any of its respective directors, employees, accountants or
other agents and representatives (collectively, "Representatives") shall,
directly or indirectly, solicit a competitive bid or proposal from a third party
to purchase all or any portion of the assets of GC or the New Common Stock of
Reorganized GC, whether in a separate transaction or as part of a plan of
reorganization for GC (an "Acquisition"), or engage in or continue any
discussions or negotiations with any party that has made or who may make such a
competitive bid for such New Common Stock or assets of GC until after entry of
the Overbid Order. Notwithstanding the foregoing, after the motion to approve
the Overbid Order has been filed, GC and its Representatives may receive, but
not solicit, proposals from third parties relating to such an Acquisition (an
"Acquisition Proposal"); PROVIDED, that prior to the entry of the Overbid Order,
GC and its Representatives shall not solicit, discuss or negotiate any
Acquisition Proposal with any such third party but may provide information,
subject to appropriate confidentiality provisions, to any such third party.
After the entry of the Overbid Order, GC and its Representatives shall be
entitled to solicit Acquisition Proposals from third parties, to provide
information, subject to appropriate confidentiality provisions, to such third
parties and to discuss and negotiate any such Acquisition Proposal with such
third parties. GC shall keep Sponsors informed on a current basis of the
identity of the parties to whom GC provides information and of the status of all
written Acquisition Proposals (including drafts or other preliminary indications
of interest) received and provide Sponsors with copies of any such written
Acquisition Proposals (including such drafts and indications of interest) within
1 business day after receipt thereof.
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B. EXPENSE REIMBURSEMENT. GC shall be required to reimburse
Sponsors' reasonable and documented out-of-pocket expenses incurred in
connection with the Sponsors Investment, the New Financing, the Plan and the
transactions contemplated thereby (including Sponsors' continued due diligence
in connection therewith), including the reasonable fees and expenses of
Sponsors' professionals, not to exceed $1 million (the "Expense Reimbursement"),
PROVIDED that Sponsors have not breached this agreement, which obligation shall
constitute an allowed administrative claim against GC under sections 503 and
507(a) of the Bankruptcy Code, if and when:
(a) (i) GC seeks approval of, or the Bankruptcy
Court approves, any agreement with a third
party for the sale of all or any substantial
portion of the business or assets of GC or
an investment in or underwriting of
post-confirmation securities of GC, whether
pursuant to a chapter 11 plan for GC or
under section 363(b) of the Bankruptcy Code,
or (ii) GC seeks confirmation of, or the
Bankruptcy Court confirms, a chapter 11 plan
that does not contain the Sponsors
Investment and implement the Proposed
Transaction (each of (i) and (ii), an
"Alternative Transaction"); and
(b) The Plan is not confirmed on or before
October 31, 2001: PROVIDED that Sponsors
shall not have breached its obligations
under this letter or the Plan.
C. TERMINATION FEE. GC shall be required to pay Sponsors a
termination fee of $3 million (the "Termination Fee") upon the consummation of
an Alternative Transaction, which obligation shall constitute an allowed
administrative claim against GC under sections 503 and 507(a) of the Bankruptcy
Code; PROVIDED, that Sponsors shall not be entitled to the Termination Fee if it
(1) shall have breached its obligations under this letter or the Plan in any
material respect or (2) shall have terminated the Proposed Transaction as a
result of its due diligence.
D. PARTICIPATION REQUIREMENTS. Unless otherwise ordered by the
Bankruptcy Court for cause shown, to participate in any bidding process, each
potential bidder (a "Potential Bidder") must deliver (unless previously
delivered) to GC: (i) an executed confidentiality agreement in form and
substance satisfactory to GC; and (ii) such financial disclosure and other
information acceptable to GC and its financial advisor that demonstrates such
party's financial and other ability to consummate an Alternative Transaction. A
Potential Bidder shall be considered to be a qualified bidder (a "Qualified
Bidder") if it delivers the documents described in subparagraphs (i) and (ii)
above and GC determines it is reasonably likely (based on availability of
financing, experience and other considerations) to be able to consummate a
purchase of GC, if selected as the successful bidder. Sponsors are a Qualified
Bidder.
E. BID REQUIREMENTS. Any Qualified Bidder that desires to make
a Qualified Bid (as defined below) shall, among other things, deliver 8 written
copies of its Qualified bid to GC's bankruptcy counsel not later than 4:00 p.m.
(East Coast time) on the date that is 10
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business days before the first Disclosure Statement Hearing on the adequacy of
the Disclosure Statement for the Plan (the "Bid Deadline"), who shall then
distribute a copy of the bid to (i) GC and its financial advisor, (ii) counsel
for Creditors' Committee, (iii) counsel for Sponsors, and (iv) all other
Qualified Bidders. A bid received from a Qualified Bidder shall be a "Qualified
Bid" if such bid meets the following requirements:
(a) The bid shall be a letter from such
Qualified Bidder stating that (i) the bidder
offers to acquire GC upon the terms and
conditions set forth herein or the Plan
marked to show those amendments and
modifications to this letter or the Plan,
including price and terms, that the
Qualified Bidder proposes (the "Marked
Applicable Agreement") and (ii) such
Qualified Bidder's offer is irrevocable
until the conclusion of any scheduled
Auction and, if accepted as the winning bid
at such Auction, until the conclusion of the
hearing on approval of such Alternative
Transaction. Each Qualified Bidder shall
accompany its bid with written evidence of a
commitment for financing or other evidence
of ability to consummate the applicable
transaction.
(b) GC will consider a bid only if the bid
provides for consideration of at least $5
million greater than the consideration set
forth in this letter and the Plan.
(c) Upon the Sponsors Commitment Date, this
letter and the Plan, if filed, shall be
deemed to be a Qualified Bid.
F. AUCTION. If there is at least one Qualified Bid (other than
from Sponsors), GC may conduct an auction (the "Auction"). The Auction shall
take place 3 business days before the Disclosure Statement Hearing, at the
offices of GC's bankruptcy counsel. Unless the Bankruptcy Court determines
otherwise, only a Qualified Bidder who has submitted a Qualified Bid is eligible
to participate in the Auction. The bidding shall start at the purchase price
stated in the highest or best Qualified Bid and be based upon such Qualified
Bidder's Marked Applicable Agreement (subject to non-material modifications) for
the respective assets and continue in increments of at least $500,000. Upon
conclusion of the Auction or, if GC determines not to hold an Auction, then
promptly following the Bid Deadline, GC, after consultation with the Creditors
Committee, shall review each Qualified Bid on the basis of financial and
contractual terms and the factors relevant to the sale and chapter 11 process,
including those factors affecting the speed and certainty of consummating the
transaction. GC shall present to the Bankruptcy Court for consideration and
approval the Qualified Bid (or the Plan if no other Qualified Bid is received)
which GC determines in the aggregate constitutes the highest or otherwise best
offer.
G. ADDITIONAL BUYER PROTECTION. In addition to procedures and
terms set forth herein, including, but not limited to the Expense Reimbursement
and Termination Fee, the Overbid Procedures described in the Overbid Order shall
contain such other appropriate buyer protection provisions as may be requested
by Sponsors, such as provisions providing for requirements for competing bids
and open auction procedures.
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XII. FIDUCIARY DUTIES. Nothing in this letter is intended to waive or
abrogate any fiduciary duties.
XIII. TIME OF THE ESSENCE. Time is of the essence with respect to this
proposal. Unless accepted, this proposal will expire at 5:00 p.m. East
Coast time on June 29, 2001 (the "Expiration Date").
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We look forward to working with you on this transaction.
Onex Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------------
Title: Managing Director
Oaktree Capital Management, LLC, on
behalf of certain investment funds and
accounts managed by it
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Title: President
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------
Title: Managing Director & General Counsel
Agreed:
GC Companies, Inc.
By: /s/ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Title: President & COO
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EXHIBIT 1
REORGANIZED GC - TERM A NOTES
INDICATIVE SUMMARY OF TERMS
-----------------------------------------------------------------------------------------------------------
Principal Amount: The Term A Notes will have an initial face amount of $109.0 million in the
Plan.
-----------------------------------------------------------------------------------------------------------
Maturity: The Term A Notes will have a term of 5 years from their issue date or the
Effective Date.
-----------------------------------------------------------------------------------------------------------
Amortization: The Term A Notes will have a scheduled amortization of $5 million per year.
-----------------------------------------------------------------------------------------------------------
Interest: The Term A Notes will bear interest at the rate of 8.5% per annum.
-----------------------------------------------------------------------------------------------------------
Collateral and The Term A Notes shall be secured by a pool consisting of the respective
Subordination: collateral securing each such Allowed Secured Claim, junior to any security
interest therein securing the Exit Facility.
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EXHIBIT 2
REORGANIZED GC - TERM B NOTES
INDICATIVE SUMMARY OF TERMS
-----------------------------------------------------------------------------------------------------------
Principal Amount: The Term B Notes will have an initial face amount of $20 million in the Plan.
-----------------------------------------------------------------------------------------------------------
Maturity: The Term B Notes will have a term of 3 years from
their issue date or the Effective Date. Reorganized
GC may prepay Term B Notes at its option without
premium or penalty.
-----------------------------------------------------------------------------------------------------------
Interest: The Term B Notes will bear interest (PIK) at the rate of 7.5% per annum,
payable in cash at maturity.
-----------------------------------------------------------------------------------------------------------
Guaranty and Payment of the Term B Notes of Reorganized GC shall be subordinated to
Subordination: payment of the Term A Notes.
-----------------------------------------------------------------------------------------------------------
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