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EXHIBIT 10.1
January 3, 2005
CONFIDENTIAL
Liberty Group Operating, Inc.
3000 Dundee Road, Suite 202
Northbrook, Illinois 60062
Attention: Kenneth Serota
Ladies and Gentlemen:
FINANCING. Liberty Group Operating, Inc.
("you" or "Company") has advised Wells
Fargo Bank, National Association ("we" or
"us") that the Company would like to
have up to $330,000,000 available to
refinance existing indebtedness of the
Company and Liberty Group Publishing, Inc.
("Holdings"), retire preferred stock
of Holdings, make certain fee and expense
payments, and provide for its ongoing
working capital and letter of credit needs.
The financing we propose
("Financing") is described in the Summary
of Terms and Conditions attached as
Exhibit A ("Term Sheet"), and consists of a
$50,000,000 senior secured revolving
credit facility with a sublimit for letters
of credit ("Revolver"), and a
$280,000,000 senior secured term loan
("Term Loan").
COMMITMENT. Subject to the terms and
conditions of this letter, we are pleased
to commit up to $50,000,000 of the
Financing and to endeavor to form a syndicate
of institutional lenders and accredited
investors acceptable to the Company and
us to provide the remainder of the
Financing plus, if we so decide, a portion of
our commitment. Our commitment may be
reduced as and when commitments to provide
a portion of the Financing exceeding such
remainder are received from such
lenders.
If necessary for successful syndication of
the Financing, we are willing to
commit up to $25,000,000 of second lien
term financing, which would reduce the
first lien Term Loan to an aggregate amount
of $255,000,000 and our commitment
for the first lien Financing to
$25,000,000. Pricing for the second lien term
financing would be floating rate, at LIBOR
plus 5.50%.
We will act as sole and exclusive lead
arranger and book runner for the
Financing, and also as administrative agent
for the syndicate of lenders. You
agree that no additional agents, co-agents
or arrangers will be appointed, no
other titles will be awarded and no
compensation (other than as set forth in
this letter and the Fee Letter referred to
below) will be paid in connection
with the Financing, unless you and we agree
in writing.
CONDITIONS TO COMMITMENT. Our commitment is
conditioned on (a) no material
adverse change occurring in the business,
assets, condition (financial or
otherwise), or results of operations of the
Company or any of its material
subsidiaries, taken as a whole, or in the
enforceability of the credit
documentation for the transactions
contemplated hereby, in each case since the
date of the latest audited financial
statements provided to us, (b) our being
satisfied with the results of our
continuing due diligence review of the Company
and discovering no information in the
course of our due diligence or otherwise
that we reasonably believe has a materially
adverse impact on any of the items
in (a) above, (c) the information provided
by the
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Company as described above being correct in
all material respects, and (d) the
conditions to be set forth in the loan
documents being satisfied. We note that
the commitments of prospective lenders will
be conditioned on their satisfaction
with their own due diligence reviews.
Our commitment is also conditioned on the
negotiation, execution and delivery of
loan documents acceptable to you, us, the
other lenders and respective counsel,
not later than February 28, 2005. The Term
Sheet does not include all of the
conditions, business and financial
covenants, representations, warranties,
defaults, definitions and other terms to be
contained in the loan documents,
some of which must still be developed and
agreed upon.
SYNDICATION. We intend to commence
syndication efforts promptly after you sign
this letter. You agree to cooperate with us
in good faith toward a successful
Closing and to take all actions we
reasonably request of you to assist us in
forming a syndicate of lenders and
completing a syndication satisfactory to us,
in consultation with you and with your
approval of the identities of the lenders
in the syndicate. These actions will
include (a) providing us with all
information we consider reasonably
necessary, and in the form we reasonably
request, including information and
projections relating to the Financing and its
uses, (b) assisting us in preparing an
information memorandum for use in
connection with the syndication, and
verifying the information contained
therein, (c) making senior officers and
representatives of the Company available
during the syndication to make
presentations concerning the business and
prospects of the Company at one or more
meetings and conference calls we may
arrange with prospective lenders, and (d)
providing assistance to us in
obtaining ratings from rating agencies
prior to the Closing. The content of the
information memorandum will be subject to
your approval prior to distribution.
You also agree to refrain from any activity
in the bank loan syndication market
and the private placement market from the
date you sign this letter until the
date the Closing occurs and the syndication
has been successfully completed or
this letter is terminated in accordance
with the provisions herein.
You represent and warrant (in the case of
industry information, to the best of
your knowledge) that (a) all information
(other than financial projections) that
you or your representatives have provided
or will provide to us or any
prospective lender is, or when provided
will be, correct in all material
respects and does not, or when provided
will not, contain any untrue statement
of a material fact or omit to state a
material fact necessary in order to make
the statements contained therein not
materially misleading in light of the
circumstances under which they are made,
and (b) all financial projections that
have been or will be so provided have been
or will be prepared in good faith
based on reasonable assumptions (it being
understood that assumptions as to
future results are inherently subject to
uncertainty and contingencies, many of
which are beyond your control, and that no
assurance can be given that any
particular projections will be realized).
You agree to supplement such
information and projections from time to
time before the Closing and during the
syndication so that these representations
and warranties remain correct. We will
use the information and projections without
independent verification in
syndicating the Financing.
INDEMNIFICATION AND EXPENSES. You agree to
indemnify and hold harmless us, the
prospective lenders and our and their
respective directors, officers, employees,
agents, attorneys and affiliates (each, an
"indemnified person") from and
against all losses, claims, damages,
liabilities and expenses which may be
incurred by or asserted against an
indemnified person in connection with or
arising out of this letter, the Financing,
the use of the proceeds thereof, or
any related transaction, regardless of
whether the indemnified person is a party
thereto, and to reimburse each indemnified
person on demand for all reasonable
out-of-pocket legal and other expenses
incurred in connection with investigating
or defending any of the
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foregoing, provided that this indemnity
will not, as to any indemnified person,
apply to losses, claims, damages,
liabilities or expenses arising from the
willful misconduct or gross negligence of
such indemnified person or any breach
by such indemnified person of its
obligations under this letter. No party hereto
will be liable to any other party hereto
for indirect or consequential damages
relating to any such matters. You also
agree to pay all of our reasonable
out-of-pocket expenses (including fees and
expenses of our outside counsel)
incurred in connection with preparing,
negotiating and enforcing this letter and
the loan documents, conducting the due
diligence reviews, syndicating the
Financing and related matters.
GENERAL. Your obligations to pay the
expenses set forth in the last sentence
under Indemnification and Expenses above
will survive the Closing or the
expiration or termination of our
commitments in this letter. Your
representations and warranties under
Syndication above, and your indemnification
obligations under Indemnification and
Expenses above, will be superseded at the
Closing by the representations and
warranties and indemnification provisions,
respectively, in the loan documents.
This letter may be terminated by the
Company at any time, in its sole
discretion, and without any further
liability except under the first sentence
under Indemnification and Expenses above
and the fourth full paragraph on this
page (relating to confidentiality).
This letter is supplemented by a separate
fee letter dated the date hereof from
us to you (the "Fee Letter"). This letter
and the Fee Letter constitute the
entire understanding of the parties hereto
with respect to the subject matter
hereof and supersede all prior and current
understandings and agreements,
whether written or oral. Any changes to
this letter or the Fee Letter must be
agreed in writing by the parties hereto.
This letter and the Fee Letter may be
executed in any number of counterparts (and
delivery of an executed counterpart
by telecopier will be effective as delivery
of a manually executed counterpart),
which together will constitute one
agreement, and will be governed by and
construed in accordance with the internal
laws of the State of New York. The
parties hereto hereby waive any right to
trial by jury with respect to any
claim, action, suit or proceeding arising
out of or contemplated by this letter
and/or the Fee Letter.
You agree not to disclose this letter, the
Fee Letter or any of their terms,
directly or indirectly, to any person other
than your employees, agents and
advisors who are directly involved in the
Financing or related transactions and
agree not to disclose the same, or as may
be required by law (in which case you
agree to inform us promptly thereof);
provided that after you sign and return
this letter and the Fee Letter, the
foregoing restrictions will cease to apply
to this letter but continue to apply to the
Fee Letter. This letter is for your
benefit only and may not be relied upon by,
and does not create any rights in
favor of, any other person or entity,
including those who are authorized to
receive copies hereof.
If you are in agreement with the foregoing,
please sign and return to us a copy
of this letter and the Fee Letter, no later
than 5:00 p.m., Pacific time, on
January 12, 2005. Our commitment and other
agreements herein will expire at that
time if by then we have not received such
signed letters.
We look forward to working with you on this
transaction.
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Very truly yours,
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By: /s/ Alex Y. Kim
-----------------------
Name: Alex Y. Kim
Title: Vice President
Accepted and agreed to:
LIBERTY GROUP OPERATING, INC.
By: /s/ Ken Serota
-------------------------
Name: Ken Serota
Title: President and Chief Executive
Officer
Dated: January 12, 2005
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EXHIBIT A
LIBERTY GROUP OPERATING, INC.
SUMMARY OF TERMS AND CONDITIONS
$330,000,000 SENIOR SECURED CREDIT FACILITIES
I. THE SENIOR CREDIT
FACILITIES
Borrower:
Liberty Group Operating, Inc.
Guarantors:
All existing and future subsidiaries of the
Borrower (the "Guarantors" and together with the
Borrower, the "Credit Parties"); provided,
however, that non-U.S. subsidiaries shall only be
required to deliver guarantees to the extent it
would not result in material increased tax
liabilities for the Credit Parties.
Sole Lead Arranger and Book Wells Fargo Bank,
National Association ("Wells
Runner:
Fargo," the "Lead Arranger").
Administrative Agent:
Wells Fargo (the "Administrative Agent").
Collateral Agent:
Wells Fargo (the "Collateral Agent").
Lenders:
Wells Fargo and a syndicate of financial
institutions and other accredited investors (the
"Lenders").
Closing Date:
The date the initial loans are made under the
Senior Credit Facilities.
Type and Amount:
Revolver: A $50,000,000 senior secured revolving
credit facility (the "Revolver" or "Revolving
Loans"). The Revolver will also be available for
standby and commercial letters of credit. In
addition, a portion of the Revolver in an amount
to be agreed upon shall be available for swing
line advances (the "Swingline Loans"). Swingline
Loans will constitute usage under the Revolver
(except for purposes of computing the Commitment
Fee, as defined below) and will reduce
availability of the Revolving Loans and the
letters of credit dollar-for-dollar.
Term Loan: A $280,000,000 senior secured term
loan facility (the "Term Loan" and together with
the Revolver, the "Senior Credit Facilities"),
provided in two tranches. "Tranche B-1" of the
Term Loan may be in an aggregate amount of up to
$80,000,000 and shall
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be drawn in full on the Closing Date. "Tranche
B-2" of the Term Loan may be in an aggregate
amount of up to $210,000,000 and shall be drawn
in full in a single drawing on a date that is not
more than 60 days from the Closing Date, in
connection with redemption of the Senior
Subordinated Notes, Holdings Senior Discount
Notes and Holdings Preferred Stock.
Notwithstanding the above, the final aggregate
amount of the Tranche B-1 Term Loan and the
Tranche B-2 Te
