Term Sheet — First Lien Term Loan and ABL Credit Facilities
(Exhibit A to Commitment Letter)

Summary

This template is a term sheet for a term loan facility and an asset-based loan (ABL) facility in an acquisition financing. It is an exhibit to the commitment letter. This template includes practical guidance, drafting notes, and alternate and optional clauses. This template is meant to be used together with the template Commitment Letter (Fully Underwritten Commitment). If the transaction is a simple refinancing or does not involve an acquisition, this form should be modified to remove references to the "Acquisition" and the "Acquired Business." While this term sheet includes terms that are typical for an acquisition financing, it should be tailored to conform to the terms of your specific transaction. Note that the financial institution acting as lead arranger will generally use its own form commitment letter and term sheet, which may have different language and/or additional conditions specific to its form. This term sheet template is for a syndicated U.S. dollar-denominated loan (with an option for alternative currencies) governed by New York law. It assumes a holding company structure with one borrower and includes first lien term loans (divided into two tranches – Term Loan A and Term Loan B) and a first lien asset-based revolving credit facility, with sublimits for letters of credit and swingline loans. The revolving facility here is structured as an ABL. For a term sheet with a term loan and revolver that is not structured as an ABL, see the template of a Term Sheet — First Lien Term Loan and Revolving Credit Facilities. For additional resources and general guidance on commitment letters and term sheets, see Commitment Papers Resource Kit and Commitment Letter and Term Sheet Provisions. For current trends in publicly filed commitment letters, see Market Trends 2023/24: Commitment Letter Provisions and Market Trends 2023/24: Commitment Letter Term Sheet Provisions. In the case of an acquisition financing, see Market Trends 2022/23: Commitment Letters for Acquisition Financing. While this term sheet includes terms that are typical for an acquisition financing, it should be tailored to conform to the terms of your specific transaction. For example, the ABL facility and the term loan facility are sometimes documented under separate agreements. The drafting notes in this template indicate how such differences should be addressed. See the following practice notes for background on the ABL concepts discussed in this template: • Asset-Based Lending vs. Leveraged Finance • Accounts Receivable Eligibility Criteria • Advance Rates for Eligible Assets — Accounts Receivable Advance Rate • Advance Rates for Eligible Assets — Inventory Advance Rate • Reporting Requirements, Field Examinations, and Appraisals • Cash Dominion • Negative Covenant Baskets: Use of Payment Conditions These ABL terms are also demonstrated in: • Borrowing Base Definition (Asset-Based Loan Agreement) • Eligible Account Definition (Asset-Based Loan Agreement) • Eligible Inventory Definition (Asset-Based Loan Agreement) • Eligible Equipment Definition (Asset-Based Loan Agreement) • Reserves Definition Clause (Asset-Based Loan Agreement) • Permitted Discretion Clauses (Asset-Based Loan Agreement) For a full listing of key content covering finance fundamentals, see Finance Fundamentals Resource Kit. For a full listing of key content covering asset-based lending, including agreements, security, guaranties, perfection, and priorities, see Asset-Based Lending Resource Kit.