================================================================= FINOVA BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2001 (ISSN XXXX-XXXX) March 8, 2001 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- FINOVA BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, On an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue. Reproduction of FINOVA BANKRUPTCY NEWS is prohibited without permission. ================================================================= IN THIS ISSUE ------------- [00001] BACKGROUND & DISCRIPTION OF FINOVA [00002] COMPANY'S BALANCE SHEET AT SEPTEMBER 30, 2000 [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING [00004] FINOVA DEBTORS' CHAPTER 11 DATABASE [00005] LIST OF THE FINOVA GROUP'S 20 LARGEST UNSECURED CREDITORS [00006] LIST OF FINOVA CAPITAL'S 20 LARGEST UNSECURED CREDITORS [00007] PRESS RELEASES SUMMARIZING BERCADIA'S COMMITMENT [00008] THE BERCADIA $6,000,000,000 LOAN COMMITMENT LETTER [00009] TERM SHEET SUMMARIZING $6,000,000,000 BERCADIA FINANCING [00010] TERMS OF NEW $5,000,000,000 FNV SENIOR SECURED NOTES [00011] LEUCADIA/FINOVA MANAGEMENT SERVICE AGREEMET KEY DATE CALENDAR ----------------- 03/07/01 Voluntary Petition Date 03/22/01 Deadline for filing Schedules of Assets and Liabilities 03/22/01 Deadline for filing Statement of Financial Affairs 03/22/01 Deadline for filing Lists of Leases and Contracts 03/27/01 Deadline to provide Utilities with adequate assurance 05/06/01 Deadline to make decisions about lease dispositions 06/05/01 Deadline to removal actions pursuant to F.R.B.P. 9027 07/05/01 Expiration of Debtors' Exclusive Plan Proposal Period 08/31/01 Bercadia's Drop-Dead Date for $6 Billion Loan Closing 09/03/01 Expiration of Debtors' Exclusive Solicitation Period 03/07/03 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00000] HOW TO ORDER A SUBSCRIPTION TO FINOVA BANKRUPTCY NEWS ----------------------------------------------------------------- FINOVA BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is $45 per issue. Newsletters are delivered via e-mail; invoices, transmitted with each newsletter issue, arrive by fax. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving FINOVA BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 24 Perdicaris Place Trenton, NJ 08618 Telephone (609) 392-0900 Fax (609) 392-0040 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990. Currently, we provide similar coverage about the chapter 11 cases involving Bridge Information Systems, ICG Communications, LTV, Wheeling-Pittsburgh, Safety- Kleen, Owens Corning, Armstrong World Industries, Lernout & Hauspie & Dictaphone, Fruit of the Loom, Pillowtex, Imperial Sugar, Vlasic Foods, The Loewen Group International, Inc., Harnischfeger Industries, Inc., Vencor, Inc., Sun Healthcare Group, Inc., Mariner Post-Acute & Mariner Health, and Integrated Health Services. ================================================================= [ ] YES! Please enter my personal subscription to FINOVA BANKRUPTCY NEWS. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- ----------------------------------------------------------------- [00001] BACKGROUND & DISCRIPTION OF FINOVA ----------------------------------------------------------------- THE FINOVA GROUP, INC. 4800 N. Scottsdale Rd. Scottsdale, AZ 85251-7623 Telephone 480-636-4800 Fax 480-636-5726 http://www.finova.com Calling itself The Capital Source for Midsize Business(R), The FINOVA Group Inc. (NYSE: FNV), through its principal operating subsidiary, FINOVA Capital Corporation, is one of the largest financial services companies in the U.S. primarily focused on providing a broad range of capital solutions to midsize business. Headquartered in Phoenix with business development offices throughout the U.S. and in London, U.K., and Toronto, Canada, FINOVA, which stands for "financial innovators," operates through 12 business units, falling within one of 3 market groups: (A) COMMERCIAL FINANCE * REDISCOUNT FINANCE offers revolving credit facilities to the independent consumer finance industry including direct loan, automobile, mortgage and premium finance companies. Typical transaction sizes range from $1 million to $35 million. (B) SPECIALTY FINANCE * COMMERCIAL EQUIPMENT FINANCE offers equipment leases and loans to a broad range of midsize companies. Specialty markets include emerging growth technology industries (primarily biotechnology), electronics, telecommunications, corporate aircraft, supermarket/specialty retailers and most heavy industries. Typical transaction sizes range from $1 million to $20 million. * COMMUNICATIONS FINANCE specializes in term financing to advertising and subscriber-supported businesses, including radio and television broadcasting, cable television, paging, outdoor advertising, publishing and emerging technologies such as internet service providers and competitive local exchange carriers. Typical transaction sizes range from $3 million to $40 million. * FRANCHISE FINANCE offers equipment, real estate and acquisition financing for operators of established franchise concepts. Typical transaction sizes generally range from $500,000 to $40 million. * HEALTHCARE FINANCE offers a full range of working capital, equipment and real estate financing products for the U.S. healthcare industry. Transaction sizes typically range from $500,000 to $35 million. * PUBLIC FINANCE provides tax-exempt term financing to non- profit corporations, manufacturers and state and local governments. Typical transaction sizes range from $2 million to $15 million. * RESORT FINANCE focuses on construction, acquisition and receivables financing for timeshare resorts, second home communities and fractional interest resorts. Typical transaction sizes ranges from $5 million to $35 million. * SPECIALTY REAL ESTATE FINANCE provides senior term acquisition and bridge/interim loans from $5 million to $30 million or more for hotel and resort properties in the U.S., Canada and the Caribbean. Through this division, FINOVA also provides equity investments in credit-oriented real estate sale leasebacks. * TRANSPORTATION FINANCE structures equipment loans, leases and acquisition financing for commercial and cargo airlines worldwide, railroads and operators of other transportation- related equipment. Typical transaction sizes range from $5 million to $30 million. Through FINOVA Aircraft Investors LLC, FINOVA also seeks to use its market expertise and industry presence to purchase, upgrade and remarket used commercial aircraft. (C) CAPITAL MARKETS * INVESTMENT ALLIANCE provides equity and debt financing for midsize businesses in partnership with institutional investors and selected fund sponsors. Typical transaction sizes range from $2 million to $15 million. * MEZZANINE CAPITAL provides secured subordinated debt with warrants to midsize North American companies for expansion capital, buyouts or recapitalizations. Typical transaction sizes range from $2 million to $15 million. * REALTY CAPITAL provides commercial real estate bridge/interim mortgage loans and capital markets-funded commercial real estate loans. Typical transaction sizes range from $1 million to $25 million. ----------------------------------------------------------------- [00002] COMPANY'S BALANCE SHEET AT SEPTEMBER 30, 2000 ----------------------------------------------------------------- THE FINOVA GROUP INC. CONDENSED CONSOLIDATED BALANCE SHEETS At September 30, 2000 (Unaudited) ASSETS: Cash and cash equivalents $ 708,151,000 Investment in financing transactions: Loans and other financing contracts 8,463,413,000 Leveraged leases 816,956,000 Operating leases 565,514,000 Direct financing leases 588,219,000 ---------------- 10,434,102,000 Less reserve for credit losses (257,702,000) ---------------- Net investment in financing transactions 10,176,400,000 Investments 440,017,000 Goodwill, net of accumulated amortization 242,838,000 Other assets 331,431,000 Investment in discontinued operations 1,457,897,000 ---------------- $ 13,356,734,000 ================ LIABILITIES: Accounts payable and accrued expenses $ 116,361,000 Interest payable 126,595,000 Senior debt 11,271,980,000 Deferred income taxes 299,617,000 ---------------- 11,814,553,000 ---------------- Commitments and contingencies Company-obligated mandatory redeemable convertible preferred securities of subsidiary trust solely holding convertible debentures of FINOVA, net of expenses ("TOPrS") 111,550,000 SHAREOWNERS' EQUITY: Common stock, $0.01 par value, 400,000,000 shares authorized, and 64,849,000 shares issued 648,000 Additional capital 1,107,205,000 Retained income 435,666,000 Accumulated other comprehensive income 53,750,000 Common stock in treasury, 3,546,000 shares (166,638,000) ---------------- $ 1,430,631,000 ---------------- $ 13,356,734,000 ================ ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING ----------------------------------------------------------------- FINOVA Group Inc. Files Chapter 11 to Implement Debt Restructuring Company Has $1 Billion Cash With Which to Operate SCOTTSDALE, Arizona -- March 7, 2001 -- The FINOVA Group Inc. (NYSE: FNV), a diversified financial services company, and eight of its subsidiaries, including FINOVA Capital Corporation, today voluntarily filed to reorganize their debt under Chapter 11 of the U.S. Bankruptcy Code. The action is part of an agreement announced last week in which Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) and Leucadia National Corporation (NYSE: LUK; PCX) would provide FINOVA Capital a $6 billion loan in connection with the restructuring of the company's outstanding bank and publicly traded debt. The petitions were filed in the Bankruptcy Court for the District of Delaware in Wilmington. Subject to Court approval, FINOVA Capital will use proceeds of the $6 billion senior secured five-year term loan to pay down, at par value, its existing bank and publicly traded indebtedness on a pro rata basis. Under the agreement with Berkshire Hathaway and Leucadia, and pending Court approval, the balance of FINOVA Capital's bank and bond indebtedness will be restructured into approximately $5 billion of new senior notes of FINOVA. In addition to The FINOVA Group Inc. and FINOVA Capital Corporation, the filing entities include: FINOVA (Canada) Capital Corporation; FINOVA Capital plc; FINOVA Loan Administration Inc.; FINOVA Mezzanine Capital Inc.; FINOVA Portfolio Services, Inc.; FINOVA Technology Finance, Inc.; and FINOVA Finance Trust. No other FINOVA subsidiaries are included in the filing. The FINOVA Group Inc. and its filing subsidiaries listed assets of $12.5 billion and liabilities of $11.4 billion, primarily in bank and publicly traded debt securities. According to William J. Hallinan, FINOVA's newly appointed president and chief executive officer, "It will be business as usual at FINOVA. The company has positive cash flow and $1 billion in cash on hand to continue funding operations throughout the reorganization period. We will be open for business as usual and, pending Court approval, which we anticipate later today, employees will be paid their usual salary." The company said that it is seeking immediate permission from the Court to continue honoring all customer commitments, and that it has also asked Court permission to pay its offshore vendors in the ordinary course of business. The company has also requested Court approval to pay claims of trade creditors that continue customary terms in the ordinary course of business. The FINOVA Group Inc., through its principal operating subsidiary, FINOVA Capital Corporation, is a financial services company focused on providing a broad range of capital solutions primarily to midsize business. FINOVA is headquartered in Scottsdale, Ariz., with business development offices throughout the U.S. and London, U.K., and Toronto, Canada. For more information, visit the company's website at http://www.FINOVA.com, or call (480) 636-5800. ----------------------------------------------------------------- [00004] FINOVA DEBTORS' CHAPTER 11 DATABASE ----------------------------------------------------------------- LEAD DEBTOR: The FINOVA Group Inc. DEBTOR-AFFILIATES FILING SEPARATE CHAPTER 11 PETITIONS: FINOVA Capital Corporation FINOVA (Canada) Capital Corporation FINOVA Capital plc FINOVA Loan Administration Inc. FINOVA Mezzanine Capital Inc. FINOVA Portfolio Services Inc. FINOVA Technology Finance Inc. FINOVA Finance Trust COURT: United States Bankruptcy Court District of Delaware 824 Market Street, 6th Floor Wilmington, DE 19801 JUDGE: The Honorable Peter J. Walsh CIRCUIT: Third CASE NUMBERS: 01-00697 through 01-00705, inclusive PETITION DATE: March 7, 2001 OFFICER SIGNING DEBTOR'S PETITION: William J. Hallinan President, CEO, General Counsel & Secretary DEBTORS' COUNSEL: Jonathan M. Landers, Esq. Gibson, Dunn, & Crutcher LLP MetLife Building 200 Park Avenue New York, New York 10166 Telephone (212) 351-4000 Fax (212) 351-4035 and Skadden, Arps, Slate, Magher & Flom LLP Four Times Square New York, New York 10036 and Mark D. Collins, Esq. Richards Layton & Finger, P.A. P.0. Box 551 Wilmington, DE 19899-0551 Telephone (302) 658-6541 Fax (302) 658-6548 REPORTED FINACIAL CONDITION As of December 31, 2000: Total Assets: $12,455,395,000 Total Debts: $11,378,286,000 ----------------------------------------------------------------- [00005] LIST OF THE FINOVA GROUP'S 20 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ State Street Bank Debt Securities $115,000,000 225 Asylum Street Hartford, CT 06103 Contact: Michael Hopkins Trustee P(860)244-1820 F(860)244-1889 Deutsche Capital Markets Swap Counterparty $8,000,000- 31 West 52nd Street 9,000,000 17th Floor New York, NY 10019 Contact: ABS Department Fax: (212)469-5160 State Street Bank Annual Trustee fees $5,100,000 P.O. Box 5390 Boston, MA 02206 Contact: Trustee P: (617)662-1386 F: (617)662-1441 First Union National Bank Annual Trustee fees $1,600,000 1525 West W.T. Harris Blvd. 3C3, Charlotte NC 28288 Contact: Steve Kaba P: (302) 888-7530 F: (302) 888-7544 First Union National Bank Annual Trustee Fees $50,000 NC1156 Benefit Services Group 401 South Tryon, TH14 Charlotte, NC 28288-1156 Contact: Jon Yancey Trustee P: (704) 374-3412 F: (704) 383-5144 ----------------------------------------------------------------- [00006] LIST OF FINOVA CAPITAL'S 20 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ Wilmington Trust Debt Securities $4,380,000,000 Rodney Square North Issued Under 1100 North Market Street Multiple Indentures Wilmington, DE 19890-0001 Contact: Steven Cimalore T: (302)651-8681 F: (302)427-4749 The Bank Of New York Debt Securities $980,000,000 101 Barclay Street Issued Under Indenture New York, NY 10286 Contact: Walter Gitlin T: (212)815-5375 F: (212)815-5915 Chase Manhattan Bank Debt Securities $481,690,000 (London) Issued Under Indenture 1 Chaseside Bournemouth, UK BH7 7DB Contact: Mark Storey T: 44-1-202-347-436 F: 44-1-202-347-438 US Bank Trust National Debt Securities $305,680,000 Association Issued Under Indenture 101 N. First Avenue Suite 2000 Phoenix, AZ 85003 Contact: Robert Von Hess T: (602)371-3568 F: (602)371-3728 Bank Of America Bank Loans $295,000,000 901 Main Street Dallas, TX 75202-3714 Contact: Elizabeth Kurileez T: (214)209-0975 F: (214)209-0604 The Chase Manhattan Bank Bank Loans $262,500,000 380 Madison Avenue New York, NY 10017-2513 Contact: Craig Moore T: (212)622-4874 F: (212)270-4873 Credit Suisse First Boston Bank Loans $259,500,000 11 Madison Avenue 20th Floor New York, NY 10010 Contact: Jay Chall T: (212)325-9010 F: (212)325-8320 HSBC Debt Securities $230,000,000 140 Broadway Issued Under Indenture 12th Floor Issuer Services Dept. New York, NY 10005 Contact: Russ Palladino T: (212)658-6041 F: (212)658-6425 Bank One Bank Loans $217,500,000 1 First National Plaza Suite 0084 Chicago, IL 60670-0084 Contact: Thomas Bower T: (312)732-6904 F: (312)732-1775 Westdeutsche Landesbank Bank Loans $215,000,000 Girozentrale 1211 Avenue of the Americas 24th Floor New York, NY 10036 Contact: Ray Miller T: 212-852-6160 F: 212-852-6148 Citicorp Securities, Inc. Bank Loans $201,250,000 599 Lexington Avenue New York, NY 10043 Contact: Peter Nathanial T: 212-559-8623 F: 212-793-0642 The Bank Of Nova Scotia Bank Loans $192,500,000 New York Agency One Liberty Plaza New York, NY 10006 Contact: Ronald Dooley T: 212-225-5228 F: 212-225-5205 Commerzbank, AG Bank Loans $170,000,000 2 World Financial Center 32nd Floor New York, NY 10281 Contact: Mary Harold T: 212-266-7509 F: 212-266-7595 Credit Lyonnaise Bank Loans $157,500,000 Financial Institutions Dept. 1301 Avenue of the Americas New York, NY 10019 Contact: Sebastian Rocco T: 212-261-7360 F: 212-261-7348 Deutsche Bank AG Bank Loans $157,500,000 31 West 52nd Street New York, NY 10019 Contact: Suzanne R. Kissling T: 212-469-8100 F: 212-469-8108 Dresdner Bank AG Bank Loans $157,500,000 New York Branch 75 Wall Street New York, NY 10005 Contact: Lloyd C. Stevens T: 212-429-2229 F: 212-429-2524 Bank Of Montreal Bank Loans $137,500,000 115 South LaSalle Street 12 West Chicago, IL 60603 Contact: Geoffrey R. McConnel T: 312-750-8702 F: 312-750-6065 ABN AMRO Bank NV Bank Loans $127,500,000 10 East 53rd Street 37th Floor New York, NY 10022 Contact: William J. Fitzgerald T: (212)891-0626 F: (212)891-0651 BH Finance LLC Bank Loans $127,500,000 c/o Berkshire Hathaway Inc. 1440 Kiewit Plaza Omaha, NB 68131 Contact: Mark Millard T: 402-346-1400 F: 402-346-3375 Barclays Bank PLC Bank Loans $125,000,000 222 Broadway, 8th Floor New York, NY 10038 Contact: Eric Jaeger T: 212-412-2973 F: 212-412-5610 ----------------------------------------------------------------- [00007] PRESS RELEASES SUMMARIZING BERCADIA'S COMMITMENT ----------------------------------------------------------------- The FINOVA Group Inc. Announces Agreement with Berkshire Hathaway Inc. and Leucadia National Corporation for $6 Billion Loan Commitment FINOVA Capital Corporation Announces Moratorium on Principal Repayments SCOTTSDALE, Arizona, Omaha, Nebraska and New York, New York -- Feb. 27, 2001 -- The FINOVA Group Inc. (NYSE: FNV), Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) and Leucadia National Corporation (NYSE and PCX: LUK) announced today that they have entered into an agreement for a $6 billion loan to FINOVA Capital Corporation, the principal operating subsidiary of The FINOVA Group Inc., in connection with a restructuring of all of FINOVA Capital?s outstanding bank and publicly traded debt securities. The restructuring will be accomplished pursuant to proceedings under Chapter 11 of the United States Bankruptcy Code. FINOVA expects to file a petition for reorganization under Chapter 11 in the near future. Subject to necessary approval of creditors and the court, FINOVA Capital will use proceeds of this $6 billion senior secured five year term loan to pay down, at par value, its existing bank and publicly traded indebtedness on a pro rata basis. The balance of FINOVA Capital?s bank and bond indebtedness will be restructured into approximately $5 billion of new senior notes of FINOVA. The $6 billion loan will be made by Berkadia LLC, an entity formed for this purpose and owned jointly by Berkshire Hathaway and Leucadia. Berkadia has received a $60 million commitment fee and, in addition to certain other fees, will receive an additional $60 million fee upon funding under the agreement. Berkadia?s commitment for the loan has been guaranteed by Berkshire Hathaway and Leucadia and expires on August 31, 2001, or earlier, if certain conditions are not satisfied. Berkadia expects to finance its funding commitment and Berkshire Hathaway will provide Berkadia?s lenders with a 90% primary guarantee of such financing, with Leucadia providing a 10% primary guarantee and Berkshire providing a secondary guarantee of Leucadia?s guarantee. Upon completion of the reorganization as currently contemplated, Berkshire Hathaway and Leucadia together will receive common stock representing 51% of FINOVA?s outstanding shares and the public will retain its existing shares. Berkadia will be entitled to designate a majority of FINOVA?s board of directors. FINOVA currently has cash on hand of approximately $1 billion, which will be available in the bankruptcy proceedings to address commitments to customers, operating expenses, claims and expenses of the bankruptcy and expenses related to the consummation of the restructuring. In connection with the agreements, FINOVA and Leucadia have entered into a 10-year management agreement under which Leucadia is providing general management services to FINOVA in exchange for an $8 million annual fee. Lawrence S. Hershfield, an executive of Leucadia, has been appointed Chief Restructuring Officer of FINOVA and will work closely with a special committee of FINOVA's board of directors to complete the restructuring. Completion of the transaction is subject to negotiation and approval of definitive loan documentation, Berkadia's approval of the terms and conditions of FINOVA's restructuring plan and bankruptcy court and necessary creditor approval of the plan of reorganization. In connection with the agreements, FINOVA Capital announced a moratorium on repayment of principal on its outstanding bank and bond debt. The purpose of the moratorium is to help assure that all creditors are treated equitably in the debt restructuring process. It is the company's intention to schedule a meeting with creditors in the near future. * * * Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities. The most important of these businesses is the property and casualty insurance business conducted on both a direct and reinsurance basis through a number of subsidiaries. Leucadia National Corporation is a holding company for its consolidated subsidiaries engaged in property and casualty insurance (through Empire Insurance Company and Allcity Insurance Company), manufacturing (through its Plastics Division), banking and lending (principally through American Investment Bank, N.A.) and mining (through MK Gold Company). THE FINOVA GROUP INC. PROVIDES ADDITIONAL DETAILS REGARDING PROPOSED DEBT RESTRUCTURING SCOTTSDALE, Arizona -- February 28, 2001 -- The FINOVA Group Inc. (NYSE:FNV) announced yesterday a $6 billion loan commitment from Berkshire Hathaway Inc., Leucadia National Corporation and Berkadia LLC to FINOVA Group's principal subsidiary, FINOVA Capital Corporation, in connection with a restructuring of all of FINOVA Capital's outstanding bank and publicly traded debt securities. The information in this press release is intended to provide additional details regarding the proposed restructuring. As previously disclosed, the restructuring will be accomplished pursuant to proceedings under Chapter 11 of the United States Bankruptcy Code. In order to facilitate the restructuring, FINOVA Group expects that FINOVA Group, FINOVA Capital and certain other subsidiaries, including FINOVA Finance Trust, will file petitions for Chapter 11 reorganization. Subject to necessary approval of creditors and the bankruptcy court, FINOVA Capital will use proceeds of the $6 billion senior secured five-year term loan to pay down, at par value, its existing bank and publicly traded indebtedness on a pro rata basis. The balance of FINOVA Capital's bank and bond indebtedness will be restructured into approximately $5 billion of new ten-year senior notes of FINOVA Group. * * * The term loan will be secured by all assets of FINOVA Capital and will bear interest at an annual rate equal to the greater of 9% or LIBOR plus 3%. Interest on the term loan will be payable quarterly. In addition, an annual facility fee will be payable at the rate of 25 basis points on the outstanding principal amount of the term loan. After payment of accrued interest on the term loan and operating and other corporate expenses, providing for reserves and payment of accrued interest on the FINOVA Group senior notes, 100% of excess cash flow and net proceeds from asset sales will be used to make mandatory prepayments of principal on the term loan without premium. Any remaining principal and accrued and unpaid interest on the term loan will be due at maturity. The term loan will be guaranteed on a secured basis by FINOVA Group and substantially all subsidiaries of FINOVA Group and FINOVA Capital. The senior notes will bear interest, payable semi-annually out of available cash, at the weighted average rate of FINOVA Capital's currently outstanding bank and bond debt and will be secured by a second priority security interest in the stock of FINOVA Capital and FINOVA Group's other assets. Enforcement of the senior note security interests will not be allowed until the term loan is paid in full. Available cash from FINOVA Capital, after paying accrued interest on the term loan and operating and other corporate expenses and providing for reserves, will be used to pay accrued interest on the senior notes. No payments of principal will be made on the senior notes until the term loan is paid in full. After payment in full of the term loan, available cash flow from FINOVA Capital, after paying operating and other corporate expenses, providing for reserves and paying accrued interest on the senior notes, will be used first to fund a reserve to pay dividends on FINOVA Group's outstanding Trust Originated Preferred Securities and then to make semi-annual prepayments of principal on the senior notes and distributions to FINOVA Group common stockholders. 95% of the remaining available cash will be used for principal payments on the senior notes and 5% will be used for distributions to stockholders. After payment in full of the outstanding principal of the senior notes, 95% of any available cash of FINOVA Capital will be used to pay additional interest to senior noteholders in an aggregate amount up to $100 million. ----------------------------------------------------------------- [00008] THE BERCADIA $6,000,000,000 LOAN COMMITMENT LETTER ----------------------------------------------------------------- BERKSHIRE HATHAWAY INC. LEUCADIA NATIONAL CORPORATION 1440 KIEWIT PLAZA 315 PARK AVENUE SOUTH OMAHA, NEBRASKA 68131 NEW YORK, NEW YORK 10010 BERKADIA LLC 1440 KIEWIT PLAZA OMAHA, NEBRASKA 68131 February 26, 2001 The FINOVA Group Inc. 4800 North Scottsdale Road Scottsdale, Arizona 85251-7623 Attention: Matthew M. Breyne President FINOVA Capital Corporation 4800 North Scottsdale Road Scottsdale, Arizona 85251-7623 Attention: Matthew M. Breyne President COMMITMENT LETTER $6,000,000,000 SENIOR SECURED CREDIT FACILITY Ladies and Gentlemen: You have advised us that The FINOVA Group Inc. ("FNV"), its subsidiary, FINOVA Capital Corporation (the "COMPANY" or the "BORROWER"), and certain affiliated entities each intend to file a petition for voluntary reorganization under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware and to seek confirmation of a chapter 11 plan having the principal terms outlined herein, or such other terms agreed to by the Company as are reasonably acceptable to both Berkshire Hathaway Inc. ("BERKSHIRE") and Leucadia National Corporation ("LEUCADIA") (the "PLAN") pursuant to which, among other things, the Company would repay approximately $6,000,000,000 of its existing pre-petition unsecured indebtedness (the "EXISTING DEBT REPAYMENT") with the proceeds of a $6,000,000,000 senior secured term loan facility (the "FACILITY") to be made available by Lender (as defined below) to the Company. You have advised us that the Existing Debt Repayment will be made pursuant to the Plan and that under the Plan, the unpaid portion of the Company's pre-petition indebtedness (after giving effect to the Existing Debt Repayment) will be restructured into new secured notes of FNV (the "SENIOR NOTES") as described herein. You have also advised us that simultaneous with the execution of this Commitment Letter (as defined herein), FNV is entering into a Management Services Agreement with Leucadia and Leucadia International Corporation dated the date of this Commitment Letter (the "MANAGEMENT AGREEMENT"). Leucadia and Berkshire have organized Berkadia LLC, a Delaware limited liability company owned jointly by them (the "LENDER"), whose performance hereunder is guaranteed by Berkshire and Leucadia. Berkshire guaranties 90% of Lender's commitments hereunder; Leucadia guaranties 10% of Lender's commitments hereunder; and Berkshire secondarily guaranties the 10% of Lender's commitments guaranteed by Leucadia. Leucadia shall have no obligation to FNV or the Company (or any affiliate of either FNV or the Company) with respect to the Facility (other than the guaranty of Lender's commitment stated in the immediately preceding sentence). Lender is pleased to inform you of its commitment to provide the entire amount of the Facility, subject to (i) the receipt by Lender in immediately available funds of the non-refundable commitment fee of $60,000,000 (the "COMMITMENT FEE") and (ii) the terms and conditions described in this letter and the attached [the Term Sheet] ("[the Term Sheet]," and together with this letter, the "COMMITMENT LETTER"). Until Lender has received payment in full of the Commitment Fee and Leucadia has received payment in full of the first Annual Management Fee (as defined in the Management Agreement), none of Lender, Berkshire nor Leucadia shall have any obligation to you with respect to the Facility. CONDITIONS PRECEDENT The commitment and other obligations of Lender hereunder are subject to: (i) the filing by the Company and FNV no later than March 8, 2001 of a petition for voluntary reorganization (each a "VOLUNTARY PETITION") under chapter 11 of title 11 of the United States Code, 11 U.S.C. Sections 101 et seq., with the United States Bankruptcy Court for the District of Delaware (and together with the United States District Court, the "BANKRUPTCY COURT"); (ii) the approval by the Bankruptcy Court, on or before the day an order is issued by the Bankruptcy Court approving a disclosure statement for the Company and FNV, which shall be no later than 130 days from the date hereof (the "DISCLOSURE STATEMENT APPROVAL DATE"), of this Commitment Letter including all fees set forth herein (the "COMMITMENT LETTER APPROVAL") (such fees to include without limitation (x) the Company's payment of all reasonable fees incurred by Lender in connection with its financing of the Facility ("REIMBURSEMENT FEES") as and when such fees are incurred by Lender and reimbursement by the Company of the Reimbursement Fees to the extent incurred by Lender prior to such Bankruptcy Court Approval and (y) the Company's payment of a termination fee (the "TERMINATION FEE") of $60,000,000 to Lender if Borrower does not borrow under the Facility for any reason (including the termination of Lender's obligations under this Commitment Letter, whether or not the Facility agreements have been entered into), unless Borrower's failure to borrow is solely due to (a) the failure by Lender to fund the Facility in violation of its obligations hereunder or, (b) following confirmation of the Plan by the Bankruptcy Court, a Material Adverse Change (as defined in [the Term Sheet]) has occurred or a due diligence condition relating to environmental, insurance or employee matters has not been satisfied); (iii) the Management Agreement being in effect and there being no material breach by FNV thereunder; (iv) our reasonable satisfaction with, and the approval by the Bankruptcy Court of, (x) the Facility and the fees and transactions contemplated thereby, including, without limitation, the liens to be granted by the Company to secure the Facility, and the Definitive Documentation (as defined below) and (y) all actions to be taken, all undertakings to be made and obligations to be incurred by the Company in connection with the Facility and by the Company and FNV in connection with the Plan (all such approvals to be evidenced by the entry of one or more orders of the Bankruptcy Court reasonably satisfactory in form and substance to Lender, which orders shall, among other things, approve the payment by the Company of all unpaid fees that are provided for in [the Term Sheet], and such orders shall have become final and nonappealable); (v) the preparation, execution and delivery of mutually acceptable loan documentation, including, without limitation, a credit agreement containing terms consistent with the terms and conditions outlined in this Commitment Letter (the "DEFINITIVE DOCUMENTATION"); (vi) the absence of any change, occurrence or development that could, in our reasonable opinion, constitute a material adverse change in the business, condition (financial or otherwise), operations, performance, properties, assets, liabilities (actual or contingent) or prospects of FNV, the Company and each of their respective subsidiaries taken as a whole since December 31, 2000 (other than the commencement and continuation of the Chapter 11 cases and the consequences that would normally result therefrom); (vii) the accuracy and completeness in all material respects of all representations and warranties that you make to us and all information that you furnish to us and your compliance with the terms of this Commitment Letter; viii) the immediate payment in full of all fees, expenses and other amounts due and payable under this Commitment Letter; (ix) our not becoming aware after the date hereof of any information or other matter which in our reasonable judgment is inconsistent in a material and adverse manner with any information or other matter disclosed to us prior to the date hereof; (x) the satisfaction of the other conditions precedent to the closing of the Facility contained in [the Term Sheet]; and (xi) a closing of and borrowing under the Facility on or prior to August 31, 2001. COMMITMENT TERMINATION Lender's commitment set forth in this Commitment Letter will terminate on the earlier of (x) August 31, 2001, unless the Facility closes and funds on or before such date or (y) the Disclosure Statement Approval Date if the Commitment Letter Approval is not received from the Bankruptcy Court by the Disclosure Statement Approval Date. Prior to such termination, Lender's commitment set forth in this Commitment Letter may be terminated (i) by Lender if any event occurs or information has become available that, in its reasonable judgment, results in, or is likely to result in, the occurrence of any of the events referred to in clause (vi) of the paragraph captioned "CONDITIONS PRECEDENT" or the failure of any other condition referred to in the paragraph captioned "CONDITIONS PRECEDENT" or (ii) by Lender upon termination of the Management Agreement. FEES In addition to the fees described herein, you agree to pay the unpaid fees set forth in [the Term Sheet], including, without limitation, the Funding Fee (as defined therein), the Termination Fee, the Reimbursement Fees and the Facility Fee (as defined therein). You agree to seek the Commitment Letter Approval by the Bankruptcy Court, and shall use your best efforts to obtain the same on or before the Disclosure Statement Approval Date. If the Commitment Letter Approval is not received from the Bankruptcy Court by such date, Lender's entitlement to the Termination Fee shall be a general unsecured claim against the estates of the Company and FNV. Each of the fees described in this Commitment Letter shall be non-refundable when paid. INDEMNIFICATION You agree to indemnify and hold harmless Lender, Leucadia, Berkshire and each of their respective affiliates and each of their respective officers, directors, employees, members, managers, agents, advisors, attorneys and representatives (each, an "INDEMNIFIED PARTY") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel), whether joint or several, that may be incurred by or asserted or awarded against any Indemnified Party (including, without limitation, in connection with or relating to any investigation, litigation or proceeding or the preparation of any defense in connection therewith), in each case arising out of or in connection with or by reason of this Commitment Letter or any of the transactions contemplated hereby, or any actual or proposed use of the proceeds of the Facility, except to the extent such claim, damage, loss, liability or expense is found in a final non-appealable judgment by a court of competent jurisdiction (or admitted by an Indemnified Party pursuant to a written settlement agreement) to have resulted primarily from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Company, FNV, any of their respective directors, securityholders or creditors, an Indemnified Party or any other person, or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. You further agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to FNV, the Company or their respective securityholders or creditors for or in connection with the transactions contemplated hereby, except for direct damages (as opposed to special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings)) determined in a final non-appealable judgment by a court of competent jurisdiction (or admitted by an Indemnified Party pursuant to a written settlement agreement) to have resulted primarily from such Indemnified Party's gross negligence or willful misconduct and any liability of any Indemnified Party shall be limited to the amount of actual fees received by such Indemnified Party hereunder. Prior to Commitment Letter Approval by the Bankruptcy Court, this indemnification shall be a general unsecured claim against the estates of the Company and FNV. COSTS AND EXPENSES In further consideration of the commitment of Lender hereunder, and recognizing that in connection herewith Lender, Berkshire and Leucadia are incurring substantial costs and expenses in connection with the Facility and the preparation, negotiation, execution and delivery of this Commitment Letter, as well as in connection with any financing to be obtained by Lender in providing funds to you under the Facility, including, without limitation, reasonable fees and disbursements of counsel to Lender, Berkshire and Leucadia, filing and recording fees and due diligence, transportation, computer, duplication, messenger, appraisal, audit, insurance and consultant costs and expenses, you hereby agree to pay, or reimburse Lender, Berkshire and Leucadia on demand, upon presentation of reasonable documentation, for all such reasonable costs and expenses (whether incurred before or after the date hereof), regardless of whether any of the transactions contemplated hereby is consummated. You also agree to pay all reasonable costs and expenses of Lender, Berkshire and Leucadia (including, without limitation, reasonable fees and disbursements of counsel) incurred in connection with the enforcement of any of their respective rights and remedies hereunder. Prior to Commitment Letter Approval by the Bankruptcy Court, the claims of Lender, Berkshire and Leucadia hereunder shall be general unsecured claims against the estates of the Company and FNV. CONFIDENTIALITY Each of Lender, Berkshire and Leucadia agrees to keep confidential any information concerning FNV, the Company or their affiliates (whether prepared by FNV, the Company, their respective advisors or otherwise) which is furnished to Lender, Berkshire or Leucadia by or on behalf of FNV, the Company or their affiliates in connection with this Commitment Letter and the transactions contemplated hereby (herein collectively referred to as the "EVALUATION MATERIAL"); provided, however, that (i) any such information may be disclosed by Lender, Berkshire and Leucadia to their respective directors, officers, employees, representatives and advisors and their financing sources and the directors, officers, employees, representatives and advisors of such financing sources who need to know such information for the purpose of evaluating the transactions contemplated by this Commitment Letter (it being understood that such directors, officers, employees, representatives, advisors and financing sources shall be informed by Lender, Berkshire or Leucadia, as the case may be, of the confidential nature of such information and shall be directed to treat such information confidentially), (ii) any disclosure of such information may be made to which the Company consents in writing and (iii) Lender, Berkshire and Leucadia may make any public disclosures of such information as any of them is required by law or as part of the Chapter 11 cases to make. The term "EVALUATION MATERIAL" does not include information which (i) is already in the possession of Lender, Berkshire or Leucadia, provided that such information is not known by any such party to be subject to another confidentiality agreement with or other obligation of secrecy to FNV, the Company or another party, (ii) becomes generally available to the public other than as a result of a disclosure by Lender, Berkshire or Leucadia or their respective directors, officers, employees, agents or advisors, or (iii) becomes available to Lender, Berkshire or Leucadia on a non-confidential basis from a source other than FNV, the Company or its advisors, provided that such source is not known by Lender, Berkshire or Leucadia to be bound by a confidentiality agreement with or other obligation of secrecy to FNV, the Company or another party. Nothing contained herein shall prevent Lender, Berkshire or Leucadia from disclosing to each other the Evaluation Material. The obligations of Lender, Berkshire and Leucadia hereunder to keep confidential the Evaluation Material shall (i) survive for a period of eighteen (18) months following the expiration or termination of this Commitment Letter in accordance with its terms and (ii) supersede any and all prior agreements between any of the parties with respect to the subject matter hereof. Without limiting the generality of the foregoing, this Commitment Letter shall supercede in its entirety the agreement between FNV and Leucadia dated August 14, 2000. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY You represent and warrant that (i) all information, considered together in its entirety, that has been or will hereafter be made available to Lender, Berkshire or Leucadia by you or any of your representatives in connection with the transactions contemplated hereby 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 in order to make the statements contained therein not misleading in light of the circumstances under which such statements were or are made, (ii) all financial projections, if any, that have been or will be prepared by you and made available to Lender, Berkshire and Leucadia have been or will be prepared in good faith based upon assumptions that were reasonable as of the date of the preparation of such financial projections (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Company's control, and that no assurance can be given that the projections will be realized) and (iii) as of February 23, 2001, FNV and its consolidated subsidiaries had at least $1,100,000,000 of cash and cash equivalents on hand and such amounts will be used solely to fund, in whole or in part, legal commitments, normal operating expenses, the allowed claims against the debtors and expenses relating to the Chapter 11 proceedings and the expenses of the transactions contemplated by this Commitment Letter. You agree to provide such information and projections as reasonably requested by Lender, and to supplement such information and projections from time to time so that the representations and warranties contained in this paragraph remain correct in all material respects at all times. In issuing this Commitment Letter, Lender is relying on the accuracy of the information furnished to it or to Berkshire or Leucadia by or on behalf of the Company and its affiliates without independent verification thereof. NO THIRD PARTY ENFORCEMENT, ETC. The commitment of Lender hereunder is made solely for the benefit of FNV and the Company and may not be enforced by any other person. Please note that those matters that are not covered or made clear herein or in [the Term Sheet] are subject to mutual agreement of the parties. The parties hereto may not assign or delegate any of their respective rights or obligations hereunder without the prior written consent of Lender (on behalf on Lender, Berkshire and Leucadia) or FNV (on behalf of FNV and the Company), as the case may be, which may be withheld in such party's sole discretion; provided, however, that each of Lender, Berkshire and Leucadia may (without obtaining any consent) assign its rights or obligations under this Commitment Letter, in whole or in part, to any of their respective direct or indirect wholly owned subsidiaries. No assignment will relieve the assigning party of its obligations hereunder. The terms and conditions of this Commitment Letter may be modified only in writing signed by all parties hereto. This Commitment Letter is not intended to create a fiduciary relationship among the parties hereto, or between any of the Lender, Berkshire and Leucadia on the one hand, and any third parties, including creditors and stockholders of FNV, the Company and their respective subsidiaries, on the other hand. GOVERNING LAW, ETC. This Commitment Letter shall be governed by, and construed in accordance with, the law of the State of New York. This Commitment Letter sets forth the entire agreement between the parties with respect to the matters addressed herein and supersedes all prior communications, written or oral, with respect hereto. This Commitment Letter may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original and all of which, taken together, shall constitute one and the same Commitment Letter. Delivery of an executed counterpart of a signature page to this Commitment Letter by telecopier shall be as effective as delivery of a manually executed counterpart of this Commitment Letter. The paragraphs captioned "FEES", "INDEMNIFICATION", "COSTS AND EXPENSES," "CONFIDENTIALITY," "NO THIRD PARTY ENFORCEMENT," "GOVERNING LAW" and "WAIVER OF JURY TRIAL" shall survive the expiration or termination of this Commitment Letter. WAIVER OF JURY TRIAL EACH PARTY HERETO 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 THE COMMITMENT LETTER OR THE TRANSACTIONS CONTEMPLATED BY THE COMMITMENT LETTER OR THE ACTIONS OF ANY OF THE PARTIES HERETO OR ANY OF THEIR RESPECTIVE AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT OF THE COMMITMENT LETTER. Please indicate your acceptance of the provisions hereof by signing the enclosed copy of this Commitment Letter and returning it to Marc Hamburg, President, c/o Berkadia LLC, 1440 Kiewit Plaza, Omaha, Nebraska 68131 (telecopier: 402-346-3375) on February 26, 2001. Notwithstanding anything contained herein to the contrary, this Commitment Letter will not be effective, and neither the existence of this Commitment Letter nor the terms hereof shall be disclosed by you to any person (other than your officers, directors, employees, accountants, attorneys and other advisors, and then only on a "NEED TO KNOW" basis in connection with the transactions contemplated hereby and on a confidential basis), unless both the Commitment Fee is received by Lender and the first Annual Management Fee due upon execution of the Management Agreement is received by Leucadia at or before 2 p.m. (New York City time) on February 27, 2001. If you elect to deliver the Commitment Letter by telecopier, please arrange for the executed original to follow by next-day courier. Very truly yours, BERKADIA LLC By: /s/ Marc D. Hamburg ------------------------------------- Name: Marc D. Hamburg Title: President BERKSHIRE HATHAWAY INC. By: /s/ Marc D. Hamburg ------------------------------------- Name: Marc D. Hamburg Title: President LEUCADIA NATIONAL CORPORATION By: /s/ Joseph A. Orlando ------------------------------------- Name: Joseph A. Orlando Title: Vice President ACCEPTED this 26th day of February, 2001 THE FINOVA GROUP INC. FINOVA CAPITAL CORPORATION By: /s/ Matthew M. Breyne By: /s/ Matthew M. Breyne ---------------------- ------------------------- Name: Matthew M. Breyne Name: Matthew M. Breyne Title: President and CEO Title: President and CEO ----------------------------------------------------------------- [00009] TERM SHEET SUMMARIZING $6,000,000,000 BERCADIA FINANCING ----------------------------------------------------------------- $6,000,000,000 SENIOR SECURED CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS This Summary of Terms and Conditions outlines certain terms of the Facility referred to in the Commitment Letter dated February 26, 2001 among The FINOVA Group Inc. ("FNV"), FINOVA Capital Corporation (the "COMPANY" or the "BORROWER"), Lender, Berkshire and Leucadia (the "COMMITMENT LETTER"). This Summary of Terms and Conditions is part of and subject to the Commitment Letter. Certain capitalized terms used herein are defined in the Commitment Letter. BORROWER: FINOVA Capital Corporation GUARANTORS: FNV and all of FNV's direct and indirect domestic subsidiaries other than (i) the Company and (ii) any special purpose subsidiary that is currently contractually or legally prohibited from acting as a guarantor (the "GUARANTORS"). LENDER: Berkadia LLC ("LENDER"). THE FACILITY: A five-year amortizing term loan made to the Borrower in a single drawing on the Closing Date in a principal amount of $6,000,000,000 (the "TERM LOAN"), prepayable with cash flows as set forth under "PREPAYMENTS." The final maturity date for the Term Loan will be five years from the Closing Date. CLOSING DATE: On or before August 31, 2001. PURPOSE: Proceeds of the Term Loan will be used solely to repay a portion of the pre-petition debt of the Company and its subsidiaries in accordance with the Plan. INTEREST: The Term Loan will bear interest at the greater of the following rates: (i) the current LIBO rate (for a period not to exceed six months and to be determined prior to execution of the loan documentation) as quoted by Telerate Page 3750, adjusted for reserve requirements, if any, applicable to Lender's source of funds and subject to customary change of circumstance provisions applicable to Lender and Lender's provider of funds (the "LIBO RATE"), PLUS 3% per annum; and (ii) 9% per annum. The interest rate shall be reset daily and interest shall be calculated on the basis of the actual number of days elapsed in a 360-day year. Interest shall be payable quarterly. DEFAULT INTEREST: During the continuance of an event of default (as defined in the loan documentation), the Term Loan (including unpaid interest and unpaid default interest) will bear interest at an additional 2% PER ANNUM. PREPAYMENTS: Following the (i) payment of accrued interest on the Term Loan, (ii) payment of operating expenses and taxes of FNV, the Company and their respective subsidiaries, (iii) funding of reasonable reserves for revolving and unfunded commitments and general corporate purposes of the Company and (iv) payment of accrued interest on the Senior Notes, mandatory prepayments of the Term Loan without premium thereon shall be required in an amount equal to (x) 100% of the net sale proceeds from permitted asset sales, (y) 100% of annual excess cash flow (to be defined in the loan documentation) and (z) 100% of net proceeds from insurance and condemnation, in each case received by FNV, the Company or any of its subsidiaries, except to the extent any special purpose subsidiary is currently subject to a contractual or legal restriction on making distributions to its parent entity. In no event shall the Company or its subsidiaries make any prepayment on the Term Loan out of any refinancing or issuance of securities. SECURITY: All amounts owing by and the obligations of the Company under the Term Loan and the Guarantors in respect thereof will be secured by (i) a first priority perfected pledge of (x) all notes owned by the Company and the Guarantors and (y) all capital stock owned by the Company and the Guarantors (but not more than 65% of the capital stock of foreign subsidiaries) and (ii) a first priority perfected security interest in all other assets owned by the Company and the Guarantors, including, without limitation, accounts, inventory, equipment, investment property, instruments, chattel paper, real estate, leasehold interests, contracts, patents, copyrights, trademarks and other general intangibles, subject to customary exceptions for transactions of this type. CONDITIONS PRECEDENT TO THE CLOSING: The loan documentation will contain conditions to the closing of the Facility customarily found in loan agreements for similar financings and transactions of this type and other conditions deemed by Lender to be appropriate to the specific transaction and in any event including without limitation: * All documentation relating to the Facility shall be in form and substance satisfactory to the Company and its counsel and Lender and its counsel. Guarantees in form and substance satisfactory to the Lender and its counsel shall have been executed and delivered by the Guarantors, and shall be in full force and effect. * FNV and the Company shall not be in default of any of their obligations under the Commitment Letter. * The terms and conditions of, and documentation relating to the Senior Notes, the principal terms of which are outlined on [the Summary following this [Term Sheet] together with any changes thereto as may be agreed to by Lender, shall be satisfactory to Lender, including in the case of such debt the extent of subordination, security, absence of guarantees, amortization, maturity, prepayments, limitations on remedies and acceleration, covenants, events of default, interest rate and other intercreditor arrangements. All conditions precedent to the issuance of the Senior Notes shall have been satisfied or, with the prior approval of Lender waived, and the Senior Notes shall be issued concurrently. * FNV and the Company shall have filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code (the "CHAPTER 11 Cases") in the Bankruptcy Court and all motions and other documents to be filed with and submitted to the Bankruptcy Court in connection with the Facility and the Management Agreement, the fees and transactions contemplated thereby and the approval thereof shall be in form and substance satisfactory to Lender. * An order of the Bankruptcy Court granting approval and confirmation of the Plan shall have been entered and have become final and nonappealable (the "FINAL ORDER"), which Final Order shall provide for, among other things, (i) borrowing under the Facility, including first priority liens on all collateral thereunder, (ii) the use of proceeds of the Facility to make the Existing Debt Repayment, (iii) issuance of the Senior Notes, (iv) the reinstatement of FNV's outstanding Trust Originated Preferred Securities ("TOPRS") at 100% of principal amount or an exchange of the TOPrS at a discount for Senior Notes, which discount is acceptable to FNV and the Lender, (v) the adoption by each of FNV and the Company of a Certificate of Incorporation and By-laws in form and substance acceptable to Lender, (vi) the designees of Lender constituting not less than a majority of the Boards of Directors of FNV and the Company, at least two (2) of the remaining members of which shall be selected from the current Board of Directors of FNV as of the date hereof, (vii) the issuance by FNV to Lender for no additional consideration of shares of common stock of FNV such that Lender will own 51% of the outstanding equity of FNV on a fully diluted basis (and an allocation of consideration for such issuance to the capital of FNV in an amount equal to the aggregate par value represented by such equity interests so that such equity interests are fully paid and non-assessable), (viii) the release, in form and substance satisfactory to Lender, Leucadia and Berkshire, of each Indemnified Party (as defined in the Commitment Letter) from any and all claims or liabilities that any creditor or other party in interest has or could have had in connection with or arising out of the Chapter 11 Cases, the Commitment Letter, the Management Agreement and/or any action, authority, event or transaction contemplated by any of the foregoing, and (ix) such other terms as shall be acceptable to Lender in its reasonable discretion. * All fees and expenses (including reasonable fees and expenses of counsel) required to be paid or reimbursed to Lender, Berkshire and Leucadia on or before the Closing Date shall have been paid. * Lender shall be satisfied in its reasonable judgment that (i) there shall not occur as a result of the funding of the Facility, a default (or any event which with the giving of notice or lapse of time or both would be a default) under any debt instruments and other material agreements of FNV, the Company or any of their respective subsidiaries, and (ii) that each of FNV and the Company are solvent after giving effect to the funding of the Term Loan and the Senior Notes. * Lender shall be satisfied that FNV, the Company and their respective subsidiaries will be able to meet their respective obligations under all employee and retiree welfare plans of such entities, that such employee benefit plans are, in all material respects, funded in accordance with the minimum statutory requirements, that no material "REPORTABLE EVENT" (as defined in ERISA, but excluding events for which reporting has been waived) has occurred as to any such employee benefit plan and that no termination of, or withdrawal from, any such employee benefit plan has occurred or is contemplated that could result in a material liability. Lender shall have reviewed and be satisfied with all employee benefit plans of FNV, the Company and their respective subsidiaries. * Lender shall have received satisfactory opinions of counsel to FNV and the Company, addressing such matters as Lender shall reasonably request, including, without limitation, the enforceability of all loan documentation, compliance with all laws and regulations (including Regulations T, U and X of the Board of Governors of the Federal Reserve System), the perfection of all security interests purported to be granted and no conflicts with material agreements. * There shall not have occurred any change, occurrence or development that could, in our reasonable opinion, result in a material adverse change in (i) the business, condition (financial or otherwise), operations, performance, properties, assets, liabilities (actual or contingent) or prospects of FNV, the Company and their respective subsidiaries taken as a whole since December 31, 2000 (other than the commencement and continuation of the Chapter 11 Cases and the consequences that would normally result therefrom), (ii) the ability of the Company to perform its obligations under the loan documentation, (iii) the ability of the Guarantors (other than Guarantors as to which Lender, in its reasonable judgment, is satisfied that their inability, individually or in the aggregate, to perform their obligations is not material) to perform their obligations under the loan documentation or (iv) the ability of Lender to enforce the loan documentation (any of the foregoing being a "MATERIAL ADVERSE CHANGE"). * There shall exist no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that (i) could reasonably be expected to result in a Material Adverse Change or, if adversely determined, could reasonably be expected to result in a Material Adverse Change or (ii) restrains, prevents or imposes or can reasonably be expected to impose materially adverse conditions upon the Facility, the Plan or the transactions contemplated thereby. * All necessary governmental and material third party consents and approvals necessary in connection with the Facility, the Plan and the transactions contemplated thereby shall have been obtained (without the imposition of any conditions that are not reasonably acceptable to Lender) and shall remain in effect, and all applicable governmental filings have been made and all applicable waiting periods shall have expired without in either case any action being taken by any competent authority; and no law or regulation shall be applicable in the judgment of Lender that restrains, prevents or imposes materially adverse conditions upon the Facility or the transactions contemplated thereby. * No information shall have come to the attention of Lender that leads Lender to determine that, and Lender shall not have become aware of any fact or condition not disclosed to them prior to the date hereof which leads Lender to determine that, the Company's or any of its subsidiaries' condition (financial or otherwise), operations, performance, properties, assets, liabilities (actual or contingent) or prospects are different in any material adverse respect from that known to Lender as of this date. * Lender shall have a valid and perfected first priority lien on and security interest in the collateral referred to above under "SECURITY" (other than collateral which Lender is satisfied in its reasonable judgment is not material, individually or in the aggregate); all filings, recordations and searches necessary or desirable in connection with such liens and security interests shall have been duly made; and all filing and recording fees and taxes shall have been duly paid. * Lender shall be satisfied with the amount, types and terms and conditions of all insurance and bonding maintained by the Company and its subsidiaries, and Lender shall have received endorsements naming Lender as an additional insured and loss payee under all insurance policies to be maintained with respect to the properties of the Company and its subsidiaries forming part of Lender's collateral. * Lender shall be satisfied with all environmental matters relating to the Company or its business or assets, and shall have received such environmental review reports as Lender may request, in form and substance satisfactory to it, as to any environmental hazards or liabilities to which the Company and its subsidiaries may be subject, and Lender shall be satisfied with the amount and nature of any such hazards or liabilities and with the Company's plans with respect thereto. * The Management Agreement shall be in full force and effect, and there shall be no cause for termination thereunder. * There shall not exist or have occurred any defaults, prepayment events or creation of liens under debt instruments or otherwise as a result of the Facility, the Plan, or the transactions contemplated thereby. CONDITIONS PRECEDENT TO THE LOAN: On the funding date of the Term Loan (if different from the closing date of the Facility) (i) there shall exist no default under the loan documentation, (ii) the representations and warranties of the Company and each Guarantor therein shall be true and correct immediately prior to, and after giving effect to, funding, and (iii) the making of the Term Loan shall not violate any requirement of law and shall not be enjoined, temporarily, preliminarily or permanently. REPRESENTATIONS AND WARRANTIES: The loan documentation will contain representations and warranties customarily found in loan documentation for similar financings and transactions of this type and other representations and warranties deemed by Lender appropriate to the specific transaction (which will be applicable to FNV, the Company and their respective subsidiaries) including, without limitation with respect to: valid existence, requisite power, due authorization, no conflict with agreements or applicable law, enforceability of loan documentation, validity, priority and perfection of security interests and enforceability of liens, accuracy of financial statements and all other information provided, compliance with law, absence of Material Adverse Change, no default under the loan documentation, absence of material litigation, ownership of properties and necessary rights to intellectual property, no burdensome restrictions and inapplicability of Investment Company Act or Public Utility Holding Company Act. AFFIRMATIVE AND FINANCIAL COVENANTS: The loan documentation will contain affirmative and financial covenants customarily found in loan documentation for similar financings and transactions of this type and other covenants deemed by Lender appropriate to the specific transaction (which will be applicable to FNV, the Company and their respective subsidiaries), including, without limitation, the following: * Comply in all material respects with laws (including, without limitation, ERISA and environmental laws), pay taxes, maintain all necessary licenses and permits and trade names, trademarks, patents and other intellectual property, preserve corporate existence, maintain accurate books and records, maintain properties, maintain appropriate and adequate insurance, permit inspection of properties, books and records, use loan proceeds as specified and provide further assurances as required. * Perform obligations under leases, contracts and other agreements. * Conduct all transactions with affiliates on terms reasonably equivalent to those obtainable in arm's length transactions, including, without limitation, restrictions on management fees to affiliates. * Maintain with a bank satisfactory to Lender main cash concentration accounts and blocked accounts into which all cash flows of the Borrower and proceeds of collateral are paid and which are swept daily (and with respect to accounts at other banks, which will be limited, blocked account agreements in form and substance acceptable to Lender have been executed). * Financial covenants, including, but not limited to, minimum EBITDA, minimum net worth, minimum fixed charge coverage, minimum interest coverage, maximum leverage (measured on a balance sheet debt to EBITDA basis) and maximum capital expenditures. * Maintain a loan-to-collateral value (tangible assets, net of reserves) ratio of no greater than 1:1.75. NEGATIVE COVENANTS: The loan documentation will contain negative covenants customarily found in loan documentation for similar financings and transactions of this type (which will be applicable to FNV, the Company and their respective subsidiaries). Each of FNV, the Company and their respective subsidiaries shall agree that (i) except pursuant to the Plan, or (ii) without the consent of Lender, it will not: * Incur or assume any debt (whether or not non-recourse) other than the Term Loan or the Senior Notes (as the case may be), give any guaranties, create any liens, charges or encumbrances; incur additional lease obligations; merge or consolidate with any other person, or change the nature of business or corporate structure or create any new subsidiaries or amend its charter or by-laws; sell, lease or otherwise dispose of assets (including, without limitation, in connection with a sale leaseback transaction), except for asset sales for cash where seller retains no residual interest in such assets and proceeds are applied as set forth under "PREPAYMENTS," give a negative pledge on any assets in favor of any person other than Lender; permit to exist any consensual encumbrance on the ability of any subsidiary to pay dividends or other distributions to the Company; or permit to exist any restrictions on the ability of the Company to prepay the Term Loan. * Prepay, redeem, purchase, defease, exchange, refinance or repurchase any debt including, without limitation, the Senior Notes, or amend or modify any of the terms of any such debt or other similar agreements, or other material agreements, entered into or binding upon FNV, the Company or their respective subsidiaries. * Make any loans or advances, capital contributions or acquisitions (except to fund existing commitments not discharged in the Chapter 11 Cases) or form any joint ventures or partnerships or make any other investments in subsidiaries or any other person. * Make or commit to make any payments in respect of warrants, options, repurchase of stock, dividends or any other distributions to shareholders, except as contemplated under the terms of the Senior Notes. * Permit any change in ownership or control of the Company or any of its respective subsidiaries or any change in accounting treatment or reporting practices, except as required by GAAP and as permitted by the loan documentation. * Redeem or otherwise acquire any shares of its capital stock, or issue or sell any securities (other than the issuance of the Senior Notes, pursuant to the exercise of options or conversion of outstanding securities or otherwise pursuant to the Plan) or grant any option, warrant or right relating to its capital stock or split, combine or reclassify any of its capital stock. * Make any material amendment to any existing or enter into any new employment, consulting, severance, change in control or similar agreement or establish any new compensation or benefit or commission plans or arrangements for directors or employees. * Merge, amalgamate or consolidate with any other entity in any transaction, sell all or any substantial portion of its business or assets, or acquire all or substantially all of the business or assets of any other entity, other than acquisitions of businesses in connection with foreclosures in the ordinary course of business and mergers or consolidations among wholly-owned subsidiaries of the Company. * File any petition for voluntary reorganization or enter into any reorganization plan or recapitalization, dissolution or liquidation of the Company. * Take any action that would have a material impact on the consolidated federal income tax return filed by FNV as the common parent, make or rescind any express or deemed material election relating to taxes, settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, enter into any material tax ruling, agreement, contract, arrangement or plan, file any amended tax return, or, except as required by applicable law or GAAP or in accordance with past practices, make any material change in any method of accounting for taxes or otherwise or any tax or accounting practice or policy. * Enter into any contract, understanding or commitment that restrains, restricts, limits or impedes the ability of FNV or any of its subsidiaries to compete with or conduct any business or line of business in any geographic area. * Permit FNV to engage in any business or activity, or hold any assets, other than holding the capital stock of the Company or the common interest of FINOVA Finance Trust. * Pay any management or similar fees, other than pursuant to the Management Agreement. FINANCIAL REPORTING REQUIREMENTS: The Company shall provide: (i) monthly consolidated and consolidating financial statements of FNV, the Company and their respective subsidiaries, including balance sheet, income statement and cash flow statement within 30 days of month-end, certified by the chief financial officer of FNV or the Company, as appropriate; (ii) quarterly consolidated and consolidating financial statements of FNV, the Company and its subsidiaries within 45 days of quarter-end, certified by the chief financial officer of FNV or the Company, as appropriate; (iii) annual audited consolidated and consolidating financial statements of FNV, the Company and their subsidiaries within 90 days of year-end, certified with respect to such consolidated statements by independent certified public accountants acceptable to Lender; (iv) copies of all reports on Form 10-K, 10-Q or 8-K filed by FNV or the Company with the Securities and Exchange Commission; (v) projections for the balance of the term of the Facility provided annually and annual business and financial plans provided in each case at least 30 days prior to fiscal year-end, with the business and financial plans being updated quarterly; and (vi) periodic compliance certificates. OTHER REPORTING REQUIREMENTS: The loan documentation will contain other reporting requirements customarily found in loan documentation for similar financings and transactions of this type and other reporting requirements deemed by Lender appropriate to the specific transaction, including, without limitation, with respect to litigation, contingent liabilities, defaults and ERISA or environmental events at such times and in form and substance as is satisfactory to Lender. EVENTS OF DEFAULT: The loan documentation will contain events of default customarily found in loan documentation for similar financings and transactions of this type and other events of default deemed by Lender appropriate to the specific transaction (which will be applicable to FNV, the Company and their respective subsidiaries), including, without limitation, failure to make payments when due, defaults or accelerations under other indebtedness, noncompliance with covenants, breaches of representations and warranties, bankruptcy and insolvency events, failure to satisfy or stay execution of judgments in excess of specified amounts, the existence of certain materially adverse employee benefit or environmental liabilities, impairment of loan documentation or security, Material Adverse Change, actual or asserted invalidity of the guarantees, the security documents or the liens of Lender and change of ownership or control. INDEMNIFICATION: The Company shall indemnify and hold harmless Lender, Berkshire and Leucadia and each of their respective affiliates, officers, directors, employees, members, managers, agents, advisors, attorneys and representatives of each (each, an "INDEMNIFIED PARTY") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party (including, without limitation, in connection with or relating to any investigation, litigation or proceeding or the preparation of any defense in connection therewith), in each case arising out of or in connection with or by reason of the Facility, the loan documentation or any of the transactions contemplated thereby, or any actual or proposed use of the proceeds of the Facility, except to the extent such claim, damage, loss, liability or expense is found in a final non-appealable judgment by a court of competent jurisdiction (or admitted by an Indemnified Party pursuant to a written settlement agreement) to have resulted primarily from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by FNV, the Company, any of their respective directors, securityholders or creditors, an Indemnified Party or any other person, or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Company further agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Company or any of its securityholders or creditors for or in connection with the transactions contemplated hereby, except for direct damages (as opposed to special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings)) determined in a final non-appealable judgment by a court of competent jurisdiction (or admitted by an Indemnified Party pursuant to a written settlement agreement) to have resulted primarily from such Indemnified Party's gross negligence or willful misconduct and any liability of any Indemnified Party shall be limited to the amount of fees actually received hereunder by such Indemnified Party. EXPENSES: FNV, the Company and each of their respective subsidiaries shall jointly and severally pay all (i) reasonable costs and expenses of Lender, Berkshire and Leucadia (including all reasonable fees, expenses and disbursements of outside counsel) in connection with the preparation, execution and delivery of the loan documentation and the funding of all loans under the Facility, and all search, filing and recording fees, incurred or sustained by Lender, Berkshire and Leucadia in connection with the Facility, the loan documentation or the transactions contemplated thereby, the administration of the Facility and any amendment or waiver of any provision of the loan documentation and (ii) costs and expenses of Lender, Berkshire and Leucadia (including fees, expenses and disbursements of counsel) in connection with the enforcement of any of their rights and remedies under the loan documentation. MISCELLANEOUS: The loan documentation will include standard yield protection provisions (including, without limitation, provisions relating to compliance with risk-based capital guidelines, increased costs and payments free and clear of withholding taxes) relating to Lender and Lender's provider of funds. FEES AND EXPENSES: COMMITMENT FEE: A commitment fee of $60,000,000 shall be due and payable to Lender upon execution of the Commitment Letter. FUNDING FEE: A funding fee of $60,000,000 shall be due and payable to Lender upon the closing of and borrowing under the Facility. TERMINATION FEE: A termination fee of $60,000,000 shall be due and payable to Lender if the Company does not borrow under the Facility for any reason (including the termination of Lender's obligations under the Commitment Letter, whether or not the Facility agreements have been entered) unless the Company's failure to borrow is solely due to (x) the failure by Lender to fund in violation of its obligations under the Commitment Letter or, (y) following confirmation of the Plan by the Bankruptcy Court, a Material Adverse Change has occurred or a due diligence condition relating to environmental, insurance or employee matters has not been satisfied. REIMBURSEMENT FEES: All fees, if any, and expenses incurred from time to time by Lender and its affiliates relating to its financing for the Facility shall be due and payable to Lender or such affiliates when incurred by Lender or such affiliates. FACILITY FEE: An annual facility fee in an amount equal to 25 basis points times the outstanding principal amount of the Term Loan, payable monthly, shall be due and payable to Lender, commencing on the date of borrowing under the Facility. GOVERNING LAW AND SUBMISSION TO JURISDICTION: State of New York. ----------------------------------------------------------------- [00010] TERMS OF NEW $5,000,000,000 FNV SENIOR SECURED NOTES ----------------------------------------------------------------- SUMMARY OF TERMS OF SENIOR NOTES Issuer: The FINOVA Group Inc. ("FNV") Aggregate Principal Amount: Approximately $5 billion (assuming $6 billion pro rata pay down of existing Company debt with the proceeds of the Term Loan) Term: Ten (10) years, subject to prepayment as described below Interest Rate: Weighted Average Rate on the Company's currently outstanding debt Payment: Payable semi-annually Provided the Company is in compliance with all covenants of the Term Loan including, without limitation, the loan-to-collateral value ratio covenant, cash distributed to FNV will be permitted solely to be used as set forth below: FIRST: to pay accrued interest on the Senior Notes; SECOND: Commencing after repayment in full of the Term Loan, first to fund a reserve to pay dividends on the TOPrS (to the extent outstanding), and then 95% of the balance of the cash, if any, distributed by the Company to FNV shall be used to make semiannual payments of outstanding principal of the Senior Notes until paid in full or to make any permitted optional redemption of the Senior Notes, and 5% of such balance shall be used to pay dividends to stockholders of FNV; and THIRD: Commencing after repayment in full of the Senior Notes, 95% of the cash, if any, distributed from the Company to FNV shall be paid, on a pro rata basis, to holders of the Senior Notes as additional interest, up to a maximum aggregate payment of $100 million. Use of Cash Flow: Cash flow from the assets of the Company (including proceeds from the permitted sale of such assets) shall be applied in the following order: FIRST: to pay accrued interest when due on the Term Loan; SECOND: to pay operating expenses and taxes of FNV, the Company and their respective subsidiaries; THIRD: to fund reasonable reserves for revolving commitments, unfunded commitments and general corporate purposes of the Company; FOURTH: to pay accrued interest on the Senior Notes; FIFTH: to pay principal on the Term Loan; and SIXTH: Commencing after repayment in full of the Term Loan, first to fund a reserve to pay dividends on the TOPrS (to the extent outstanding), and then 95% of the balance of the cash, if any, distributed by the Company to FNV shall be used to make semiannual payments of outstanding principal of the Senior Notes until paid in full or to make any permitted optional redemption of the Senior Notes, and 5% of such balance shall be used to pay dividends to stockholders of FNV; and SEVENTH: Commencing after repayment in full of the Senior Notes, 95% of the cash, if any, distributed from the Company to FNV shall be paid, on a pro rata basis, to holders of the Senior Notes as additional interest, up to a maximum aggregate payment of $100 million. Optional Redemption: FNV will have the option to redeem the Senior Notes, in whole or in part, at any time and from time to time after repayment of the Term Loan, without premium or penalty. Priority and Collateral Security: FNV will grant to the holders of the Senior Notes a second priority security interest in all of the assets of FNV and all proceeds thereof. Enforcement of this security interest against the assets of FNV shall not be allowed until the Term Loan is paid in full. Lender shall be the third party beneficiary of this limitation on exercise of remedies. Covenants: Covenants, to the extent there are any, will be minimal, but will include restrictions on the incurrence of indebtedness by FNV or its subsidiaries following repayment in full of the Term Loan and a covenant by FNV to cause the Company to distribute all cash as provided above under "Use of Cash Flow." Event of Default: Events of Default generally will be those typical for public indentures but will exclude cross default/cross acceleration from any existing debt of FNV. ----------------------------------------------------------------- [00011] LEUCADIA/FINOVA MANAGEMENT SERVICE AGREEMET ----------------------------------------------------------------- MANAGEMENT SERVICES AGREEMENT MANAGEMENT SERVICES AGREEMENT, dated as of February 26, 2001, by and among The FINOVA Group Inc. ("FINOVA" or the "Company"), a Delaware corporation, and Leucadia National Corporation, a New York corporation ("Leucadia" or "Manager") and Leucadia International Corporation, a Utah corporation that is a wholly owned subsidiary of Leucadia ("Leucadia International"). WHEREAS, FINOVA has agreed to file a petition for voluntary reorganization (the "Voluntary Petition") under chapter 11 of title 11 of the United States Code 11 U.S.C. Sections 101 et seq. (the " Bankruptcy Code") with the United States Bankruptcy Court for the District of Delaware (and together with the United States District Court the "Bankruptcy Court"); and WHEREAS, FINOVA, its subsidiary, FINOVA Capital Corporation ("FCC"), Berkadia LLC, a Delaware limited liability company (the "Lender"), Berkshire Hathaway Inc., a Delaware corporation ("Berkshire") and Leucadia have entered into a commitment letter dated as of the date hereof (the "Commitment Letter") pursuant to which, among other things, the Lender will make its commitment, guarantied by Berkshire and Leucadia, to lend to FCC $6 billion on the terms and conditions set forth in the Commitment Letter; and WHEREAS, pursuant to the Commitment Letter, the Company and FCC have agreed to file a chapter 11 plan containing the principal terms outlined in the Commitment Letter or such other terms agreed to by the Company as are mutually acceptable to both Leucadia and Berkshire in their reasonable discretion (the "Plan"); and WHEREAS, the Board of Directors of the Company (the "Board") will form a special committee consisting of two directors to serve as a special committee of the Board until the effective date of the Company's chapter 11 plan (the "Special Committee"), to work closely with Leucadia and the chief restructuring officer of the Company (the "Chief Restructuring Officer"); and WHEREAS, certain management functions have previously been performed for FINOVA by its own officers; and WHEREAS, Leucadia, directly and through its subsidiaries, has the capability to provide those services to FINOVA; and WHEREAS, the Board has determined that it is in the best interests of FINOVA to obtain such services from Leucadia and its subsidiaries. It is hereby mutually agreed as follows: 1. TERM. The term of this Management Agreement shall be ten years commencing on the date hereof. 2. COMPENSATION. For a period of ten years, commencing on the date of this Agreement, FINOVA shall pay to Leucadia International annually a management fee of $8 million, payable in immediately available funds (the "Annual Management Fee"). The Annual Management Fee shall be payable quarterly, in advance, at the beginning of each calendar quarter; provided, however, that the entire first Annual Management Fee shall be paid to Leucadia International on the date hereof. Until Leucadia International receives the first Annual Management Fee, neither Leucadia nor Leucadia International shall have any responsibilities to FINOVA under this Agreement. 3. SERVICES OF LEUCADIA. Subject to the authority of the Board, Leucadia, directly and through its subsidiaries including Leucadia International, (i) shall be responsible, together with the Special Committee, for the general management of the Company; (ii) shall assume principal responsibility for management of the "portfolio" of FCC, including the supervision of corporate wide management of the portfolio sales, dispositions, acquisitions, and administration; and (iii) shall provide to the Company the Chief Restructuring Officer who initially shall be Lawrence S. Hershfield (an employee of Leucadia International), who will report to and work closely with the Special Committee and who, as part of his duties related to the restructuring of the Company and its subsidiaries, will supervise all communications with lenders and all banking/creditor and other financial relationships. In addition, following the effective date of the Plan, Leucadia shall provide to the Company, the Chairman of the Board and President of the Company and such other officers, if any, as shall be mutually determined between Leucadia and the Company. 4. PERSONNEL. Leucadia shall provide a portion of the time of such executive officers of Leucadia and its subsidiaries as Leucadia reasonably determines is necessary to carry out the services specified herein. The number of persons providing services at any one time and the number of hours such persons devote to the services specified herein shall not be fixed but shall at all times be adequate to properly and promptly perform and discharge the specified services, it being understood that acting as Chief Restructuring Officer shall be Mr. Hershfield's principal professional activity through the effective date of the Plan. The persons provided by Leucadia hereunder shall for all purposes be employees of Leucadia. Neither Leucadia nor Leucadia International shall be entitled to receive any additional compensation for services rendered under this Agreement other than the payments set forth in paragraph 2 above, but shall be reimbursed for all reasonable out of pocket expenses, including reimbursement of travel expenses. Nothing herein shall prevent, however, any individual provided hereunder from becoming an elected or appointed officer or director of FINOVA and enjoying the benefits (other than compensation) afforded to any persons in any such position. 5. OFFICE SPACE, EQUIPMENT AND SUPPLIES, ETC. FINOVA shall provide to Leucadia and its personnel provided hereunder office space, secretarial services, equipment and supplies, telephone, telefax and related support facilities to the extent available at FINOVA's regular work locations. 6. MUTUAL OBLIGATIONS. In addition to their other obligations under this Agreement, each of FINOVA and Leucadia shall cooperate with the other in the preparation of the Plan. The parties hereto also shall keep each other fully and promptly informed of developments in FINOVA's and FCC's businesses and relationships and discussions and negotiations with or affecting their respective creditors, including any notices from their respective lenders, suppliers or advisors or any notices from any third party related to their respective creditors. As promptly as practicable following execution of this Agreement, the Board of FINOVA shall elect Lawrence S. Hershfield, or such other person designated by Leucadia as is reasonably acceptable to FINOVA, as the Chief Restructuring Officer and shall elect three designees of Leucadia that are mutually acceptable to FINOVA and Leucadia as members of the Board (or upon mutual advice of counsel to Leucadia and FINOVA, to become advisory participants of the Board and, in such capacity, to attend all meetings of the Board (whether telephonic or in person) and to receive all communications with the Board at the same time sent to all regular members of the Board). FINOVA agrees that prior to confirmation of the Plan, FINOVA and its subsidiaries will carry on their respective businesses under the supervision of Leucadia and the Special Committee in the ordinary course of business in compliance in all material respects with all applicable laws and in accordance with [these additional terms: Except as otherwise expressly permitted or required by the terms of the Plan or as otherwise expressly contemplated by this Management Agreement or the Commitment Letter, during the period from the date of the Management Agreement to entry of a final order of the Bankruptcy Court confirming the Plan, the Company shall not, and shall cause any of its subsidiaries not to, without the written consent of Manager, which decision regarding consents shall be made promptly (in light of its circumstances) after receipt of notice seeking such consent: (i) amend its certificate of incorporation, bylaws or other comparable organizational documents or those of any subsidiary of the Company; (ii) except (A) pursuant to the exercise or conversion of outstanding securities, (B) for issuances of Common Stock upon the exercise of outstanding options under the benefit plans of the Company, (C) in connection with other awards outstanding on the date of this Management Agreement under any benefit plan, or (D) upon conversion of TOPrS, redeem or otherwise acquire any shares of its capital stock, or issue or sell any securities (including securities convertible into or exchangeable for any shares of its capital stock), or grant any option, warrant or right relating to any shares of its capital stock, or split, combine or reclassify any of its capital stock or issue any securities in exchange or in substitution for shares of its capital stock; (iii) make any material amendment to any existing, or enter into any new, employment, consulting, severance, change in control or similar agreement, or establish any new compensation or benefit or commission plans or arrangements for directors or employees, or amend or agree to amend any existing benefit plan; (iv) other than in connection with foreclosures in the ordinary course of business and mergers or consolidations among wholly-owned subsidiaries of the Company, merge, amalgamate or consolidate with any other entity in any transaction, sell all or any substantial portion of its business or assets, or acquire all or substantially all of the business or assets of any other person; (v) enter into any plan of reorganization or recapitalization, dissolution or liquidation of the Company; (vi) declare, set aside or make any dividends, payments or distributions in cash, securities or property to the stockholders of the Company in respect of any capital stock of the Company; (vii) except for borrowings under credit facilities or lines of credit existing on the date hereof, incur or assume any indebtedness of the Company or any of its subsidiaries, except indebtedness of the Company or any of its subsidiaries incurred in the ordinary course of business; (viii) take any action that would have a material impact on the consolidated federal income tax return filed by the Company as the common parent, make or rescind any express or deemed material election relating to taxes, settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, enter into any material tax ruling, agreement, contract, arrangement or plan, file any amended tax return, or, except as required by applicable law or GAAP or in accordance with past practices, make any material change in any method of accounting (whether for taxes or otherwise) or make any material change in any tax or accounting practice or policy; (ix) enter into any contract, understanding or commitment that restrains, restricts, limits or impedes the ability of the Company or any of its subsidiaries, or the ability of Leucadia, to compete with or conduct any business or line of business in any geographic area; (x) enter into, or amend the terms of, any contract relating to interest rate swaps, caps or other hedging or derivative instruments relating to indebtedness of the Company or any of its subsidiaries; or agree or commit, whether in writing or otherwise, to do any of the foregoing.] 7. COMPANY EXPENSES. FINOVA will continue to bear the cost and expense of its own employees, including their salary, travel, entertainment, other business and benefit expenses. 8. BANKRUPTCY COURT APPROVAL. If the Bankruptcy Court does not approve this Agreement on or before the day an order is issued by the Bankruptcy Court approving a disclosure statement for the Company and FCC (which shall be no later than 130 days from the date hereof), this Agreement will automatically terminate unless termination is specifically waived by Leucadia in writing. The Company agrees that it will use its best efforts to obtain Bankruptcy Court approval of this Agreement in a timely manner. If the Agreement is not approved by the Bankruptcy Court, the $8 million Annual Management Fee paid to Leucadia International upon execution of this Agreement shall be deemed to be fully earned upon its payment and shall not be refundable to the Company upon termination of this Agreement. 9. TERMINATION. If (i) the Commitment Letter is terminated or (ii) a plan of reorganization other than the Plan is confirmed by order of the Bankruptcy Court, then Leucadia and the Company each shall have the right to terminate this Agreement. Any termination shall be upon not less than 30 days prior written notice given by the terminating party to the other party to this Agreement. However, any termination (whether under this paragraph or otherwise) shall not relieve FINOVA of its obligation to pay to Leucadia International the portion of the Management Fee, if any, that has been earned through the termination date but has not been paid to Leucadia International as of the date of such termination and any unpaid Management Fee due to the date of termination shall be paid to Leucadia International in one payment, in immediately available funds, upon the effective date of such termination. Notwithstanding the foregoing, the $8 million Annual Management Fee paid to Leucadia International upon execution of this Agreement shall be deemed to be fully earned upon its payment and shall not be refundable to the Company upon termination of this Agreement. 10. GOVERNING LAW. This Agreement shall be governed in accordance with the laws of the State of New York. 11. ASSIGNMENT. Neither party may assign this Agreement or any of its rights or duties hereunder, except that Manager may assign this Agreement to any entity that is controlled by, controlling or under common control with Leucadia. 12. NOTICES. Services of all notices, if any, under this Agreement shall be sufficient if given personally or sent by certified, registered mail, return receipt requested, or telefax to the addresses set forth below: If to Company, at: The FINOVA Group Inc. 4800 North Scottsdale Road Scottsdale, Arizona 85251-7623 Attention: William Hallinan, Senior Vice-President, General Counsel and Secretary Facsimile No.: (480) 636-4949 with a copy (which shall not constitute notice) to: Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, California 90071-3197 Attention: Andrew E. Bogen, Esq. Facsimile No.: (213) 229-7520 If to Manager or Leucadia International, at: Leucadia National Corporation 315 Park Avenue South New York, New York 10010 Attention: Joseph S. Steinberg, President Facsimile No.: (212) 598-4869 with a copy (which shall not constitute notice) to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attention: Stephen E. Jacobs, Esq. Facsimile No: (212) 310-8007 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback or three Business Days after the same shall have been deposited in the United States mail. IN WITNESS WHEREOF, the parties hereto have caused this Management Services Agreement to be duly executed on the date first written above. THE FINOVA GROUP INC. By: /s/ Matthew M. Breyne ------------------------------------- Name: Matthew M. Breyne Title: President LEUCADIA NATIONAL CORPORATION By: /s/ Joseph A. Orlando ------------------------------------- Name: Joseph A. Orlando Title: Vice President LEUCADIA INTERNATIONAL CORPORATION By: /s/ Philip M. Cannella ------------------------------------- Name: Philip M. Cannella Title: Vice President *** End of Issue No. 1 ***