EXHIBIT T
---------
HARBINGER CAPITAL PARTNERS MASTER FUND I, LTD.
HARBINGER CAPITAL PARTNERS SPECIAL SITUATIONS FUND, L.P.
X/X 000 XXXXXXX XXXXXX, 00XX XXXXX
XXX XXXX, XXX XXXX 00000
Xxxxx 00, 0000
XXX Holding Company, Inc.
c/o 000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Reference is made to that certain Agreement and Plan of Merger, dated
as of February 7, 2007 (as amended from time to time, the "MERGER AGREEMENT"),
by and among Salton, Inc., a Delaware corporation ("PARENT"), SFP Merger Sub,
Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent
("MERGERSUB"), and APN Holding Company, Inc., a Delaware corporation ("APN
HOLDCO"), pursuant to which MergerSub shall merge with and into APN Holdco with
APN Holdco as the surviving corporation (the "MERGER"). Capitalized terms used
and not otherwise defined herein have the respective meanings ascribed to them
in the Merger Agreement.
We understand that, in order to finance the Transactions, APN Holdco
requires financing in an aggregate amount, which together with all cash
available at APN Holdco, Parent and their respective Subsidiaries, is
sufficient to (a) fully redeem the Strawberry Series A Preferred, including pay
any prepayment penalty required to be paid to the holders of Strawberry Series
A Preferred, (b) fully redeem the Strawberry Series C Preferred, including pay
any prepayment penalty required to be paid to the holders of Strawberry Series
C Preferred, (c) refinance in full all amounts outstanding under the
Indebtedness listed on SECTION 6.14(A)(II) of the Apple Disclosure Schedule and
(d) pay all fees and expenses incurred in connection with the Transactions.
We further understand that APN Holdco has received a debt commitment
letter, dated March 23, 2007 (the "BA DEBT COMMITMENT LETTER"), from Bank of
America, N.A. and Banc of America Securities LLC (together "BA") and a debt
commitment letter, dated March 23, 2007 (together with the BA Debt Commitment
Letter, the "DEBT COMMITMENT LETTERS"), from Silver Point Finance, LLC
(together with BA, the "LENDERS"), each addressed to APN Holdco, that, subject
to the terms and conditions therein, provide for up to $425 million of the
financing.
This letter agreement confirms the terms and conditions pursuant to
which Harbinger Capital Partners Master Fund I, Ltd. (the "MASTER FUND") and
Harbinger Capital Partners Special Situations Fund, L.P. (the "SPECIAL FUND"
and together with the Master Fund, the "PURCHASERS") commit to purchase from
Parent in connection with the Transactions shares of the Series D Preferred
Stock (the "PREFERRED STOCK") and Warrants (the "WARRANTS") of Parent, as
more fully described in the term sheet attached hereto as ANNEX A (the "TERM
SHEET"), which is incorporated by reference into this letter agreement.
1. PURCHASE AND SALE. The Preferred Stock and Warrants shall have
the terms specified in the Term Sheet. Subject to the terms and conditions set
forth in this letter agreement and in the Term Sheet, the Purchasers will
purchase shares of Preferred Stock and Warrants for an aggregate purchase price
of $100,000,000 (the "AGGREGATE PURCHASE PRICE"). The Purchasers will pay for
the Preferred Stock and Warrants by exchanging a principal amount of Parent's
12 1/4% Senior Subordinated Notes due 2008 and/or Second Lien Notes (in each
case at the applicable redemption or repurchase price required to be paid in
connection with a change of control) PLUS any accrued and unpaid interest
thereon through the Closing Date in an aggregate amount equal to the Aggregate
Purchase Price.
2. DEFINITIVE AGREEMENTS. As soon as reasonably practicable after
your execution of this letter agreement, you and the Purchasers shall commence
the good faith negotiation of definitive agreements relating to the issuance of
the Preferred Stock and Warrants in accordance with the terms and conditions
hereof. The definitive agreements will include the terms summarized in the Term
Sheet and such other terms typical for financings of this type.
3. CERTAIN CONDITIONS. The commitments of the Purchasers hereunder
are subject, in the Purchasers' sole discretion, to the (a) satisfaction of the
conditions set forth in Sections 7.1 and 7.3 of the Merger Agreement, (b) the
concurrent funding of the financing committed by the Lenders (on terms and
conditions set forth in the Debt Commitment Letters), (c) the execution of the
definitive agreements referred to in Section 2 above and (d) the concurrent
consummation of the Transactions in accordance with the terms of the Merger
Agreement.
4. THIRD PARTY BENEFICIARY. The Purchasers acknowledge that Parent
has relied on this letter agreement and is an express third-party beneficiary
hereof. This letter agreement is not intended to, and does not, confer upon any
Person, other than Parent and APN Holdco, rights or remedies hereunder or in
connection herewith.
5. LIMITATIONS.
(a) In no event shall the Purchasers' liability under this
letter agreement exceed an amount equal to the Reverse Termination Fee
(described in Section 8.3(b) of the Merger Agreement); provided, that, such
Reverse Termination Fee may be paid and satisfied in full by the Purchasers
delivering to Parent or APN Holdco a principal amount of Parent's 12 1/4%
Senior Subordinated Notes due 2008 and/or Second Lien Notes in the aggregate
equal to the Reverse Termination Fee (plus any accrued and unpaid interest
thereon through the date of delivery). Notwithstanding anything to the contrary
contained herein, the payment of the Reverse Termination Fee in accordance with
this Section 5(a) shall constitute liquidated damages and in no event shall the
Purchasers have any additional liability under this letter agreement beyond
their obligation to pay the Reverse Termination Fee, except that nothing herein
shall limit the liability of the Purchasers for any act of fraud or bad faith.
(b) Notwithstanding anything that may be expressed or implied
in this letter agreement, it is expressly agreed and acknowledged that, no
Person other than the Purchasers shall have any obligation hereunder and that,
notwithstanding that the Master Fund is a company organized under the laws of
the Cayman Islands and the Special Fund is a Delaware limited partnership, no
recourse hereunder or under any documents or instruments delivered in
connection herewith shall be had against any former, current or future
director, officer, agent, employee, general or limited partner, manager,
member, advisor, stockholder, affiliate or assignee of either Purchaser or any
former, current or future director, officer, agent, employee, general or
limited partner, manager, member, advisor, stockholder, affiliate or assignee
of any of the foregoing, whether by the enforcement of any assessment or by any
legal or equitable proceeding, or by virtue of any statute, regulation or other
applicable law; it being expressly agreed and acknowledged that no personal
liability whatsoever shall attach to, be imposed on, or otherwise be incurred
by any former, current or future director, officer, agent, employee, general or
limited partner, manager, member, advisor, stockholder, affiliate or assignee
of either Purchaser or any former, current or future director, officer, agent,
employee, general or limited partner, manager, member, advisor, stockholder,
affiliate or assignee of any of the foregoing, as such, for any obligations of
the Purchasers under this letter agreement or any documents or instruments
delivered in connection herewith or for any claim based on, in respect of, or
by reason of, such obligations or their creation.
6. ASSIGNMENT. Each of the Purchasers shall be entitled to assign
all or a portion of its obligations hereunder to one or more of its Affiliates
that agree to assume such Purchaser's obligations hereunder, PROVIDED that such
Purchaser shall remain obligated to perform its obligations hereunder to the
extent not performed by such Affiliate(s). This letter agreement shall not be
assignable by APN Holdco without the Purchasers' prior written consent.
7. TERMINATION; AMENDMENT.
(a) If the purchase and sale of the Preferred Stock and
Warrants contemplated hereby is not completed on or prior to the Outside Date,
this letter agreement shall automatically terminate and be of no further force
and effect, except that Sections 5, 8 and 9 of this letter agreement shall
remain in full force and effect notwithstanding the termination of this letter
agreement or the commitments and agreements of the Purchasers hereunder.
(b) This letter agreement may not be terminated (except as
otherwise provided in paragraph (a) of this Section 7), amended, and no
provision waived or modified, except by an instrument in writing signed by the
Purchasers and APN Holdco; PROVIDED that any termination, amendment, waiver or
modification prior to the payment of the Merger Consideration shall require
Parent's prior written consent.
8. GOVERNING LAW; WAIVER OF JURY TRIAL. This letter agreement shall
be governed and construed in accordance, with the laws of the State of Delaware
applicable to contracts executed in and to be performed in that State. All
actions arising out of or relating to this letter agreement shall be heard and
determined exclusively in the state courts located in the State of Delaware.
The parties hereto hereby (a) submit to the exclusive jurisdiction of the state
courts located in the State of Delaware for the purpose of any action arising
out of or relating to this letter agreement brought by any party hereto or
between any of the parties hereto and the
express third-party beneficiary hereof, and (b) irrevocably waive, and agree
not to assert by way of motion, defense, or otherwise, in any such action, any
claim that it is not subject personally to the jurisdiction of the above-named
court, that its property is exempt or immune from attachment or execution, that
the action is brought in an inconvenient forum, that the venue of the action is
improper, or that this letter agreement or the transactions contemplated hereby
may not be enforced in or by the above-named court.
EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS LETTER AGREEMENT. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS LETTER AGREEMENT, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 8.
9. ENTIRE AGREEMENT; EFFECT. This letter agreement constitutes the
entire agreement between the parties hereto with respect to the matters covered
hereby and supersedes all prior communications, written and oral, between the
parties.
10. COUNTERPARTS. This letter agreement may be executed in and
delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original but all of which taken together
shall constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
If the foregoing terms and conditions are acceptable to you, please so
indicate by signing both of the enclosed copies of this letter agreement where
indicated and returning one to the undersigned.
Very truly yours,
HARBINGER CAPITAL PARTNERS MASTER
FUND I, LTD.
By: Harbinger Capital Partners Offshore Manager,
L.L.C., AS ITS INVESTMENT MANAGER
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Managing Director
HARBINGER CAPITAL PARTNERS SPECIAL
SITUATIONS FUND, L.P.
By: Harbinger Capital Partners Special Situations
GP, LLC, ITS GENERAL PARTNER
By: HMC - New York, Inc., ITS MANAGING MEMBER
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Managing Director
Accepted and agreed to
on this __ day of March, 2007:
APN HOLDING COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and Senior
Managing Director
[Signature Page to Equity Commitment Letter]
PROJECT STRAWBERRY
------------------
TERM SHEET
ISSUER: Salton, Inc., a Delaware corporation ("PARENT")
PREFERRED STOCK: $100,000,000 of Series D Preferred Stock of Parent (the
"PREFERRED STOCK").
INVESTORS: Harbinger Capital Partners Master Fund I, Ltd., a company
organized under the laws of the Cayman Islands and
Harbinger Capital Partners Special Situations Fund, L.P.,
a Delaware limited partnership (the "INVESTORS").
MERGER: The Preferred Stock shall be issued to satisfy a portion
of the financing required in connection with the
transactions contemplated by the Agreement and Plan of
Merger (the "MERGER AGREEMENT"), dated as of February 7,
2007, among Parent, SFP Merger Sub, Inc., a Delaware
corporation and a direct wholly owned subsidiary of
Parent, and APN Holding Company, Inc., a Delaware
corporation. Capitalized terms used but not defined
herein shall have the meanings set forth in the Merger
Agreement.
DIVIDENDS: The Preferred Stock shall be entitled to a 16% cumulative
dividend, payable in kind, that shall accrue and compound
quarterly. No dividend shall be declared or paid on the
common stock of Parent (the "COMMON STOCK"), or any
capital stock of Parent ranking junior to the Preferred
Stock, unless and until all unpaid accrued or accumulated
dividends (whether or not declared) have been paid in
full in cash on the Preferred Stock.
RANK: The Preferred Stock shall, with respect to the
distribution of assets and rights upon the liquidation,
winding up or dissolution of the Parent (a
"LIQUIDATION"), a Sale Transaction (as hereinafter
defined), redemption rights and all other rights and
preferences rank (i) rank junior to all currently
outstanding shares of preferred stock of Parent and (ii)
senior to the shares of Common Stock of Parent and all
classes of capital stock of the Parent hereafter created
that do not expressly rank pari passu with or senior to
the Preferred Stock (the "JUNIOR SECURITIES").
In the event of a Liquidation or Sale Transaction, each
holder of shares of Preferred Stock shall receive, prior
to any payment or distribution to the holders of Junior
Securities, cash in an amount per share equal to the face
amount of the Preferred Stock PLUS an amount equal to all
unpaid accrued or accumulated dividends (whether or not
declared) thereon to the date of such Liquidation or Sale
Transaction.
A "SALE TRANSACTION" is, whether in a single transaction
or series of related transactions, (i) any merger, tender
offer or other business combination in which the
stockholders of Parent owning a majority of the voting
securities of Parent prior to such transaction do not own
a majority of the voting securities of the surviving
person, (ii) a sale of all or substantially all of the
assets of the Parent or (iii) the replacement of a
majority of the board of directors of Parent.
VOTING RIGHTS: The Preferred Stock shall vote as a separate class only
(x) to the extent required by law, (y) in connection with
any amendments to or restatements of the terms of the
Preferred Stock (including by way of merger) or (z) in
connection with the issuance of any shares of capital
stock or securities convertible into or exercisable for
capital stock of the Parent ranking senior to or pari
passu with the Preferred Stock. Any item on which the
Preferred Stock votes as a separate class shall require
the approval of the holders of a majority of the
aggregate number of shares of Preferred Stock issued and
outstanding.
MANDATORY REDEMPTION: On the sixth anniversary of the Closing Date, Parent
shall be required to redeem each share of Preferred Stock
for an amount in cash equal to its face amount plus any
unpaid accrued or accumulated dividends (whether or not
declared) as of the redemption date.
WARRANTS: In connection with the sale of Preferred Stock, Parent
will issue detachable Warrants (the "WARRANTS") to
purchase 21 million shares of Common Stock.
Each Warrant will entitle the holder to purchase Common
Stock at an exercise price of $2.45 (which is equal to
the volume-weighted average closing price of the Common
Stock for the 10 consecutive trading days immediately
ended on the business day immediately prior to the date
hereof). The Warrants may be exercised on a cash or
cashless basis.
The Warrants shall expire 10 years after the Closing
Date.
The number of shares of common stock issuable upon
exercise of the Warrants will be adjusted based on a
weighted average anti-dilution adjustment formula for
below fair market value equity issuances. Mechanical
adjustments will also be made to reflect any
reclassifications, recapitalizations, stock splits or
stock dividends with respect to the Common Stock or
dividends or other distributions.
REGISTRATION RIGHTS: The Preferred Stock, the Warrants and the Common Stock
issuable upon exercise of the Warrants shall be entitled
to registration rights pursuant to the Registration
Rights Agreement to be entered into by the Investors and
Parent at Closing.
