Exhibit (b)(1)
UBS AG UBS WARBURG LLC
Stamford Branch 000 Xxxx Xxxxxx
000 Xxxxxxxxxx Xxxxxxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxxx, Xxxxxxxxxxx 00000
April 10, 2002
Whitney & Co., LLC
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Golden Gate Private Equity, Inc.
Xxx Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Commitment Letter
-----------------
Ladies and Gentlemen:
Whitney & Co., LLC and Golden Gate Private Equity, Inc.
(collectively, "you" or "Sponsor") have advised UBS AG, Stamford Branch ("UBS")
and UBS Warburg LLC ("UBSW" and, together with UBS, "we" or "us") that you
intend to form a corporation or limited liability company ("AcquisitionCo") that
proposes to acquire (the "Acquisition") all of the equity interests of Herbalife
International, Inc. (the "Acquired Business"), pursuant to a merger agreement
among AcquisitionCo, a to be formed wholly owned subsidiary of AcquisitionCo
("AcquisitionSub") and the Acquired Business. The Acquisition will be effected
by the merger of AcquisitionSub with and into the Acquired Business, with the
Acquired Business surviving the merger (the "Merger"). For the purposes of the
loan facilities described herein, the borrower will be a wholly owned U.S.
subsidiary of AcquisitionCo designated by AcquisitionCo and reasonably
acceptable to UBS and UBSW ("Borrower"). All references to "dollars" or "$" in
this agreement and the attachments hereto (collectively, this "Commitment
Letter") are references to United States dollars.
We understand that the sources of funds required to fund the
Acquisition and Merger consideration, to repay existing indebtedness of the
Acquired Business and its subsidiaries of up to $10.6 million (the
"Refinancing"), to pay fees, commissions and expenses of up to $66.7 million in
connection with the Transactions (as defined below) and to provide ongoing
working capital requirements of Borrower and its subsidiaries following the
Transactions will include (a) senior secured credit facilities consisting of (i)
a senior secured term loan facility to Borrower of $165.0 million, of which not
more than $165.0 million will be drawn immediately after giving effect to the
Transactions (the "Term Loan Facility"), as described in the Summary of
Principal Terms and Conditions attached
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hereto as Annex I (the "Bank Term Sheet"), and (ii) a senior secured revolving
credit facility to Borrower of $25.0 million, of which none will be drawn
immediately after giving effect to the Transactions (the "Revolving Credit
Facility" and, together with the Term Loan Facility, the "Bank Facilities"), as
described in the Bank Term Sheet, (b) the issuance by Borrower of up to $238.0
million aggregate gross proceeds of unsecured senior subordinated notes (the
"Notes") pursuant to a public offering or Rule 144A or other private placement
(the "Notes Offering") or, in the event the Notes are not issued at the time the
Transactions are consummated, borrowings by Borrower of up to $238.0 million
under a senior subordinated unsecured bridge facility (the "Bridge Facility"
and, together with the Bank Facilities, the "Facilities") as described in the
Summary of Principal Terms and Conditions attached hereto as Annex II (the
"Bridge Term Sheet" and, together with the Bank Term Sheet, the "Term Sheets"),
(c) equity investments in AcquisitionCo (the "Equity Financing") of not less
than $176.0 million by Sponsor (including any of their affiliates) and one or
more other investors reasonably satisfactory to us (the "Equity Investors") on
terms and conditions reasonably satisfactory to us, and (d) $174.0 million of
existing cash balances available at the Acquired Business and its subsidiaries.
The Sources and Uses are summarized on Annex IV attached hereto. No other
financing is expected to be required for the uses described above. As used
herein, the term "Transactions" means the Acquisition, the Merger, the
Refinancing, the initial borrowings under the Bank Facilities, the Notes
Offering and the issuance of the Notes (or the borrowing under the Bridge
Facility, as the case may be), the Equity Financing and the payments of fees,
commissions and expenses in connection with each of the foregoing.
Commitments.
-----------
You have requested that UBS commit to provide the Facilities and
that UBSW agree to structure, arrange and syndicate the Facilities.
UBS is pleased to advise you of its commitment to provide the
entire amount of the Bank Facilities to Borrower upon the terms and subject to
the conditions set forth or referred to in this Commitment Letter and Annex III
attached hereto. The commitment of UBS and each other Bank Lender (as defined
below) hereunder is subject to the negotiation, execution and delivery of
definitive documentation (the "Bank Documentation") with respect to the Bank
Facilities reasonably satisfactory to UBS and the other Bank Lenders reflecting,
among other things, the terms and conditions set forth in the Bank Term Sheet,
in Annex III attached to this Commitment Letter and in the letter of even date
herewith addressed to you providing, among other things, for certain fees
relating to the Bank Facilities (the "Bank Fee Letter"). In addition, UBS is
pleased to advise you of its commitment to provide the entire amount of the
Bridge Facility to Borrower upon the terms and subject to the conditions set
forth or referred to in this Commitment Letter and Annex III attached hereto (it
being acknowledged that at any time prior to 5:00 p.m., New York City time, on
April 15, 2002, Whitney & Co., LLC and/or its affiliates may commit in writing
to participate in up to $55.0 million of the Bridge Facility on the terms and
conditions set forth in the Bridge Term Sheet, which shall reduce the amount of
UBS's commitments in respect of the Bridge Facility on a dollar for dollar
basis). The commitment of UBS and each other Bridge Lender (as defined below)
hereunder is subject to the negotiation, execution and delivery of definitive
documentation (the "Bridge Documentation" and, together with the Bank
Documentation, the "Financing Documentation") with respect to the Bridge
Facility reasonably satisfactory to UBS and the other Bridge Lenders reflecting,
among other things, the terms and condi-
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tions set forth in the Bridge Term Sheet, in Annex III attached to this
Commitment Letter and in the letter of even date herewith addressed to you
providing, among other things, for certain fees relating to the Bridge
Facilities (the "Bridge Fee Letter" and, together with the Bank Fee Letter, the
"Fee Letters"). You agree that the closing date of the Acquisition and the
Merger and the concurrent closing of the Facilities and, if applicable, the
Notes Offering (the "Closing Date") shall be a date mutually agreed upon between
you and us, but in any event shall not occur until the terms and conditions
hereof, in Annex III attached hereto and in the Term Sheets (including the
conditions to initial funding) have been satisfied or have been waived by us in
writing.
Syndication.
-----------
It is agreed that UBSW will act as the sole and exclusive
advisor, arranger and bookmanager for the Facilities, and will exclusively
manage the syndication of the Facilities, and will, in such capacities,
exclusively perform the duties and exercise the authority customarily associated
with such roles. It is further agreed that no additional advisors, agents,
co-agents, arrangers or bookmanagers will be appointed and no Lender (as defined
below) will receive compensation with respect to any of the Facilities outside
the terms contained herein and in the applicable Fee Letter in order to obtain
its commitment to participate in such Facilities, in each case unless you and we
so agree. It is hereby acknowledged that CIBC World Markets may participate in
the Facilities on terms and conditions satisfactory to us.
UBS reserves the right, prior to or after execution of the Bank
Documentation, and in consultation with Sponsor, to syndicate all or a portion
of its commitment to one or more institutions that will become parties to the
Bank Documentation (UBS and the institutions becoming parties to the Bank
Documentation, the "Bank Lenders"). UBS also reserves the right, prior to or
after the execution of the Bridge Documentation, and in consultation with
Sponsor, to syndicate all or a portion of its commitment to one or more
institutions that will become parties to the Bridge Documentation (UBS and the
institutions that will become parties to the Bridge Documentation, the "Bridge
Lenders," and, together with the Bank Lenders, the "Lenders"). Upon any such
additional Lender issuing its commitment to provide a portion of any of the
Facilities, UBS shall be released from a portion of its commitment in respect of
such Facilities in an aggregate amount equal to the commitment of such Lender.
You agree actively to, and to use commercially reasonable efforts to cause the
Acquired Business to, assist UBSW in achieving a timely syndication of the
Facilities that is reasonably satisfactory to UBSW and the Lenders participating
in such Facilities.
UBSW will exclusively manage all aspects of the syndication of
the Facilities in consultation with you, including selection of additional
Lenders, determination of when UBSW will approach potential additional Lenders,
any naming rights and the final allocations of the commitments in respect of the
Facilities among the additional Lenders. To assist UBSW in its syndication
efforts and to assist the Investment Bank referred to in the Bridge Fee Letter
(the "Investment Bank") in its marketing efforts, you agree (a) promptly to
prepare and provide (and to use commercially reasonable efforts to cause the
Acquired Business and your and their representatives to prepare and provide) all
financial and other information as we may reasonably request with respect to
Borrower, the Acquired Business, their respective subsidiaries, the Transactions
and any other transactions contemplated hereby, including but not limited to
financial projections (the "Projections") relating to the foregoing,
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(b) to use commercially reasonable efforts to ensure that the syndication
efforts benefit materially from existing lending relationships of Sponsor, the
Acquired Business and their respective subsidiaries, (c) to make available to
prospective Lenders senior management and advisors of Sponsor, and to use
commercially reasonable efforts (including, without limitation, incorporating
and enforcing contractual undertakings related thereto in the agreements
relating to the Merger) to make available to prospective Lenders senior
management and advisors of the Acquired Business and their respective
subsidiaries, (d) to host, with UBSW, one or more meetings with prospective
Lenders under each of the Bridge Facility and the Bank Facilities, (e) to
assist, and to use commercially reasonable efforts (including, without
limitation, incorporating and enforcing contractual undertakings related thereto
in the agreements relating to the Merger) to cause the Acquired Business and
your and its advisors to assist, UBSW in the preparation and delivery to UBS and
UBSW, no later than 45 days prior to the Closing Date (or such longer period as
may be deemed necessary by UBS and UBSW), offering materials relating to each of
the Facilities and to securities issuances or other financing arrangements for
refinancing the Bridge Facility, together with confidential information
memoranda, high yield "road show" materials and other customary offering
documentation to assist UBS and UBSW in their efforts to market each of the
Facilities and the financing arrangements for refinancing of the Bridge
Facility, in each case in form and substance satisfactory to UBS and UBSW, (f)
to obtain, at your expense, ratings of the Facilities and the Notes from rating
agencies selected by UBSW and to participate actively in the process of securing
such ratings, including having your senior management and the senior management
of the Acquired Business meet with such rating agencies, and (g) to provide, or
cause to be provided, to the Investment Bank at least the same level of
assistance as is required in connection with the syndication of the Facilities
as set forth above, including, without limitation, assisting in preparation of
road show materials and making senior management of the Acquired Business, and
using commercially reasonable efforts to make the Acquired Business and its
subsidiaries available to participate in meetings with prospective investors in
a "road show."
Information.
-----------
You hereby represent and covenant that (a) all information (other
than the Projections) concerning Borrower, the Acquired Business, their
respective subsidiaries, the Transactions and the other transactions
contemplated hereby (the "Information") that has been or will be made available
to any of the Lenders or UBSW by you or any of your representatives in
connection with the transactions contemplated hereby, when taken as a whole, is
or will be complete and correct in all material respects and does not or will
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are made
and (b) the Projections that have been or will be made available to any of the
Lenders or UBSW by you or any of your representatives in connection with the
transactions contemplated hereby have been and will be prepared in good faith
based upon assumptions believed by you to be reasonable (it being understood
that projections by their nature are inherently uncertain and that actual
results may differ from the Projections and such differences may be material).
You agree to supplement the Information and the Projections from time to time
and agree to advise UBSW of all developments materially affecting Borrower, the
Acquired Business, or any of their respective subsidiaries or affiliates or the
transactions contemplated hereby or the accuracy of Information and Projections
previously furnished to UBSW or any of the Lenders. You acknowledge that UBS and
UBSW may share with any of their affiliates, and such affiliates may
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share with UBS and UBSW, any information related to Borrower, the Acquired
Business, or any of their respective subsidiaries or affiliates (including in
each case information relating to creditworthiness) and the transactions
contemplated hereby.
Compensation.
------------
As consideration for the commitments of the Lenders hereunder
with respect to the Facilities and the agreement of UBSW to structure, arrange
and syndicate the Facilities and to provide advisory services in connection
therewith, you jointly and severally agree to pay, or cause to be paid, to UBS
(i) with respect to the Bank Facilities, the fees as set forth in the Bank Term
Sheet and the Bank Fee Letter, and (ii) with respect to the Bridge Facility, the
fees as set forth in the Bridge Term Sheet and Bridge Fee Letter.
Conditions.
----------
The commitment of the Lenders hereunder with respect to each of
the Facilities and UBSW's agreement to perform the services described herein may
be terminated by UBS if (i) the information (taken as a whole) submitted to UBS
or UBSW by or on behalf of Sponsor, Borrower, the Acquired Business or any of
their respective subsidiaries or affiliates is inaccurate, incomplete or
misleading in any material respect; (ii) any change occurs with respect to any
information previously provided, or any additional or contrary information is
disclosed to or discovered by UBS or UBSW (including, without limitation,
information contained in any review or report required to be provided to either
UBS or UBSW in connection herewith), which UBS deems to be materially adverse in
respect of the business, results of operations, condition (financial or
otherwise), assets, liabilities or prospects of Borrower, the Acquired Business
or AcquisitionCo and its subsidiaries taken as a whole or which UBS deems to be
materially adverse with respect to the legal, tax or accounting position of the
Acquired Business; (iii) in the judgment of UBS, a material adverse change or
material disruption has occurred in the financial, banking or capital markets
generally after the date of this Commitment Letter (including, without
limitation, the markets for loans to or debt securities issued by companies
similar to the Acquired Business), which has had or could reasonably be expected
to have a material adverse effect on the syndication of any portion of the
Facilities or the marketing of the Notes; or (iv) any condition set forth in
either Term Sheet or Annex III attached hereto is not satisfied or any covenant
or agreement in this Commitment Letter or either Fee Letter is not complied with
or is not waived by us in writing.
Clear Market.
------------
From the date of acceptance of the offer set forth in this
Commitment Letter until our completion of syndication of each of the Facilities
(as determined by us and notified in writing to you) and the termination of your
obligations under this Commitment Letter, you will ensure that no financing for
Borrower, the Acquired Business or any of their respective subsidiaries or
affiliates shall be syndicated or placed without the prior written consent of
UBS if such financing, syndication or placement would have, in the judgment of
UBS, a detrimental effect upon the transactions contemplated hereby. In
addition, until the repayment in full or conversion (of Initial Loans to Term
Loans
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or Exchange Notes, all as defined in the Bridge Term Sheet) of the Bridge
Facility, any efforts to sell or place any debt securities or preferred stock
(other than the Equity Financing contemplated hereby) of Borrower, the Acquired
Business or any of their respective subsidiaries or holding companies, including
marketing and pre-marketing activities, shall be conducted in a manner
acceptable to UBS.
Indemnity.
---------
By your acceptance below, you hereby jointly and severally agree
to indemnify and hold harmless each of UBSW, UBS and the other Lenders and their
respective affiliates (including, without limitation, controlling persons) and
the directors, officers, employees, advisors and agents of the foregoing (each,
an "Indemnified Person") from and against any and all losses, claims, costs,
expenses, damages or liabilities (or actions or other proceedings commenced or
threatened in respect thereof) that arise out of, result from or in any way
relate to this Commitment Letter, the Term Sheets, the Fee Letters, the
Facilities or any of the transactions contemplated hereby or the providing or
syndication of the Facilities, and to reimburse each Indemnified Person upon its
written demand (together with backup documentation supporting such reimbursement
request) for any legal or other expenses incurred in connection with
investigating, preparing to defend or defending against, or participating in,
any such loss, claim, cost, expense, damage, liability or action or other
proceeding (whether or not such Indemnified Person is a party to any action or
proceeding), other than any of the foregoing of any Indemnified Person to the
extent determined by a final judgment of a court of competent jurisdiction to
have resulted by reason of the bad faith, gross negligence or willful misconduct
of such Indemnified Person. You shall not be liable for any settlement of any
such proceeding effected without your written consent, but if settled with such
consent or if there shall be a final judgment for the plaintiff, you shall
indemnify the Indemnified Persons from and against any loss or liability by
reason of such settlement or judgment subject to your rights in this paragraph
to claim exemption from your indemnity obligations. You shall not, without the
prior written consent of any Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which such Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability or claims that are the
subject matter of such proceeding. None of UBSW, UBS or any other Lender (or any
of their respective affiliates) shall be responsible or liable to Sponsor,
Borrower, the Acquired Business or any of their respective subsidiaries,
affiliates or stockholders or any other person or entity for any consequential
or punitive damages which may be alleged as a result of this Commitment Letter,
the Term Sheets, the Fee Letters, the Facilities or the transactions
contemplated hereby. In addition, you hereby agree to reimburse each of the
Lenders and UBSW from time to time promptly upon written demand (together with
backup documentation supporting such reimbursement request) for all reasonable
out-of-pocket costs and expenses (including, without limitation, reasonable
legal fees and expenses of UBS's and UBSW's counsel, appraisal, consulting and
audit fees, and printing, reproduction, document delivery, travel, communication
and publicity costs) incurred in connection with the syndication and execution
of the Facilities, and the preparation, review, negotiation, execution and
delivery of this Commitment Letter, the Term Sheets, the Fee Letters, the
Financing Documentation and the administration, amendment, modification or
waiver thereof (or any proposed amendment, modification or waiver), whether or
not the Closing Date occurs or any Financing Documentation is executed and
delivered or any extensions of credit are made under either of the Facilities.
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To the extent the indemnification provided for in this Commitment
Letter is unavailable to an Indemnified Person or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to herein, then each
of you, in lieu of indemnifying such Indemnified Person, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, costs, expenses, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by you, on the one hand,
and such Indemnified Person, on the other hand, from this Commitment Letter, the
Term Sheets, the Fee Letters, the Facilities or any of the transactions
contemplated hereby or the providing or syndication of the Facilities or (ii) if
the allocation provided by the preceding clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in such clause (i) above but also the relative
fault of you, on the one hand, and such Indemnified Person, on the other hand,
in connection with such losses, claims, costs, expenses, damages or liabilities,
as well as any other relevant equitable considerations. You agree that it would
not be just and equitable if contribution pursuant to this paragraph were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
paragraph. Notwithstanding the provisions of this Commitment Letter, the
Indemnified Persons, in the aggregate, shall not be required to contribute any
amount in excess of the amount by which the total compensation received by the
Indemnified Persons under this Commitment Letter and the applicable Fee Letters
exceeds the amount of any damages which the Indemnified Persons have otherwise
been required to pay by reason of the losses, claims, costs, expenses, damages
or liabilities referred to above. Notwithstanding the provisions of this
Commitment Letter, no Indemnified Person shall be required to contribute any
amount in excess of the amount by which the total compensation received by such
Indemnified Person under this Commitment Letter and the applicable Fee Letters
exceeds the amount of any damages which such Indemnified Person has otherwise
been required to pay by reason of the losses, claims, costs, expenses, damages
or liabilities referred to above. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
Confidentiality.
---------------
This Commitment Letter is furnished for your benefit, and may not
be relied on by any other person or entity. This Commitment Letter is delivered
to you upon the condition that neither the existence of this Commitment Letter,
the Term Sheets or the Fee Letters nor any of their contents shall be disclosed
by you or any of your affiliates, directly or indirectly, to any other person,
except that such existence and contents may be disclosed (i) as may be compelled
in a judicial or administrative proceeding or as otherwise required by law and
(ii) to your directors, officers, employees, advisors and agents, in each case
on a confidential and "need-to-know" basis and only in connection with the
transactions contemplated hereby. In addition, this Commitment Letter and the
Term Sheets (but not the Fee Letters) may be disclosed to the Acquired Business
and its directors, officers, employees, advisors and agents, in each case on a
confidential and "need-to-know" basis and only in connection with the
transactions contemplated hereby.
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Other Services.
--------------
You acknowledge and agree that UBS, UBSW and/or their affiliates
may be requested to provide additional services with respect to Sponsor,
Borrower, the Acquired Business and/or their respective affiliates or other
matters contemplated hereby. Any such services will be set out in and governed
by a separate agreement(s) (containing terms relating, without limitation, to
services, fees and indemnification) in form and substance satisfactory to the
party thereto, UBS and UBSW (or any such affiliate of UBS and UBSW). Nothing in
this Commitment Letter is intended to obligate or commit UBS or UBSW or any of
their affiliates to provide any services other than as set out herein.
Governing Law, Etc.
------------------
This Commitment Letter and the commitment of the Lenders shall
not be assignable by you without the prior written consent of the Lenders and
UBSW, and any purported assignment without such consent shall be void. This
Commitment Letter may not be amended or any provision hereof waived or modified
except by an instrument in writing signed by UBS, UBSW and you. This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original and all of which, when taken together, shall constitute one agreement.
Delivery of an executed counterpart of a signature page of this Commitment
Letter by facsimile transmission shall be effective as delivery of a manually
executed counterpart of this Commitment Letter. Headings are for convenience
only. This Commitment Letter is intended to be for the benefit of the parties
hereto (and AcquisitionCo, once formed, provided that AcquisitionCo has joined
this Commitment Letter and the Fee Letters pursuant to joinder agreements
reasonably satisfactory to UBS and UBSW) and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than the
parties hereto, the Lenders and, with respect to the indemnification provided
under the heading "Indemnity", each Indemnified Person. This Commitment Letter
shall be governed by, and construed in accordance with, the laws of the State of
New York without regard to principles of conflicts of law. Any right to trial by
jury with respect to any claim or action arising out of this Commitment Letter
is hereby waived by the parties hereto. You hereby submit to the non-exclusive
jurisdiction of the federal and New York State courts located in The City of New
York (and appellate courts thereof) in connection with any dispute related to
this Commitment Letter or any of the matters contemplated hereby, and agree that
service of any process, summons, notice or document by registered mail addressed
to you shall be effective service of process against you for any suit, action or
proceeding relating to any such dispute. You irrevocably and unconditionally
waive any objection to the laying of such venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding has been brought in an inconvenient forum. A final judgment in any
such suit, action or proceeding brought in any such court may be enforced in any
other courts to whose jurisdiction you are or may be subject by suit upon
judgment.
Please indicate your acceptance of the terms hereof and of the
Term Sheets and the Fee Letters by returning to us executed counterparts of this
Commitment Letter and the Fee Letters not later than 12:00 p.m., New York City
time, on April 11, 2002. This Commitment Letter and the commitments of the
Lenders hereunder and the agreement of UBSW to provide the services described
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herein are also conditioned upon your acceptance hereof and of each Fee Letter,
and our receipt of executed counterparts hereof and thereof. Upon the earliest
to occur of (A) the execution and delivery of the Financing Documentation by all
of the parties thereto, (B) August 31, 2002, if the Financing Documentation
shall not have been executed and delivered by all such parties prior to that
date, or (C) if earlier than (B), the date of termination of the definitive
agreement pertaining to the Acquisition, this Commitment Letter and the
commitments of the Lenders hereunder and the agreement of UBSW to provide the
services described herein shall automatically terminate unless the Lenders and
UBSW shall, in their discretion, agree to an extension. The compensation,
expense reimbursement, confidentiality, indemnification and governing law and
forum provisions hereof and in the Term Sheets and the Fee Letters shall survive
termination of this Commitment Letter (or any portion hereof) or the commitments
of the Lenders hereunder; provided that upon the execution and delivery of the
Financing Documentation, the Acquired Business shall assume all obligations
hereunder and Sponsor shall be relieved thereof (other than obligations in
respect of the provisions under the heading "Syndication" above, for which
Sponsor shall remain jointly and severally liable).
[Signature Page Follows]
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UBS and UBSW are pleased to have been given the opportunity to
assist you in connection with the financing for the Transactions.
Very truly yours,
UBS AG, STAMFORD BRANCH
By: ____________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
UBS WARBURG LLC
By: ___________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
Accepted and agreed to as of the date first written above:
WHITNEY & CO., LLC
By: ___________________________________
Name:
Title:
GOLDEN GATE PRIVATE EQUITY, INC.
By: ____________________________________
Name:
Title:
ANNEX I
-------
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
-----------------------------------------
The following is an outline of basic terms and conditions of the proposed
financing to be arranged by UBS Warburg LLC. This Summary of Principal Terms and
Conditions does not attempt to include all the terms and conditions, but instead
provides a structural outline of the subject transaction as proposed by UBS
Warburg LLC and UBS AG, Stamford Branch.
Bank Facilities(1)
----------------
Borrower: A U.S. borrower to be designated by
-------- AcquisitionCo and reasonably acceptable
to UBS and UBSW ("Borrower").
Arranger: UBS Warburg LLC ("UBSW" or the
-------- "Arranger").
Lenders: A syndicate of banks, financial
------- institutions and other entities,
including UBS AG, Stamford Branch,
arranged by the Arranger in consultation
with Borrower.
Administrative Agent: UBS AG, Stamford Branch (the
-------------------- "Administrative Agent").
Type and Amount of Facilities: Term Loan Facility:
----------------------------- ------------------
Term Loan Facility (the "Term Loan
Facility") in an aggregate principal
amount of $165.0 million (each
individual loan thereunder a "Term Loan"
and together the "Term Loans").
Revolving Credit Facility:
-------------------------
A revolving credit facility (the
"Revolving Credit Facility") in an
aggregate principal amount of $25.0
million. The Term Loan Facility and the
Revolving Credit Facility are herein
referred to collectively as the "Bank
Facilities". An amount to be mutually
agreed of the Revolving Credit Facility
will be available as a letter of credit
subfacility. A portion of the Revolving
Credit Facility in an amount to be
mutually agreed shall be made available
as a swingline facility.
_____________________________________
1 All capitalized terms used but not defined herein shall have the meanings
provided in the Commitment Letter to which this summary is attached.
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Available Currencies: The Bank Facilities will be available in
-------------------- U.S. dollars.
Purpose: Proceeds of the Term Loan Facility will
------- be used to finance a portion of the
Acquisition, to pay fees and expenses in
connection therewith and to provide
ongoing working capital requirements of
Borrower and its subsidiaries following
the Closing Date. Proceeds of the
Revolving Credit Facility will be used
to provide ongoing working capital
requirements of Borrower and its
subsidiaries and for general corporate
purposes following the Closing Date.
Closing Date: The date of consummation of the
------------ Acquisition.
Maturity Dates: Term Loan Facility: 6 years from the
-------------- Closing Date.
Revolving Credit Facility: 5 years from
the Closing Date.
Amortization: To be mutually determined.
------------
Availability: Term Loan Facility: Upon satisfaction
------------ or waiver of conditions precedent to
drawing to be specified in the Bank
Documentation, a single drawing may be
made on the Closing Date of the full
amount of the Term Loan Facility.
Revolving Credit Facility: Upon
satisfaction or waiver of conditions
precedent to drawing to be specified in
the Bank Documentation, borrowings may
be made at any time after the Closing
Date to but excluding the Maturity Date
of the Revolving Credit Facility.
Interest: At Borrower's option, Base Rate/Prime
-------- Rate and LIBOR loans, will be available
as follows:
A. Base Rate/Prime Rate Option
---------------------------
Interest on U.S. dollar-denominated
borrowings shall be at the Base Rate of
UBS plus the applicable Interest Margin,
calculated on the basis of the actual
number of days elapsed in a year of 365
days and payable quarterly in arrears.
The Base Rate is defined as the higher
of the Federal Funds Rate, as published
by the Federal Reserve Bank of New York,
plus 1/2 of 1% and the prime com-
-3-
mercial lending rate of UBS, as
established from time to time at its
Stamford Branch.
Base Rate borrowings shall require one
business day's prior notice and shall be
in minimum amounts to be agreed upon.
B. LIBOR Option
------------
Interest shall be determined for periods
("Interest Periods") of one, two, three
or six months (or such other available
period with the consent of all Lenders)
(as selected by Borrower) and shall be
at an annual rate equal to the London
Interbank Offered Rate ("LIBOR") for the
corresponding deposits of U.S. dollars,
plus the applicable Interest Margin.
LIBOR will be determined by UBS at the
start of each Interest Period and shall
be fixed through such period. Interest
will be paid at the end of each Interest
Period or, in the case of Interest
Periods longer than three months, at
three-month intervals, and will be
calculated on the basis of the actual
number of days elapsed in a year of 360
days. LIBOR will be adjusted for maximum
statutory reserve requirements (if any).
LIBOR borrowings shall require three
business days' prior notice and shall be
in minimum amounts to be mutually agreed
upon. The availability of LIBOR loans
during the syndication period shall be
limited.
Default Interest: At the election of the Requisite
---------------- Lenders, upon the occurrence and during
the continuance of an event of default,
interest will accrue on any amount of a
loan or other amount payable under the
Bank Facilities at a rate equal to (i)
2.0% per annum in excess of the rate
(including the applicable Interest
Margin), if any, otherwise applicable to
such loan or other amount or (ii) if no
rate is then applicable to such amount,
2.0% per annum in excess of the Base
Rate plus the applicable Interest
Margin, and will, in each case, be
payable on demand.
Interest Margins: The applicable Interest Margin will
---------------- initially be the basis points set forth
in the following table and thereafter
with respect to the Revolving Credit
Facility will be determined pursuant to
a leverage ratio grid to be determined,
-4-
which grid will not be applicable until
the date on which Borrower shall have
delivered financial statements for the
fiscal quarter ending at least six
months after the Closing Date.
Base
Rate LIBOR
Loans Loans
----- -----
Term Loan 225 basis 325 basis
Facility points points
Revolving 225 basis 325 basis
Credit points points
Facility
Commitment Fee: A Commitment Fee shall accrue on the
-------------- unused amounts of the commitments under
the Revolving Credit Facility. Such
Commitment Fee will initially be 0.50%
and thereafter will be determined
pursuant to a grid (based on
utilization) to be determined. Accrued
Commitment Fees will be payable
quarterly in arrears (calculated on a
360-day basis) for the account of the
Lenders from the Closing Date.
Mandatory Prepayments: An amount equal to (a) 100% of the net
--------------------- proceeds received from the sale or other
disposition of all or any part of the
assets of Borrower or any of its
subsidiaries after the Closing Date
other than exceptions and a basket to be
agreed by the Lenders and Borrower,
(b) 100% of the net proceeds received by
Borrower or any of its subsidiaries from
the issuance of debt or preferred stock
after the Closing Date, other than the
Notes or other Qualifying Subordinated
Debt (to be defined in the Bank
Documentation) which refinances
borrowings under the Bridge Facility and
other exceptions to be agreed upon by
the Lenders and Borrower, (c) a
percentage to be determined of the net
proceeds received from the issuance of
common equity (including, but not
limited to, upon the exercise of
warrants and options), by Borrower or
any of its subsidiaries after the
Closing Date, other than any amount
thereof which is applied to the
repayment of the Bridge Facility,
(d) 100% of all insurance recoveries in
excess of amounts applied within a
period of time to be mutually agreed to
replace or restore any properties in
re-
-5-
spect of which such proceeds are paid to
Borrower and its subsidiaries, and (e) a
percentage to be determined of excess
cash flow of Borrower and its
subsidiaries (defined in a manner to be
agreed upon by UBSW and Borrower).
Percentages of equity proceeds and
excess cash flow required to be applied
to mandatory prepayments as provided
above will be reduced based on leverage
in a manner to be determined.
Mandatory prepayments under clauses (a),
(b), (c), (d) and (e) shall be applied:
first, to prepay Term Loans and, second,
to reduce the commitments under the
Revolving Credit Facility (and to repay
loans thereunder and/or cash
collateralize letters of credit, in each
case, in an amount equal to the excess
of such loans or letters of credit over
the commitment thereunder as so
reduced).
Optional Prepayments: Permitted in whole or in part, with
-------------------- prior notice, and include accrued and
unpaid interest, subject to limitations
as to minimum amounts of prepayments.
Application of Prepayments: Mandatory prepayments will be applied to
-------------------------- scheduled amortization on the Term Loan
Facility on a pro rata basis. If the
Term Loan Facility has been repaid in
full, any prepayments made shall be
applied to reduce commitments under the
Revolving Credit Facility and to prepay
loans thereunder if the amount of
outstanding loans exceeds the
commitments. Optional prepayments will
be applied as directed by Borrower,
provided that no amounts are then past
due. There shall be no prepayment
penalties (except LIBOR breakage costs)
for prepayments.
Security: The Bank Facilities and any interest
-------- rate protection facilities or other
hedging facilities to which a Lender or
an affiliate of a Lender is a
counterparty will be secured by
perfected first priority pledges of all
of the stock held by AcquisitionCo, all
of the stock of Borrower and each of its
direct and indirect subsidiaries
(provided, however, that no more than
66% of the equity interests of non U.S.
subsidiaries will be required to be
pledged as security if the pledge of a
greater percentage would result in tax
or similar liabilities for Borrower and
its subsidiaries on a consolidated
basis), and perfected first priority
(subject to customary exceptions)
security interests in and liens
-6-
on all accounts receivables and
inventory of Borrower and its
subsidiaries and all other real and
personal property and all other tangible
and intangible assets, wherever located,
now or hereafter owned by Borrower and
its subsidiaries, including without
limitation all after-acquired property
and all rights in any material
contracts, with such exceptions as shall
be mutually agreed upon by UBSW and
Borrower.
Guarantees: The Bank Facilities will be fully and
---------- unconditionally guaranteed on a joint
and several basis by all of the existing
and future direct and indirect
subsidiaries of Borrower and by
Herbalife International, Inc. and
AcquisitionCo; provided, however, that
non U.S. subsidiaries shall only be
required to deliver guarantees to the
extent such delivery would not result in
tax or similar liabilities for Borrower
and its subsidiaries on a consolidated
basis.
Conditions to Initial Borrowings: Conditions precedent to initial
-------------------------------- borrowings under the Bank Facilities
will include (without limitation) those
set forth in the Commitment Letter and
Annex III attached thereto.
Conditions to Each Borrowing: Conditions precedent to each borrowing
---------------------------- or issuance under the Revolving Credit
Facility will be customary for a
transaction of this type and others
determined by UBS to be appropriate,
including, without limitation, (1) the
absence of any continuing default or
event of default, (2) the accuracy in
all material respects of all
representations and warranties and
(3) the absence of a material adverse
change in the condition (financial or
otherwise), business, operations,
assets, liabilities or prospects of
Borrower and its subsidiaries, taken as
a whole.
Representations and Warranties: Will apply to AcquisitionCo and its
------------------------------ subsidiaries (with qualifications to be
negotiated) and include (without
limitation) representations and
warranties as to: financial statements
(including pro forma financial
statements); absence of undisclosed
liabilities; no material adverse change;
corporate existence; compliance with
law; corporate power and authority;
enforceability of the Bank
Documentation; no conflict with law or
contractual obligations; no material
litigation; no default; ownership of
property; liens; intellectual property;
no burdensome restrictions; taxes;
Federal Reserve regulations; ERISA;
-7-
Investment Company Act; subsidiaries;
environmental matters; solvency;
accuracy of disclosure; and creation and
perfection of security interests.
Affirmative Covenants: Affirmative covenants will apply to
--------------------- AcquisitionCo and its subsidiaries (with
qualifications to be negotiated) and
will include (without limitation):
Delivery of financial and other
information: certified quarterly and
audited annual financial statements,
monthly management reports, reports to
shareholders, notices of defaults,
litigation and other material events,
budgets and other information
customarily supplied in a transaction of
this type; payment of other obligations;
continuation of business and maintenance
of existence and material rights and
privileges; compliance with all
applicable laws and regulations
(including, without limitation,
environmental matters, taxation and
ERISA) and material contractual
obligations; maintenance of property and
insurance; maintenance of books and
records; right of the Lenders to inspect
property and books and records; further
assurances (including, without
limitation, with respect to security
interests in after-acquired property);
and agreement to establish an interest
rate protection program and/or have
fixed rate financing on a percentage and
for a period to be mutually determined
of the aggregate funded indebtedness of
Borrower and its subsidiaries.
Negative Covenants: Negative covenants will apply to
------------------ AcquisitionCo and its subsidiaries (with
qualifications and baskets to be
negotiated) and will include (without
limitation):
1. Limitation on dispositions of assets
and changes of business and
ownership.
2. Limitation on mergers and
acquisitions.
3. Limitations on dividends and other
restricted payments.
4. Limitation on indebtedness
(including guarantees and other
contingent obligations).
5. Limitation on loans and investments.
-8-
6. Limitation on liens.
7. Limitation on transactions with
affiliates (other than payments of
advisory fees and management fees
satisfactory to the Administrative
Agent).
8. Limitation on sale and leaseback
transactions.
9. Limitation on operating leases.
10. Certain financial covenants to be
determined (and to be applicable to
Borrower and its consolidated
subsidiaries and holding companies,
as determined by UBS), including,
without limitation, a minimum
interest coverage ratio, a maximum
leverage ratio, a minimum fixed
charge coverage ratio, minimum
levels of EBITDA and maximum capital
expenditures.
11. No modification of material
documents (including, without
limitation, charter documents of
Borrower and its subsidiaries and
all documents relating to the Bridge
Facility, the Notes, if any, and the
Equity Financing) and no change in
accounting policies without the
consent of the Requisite Lenders.
12. No change to fiscal year of Borrower
or any of its subsidiaries.
Events of Default: Will include (without limitation) (with
----------------- qualifications to be negotiated)
nonpayment, misrepresentation, breach of
covenant, cross defaults, loss of lien
on collateral, bankruptcy, ERISA,
judgments and change of ownership or
control (to be defined).
Assignments and Participations: Each Lender may assign all or a portion
------------------------------ of its loans and commitments under the
Bank Facilities (which shall not be
required to be pro-rata among the Bank
Facilities), or sell participations
therein, to any other Lender, any
eligible assignee (to be defined) or
(with Borrower's consent (which shall
not be unreasonably withheld) so long as
there is no existing default or event of
default) to any other person or persons,
provided that each such assignment shall
be in minimum amounts to be agreed upon
(or the remainder of such Lender's loans
and commitments,
-9-
if less) and shall be subject to certain
conditions (including, without
limitation, the consent of the
Administrative Agent, which consent
shall not be unreasonably withheld, and
the payment of an administrative fee to
the Administrative Agent) and no
purchaser of a participation shall have
the right to exercise or to cause the
selling Lender to exercise voting rights
in respect of the Bank Facilities
(except as to certain basic issues).
Expenses and Indemnification: All reasonable out-of-pocket expenses
---------------------------- (including but not limited to reasonable
legal fees and expenses and expenses
incurred in connection with due
diligence and travel, courier,
reproduction, printing and delivery
expenses) of the Arranger and the
Administrative Agent associated with the
syndication of the Bank Facilities and
with the preparation, execution and
delivery, administration, amendment,
waiver or modification (including
proposed amendments, waivers or
modifications) of the documentation
contemplated hereby are to be paid by
Borrower. In addition, all reasonable
out-of-pocket expenses (including but
not limited to reasonable legal fees and
expenses) of the Lenders and the
Administrative Agent for workout
proceedings, enforcement costs and
documentary and stamp taxes associated
with the Bank Facilities are to be paid
by Borrower.
Borrower will indemnify the Lenders, UBS
and UBSW and their respective
affiliates, and hold them harmless from
and against all reasonable out-of-pocket
costs, expenses (including but not
limited to reasonable legal fees and
expenses) and liabilities arising out of
or relating to the proposed
transactions, including but not limited
to the Acquisition, the Merger, the
Refinancing or any transactions related
thereto and any actual or proposed use
of the proceeds of any loans made under
the Bank Facilities; provided, however,
that no such person will be indemnified
for costs, expenses or liabilities to
the extent determined by a final
judgment of a court of competent
jurisdiction to have been incurred by
reason of the bad faith, gross
negligence or willful misconduct of such
person.
Borrower will indemnify the Lenders for
withholding taxes imposed by any
governmental authorities (subject
-10-
to customary exclusions). Such
indemnification shall consist of
customary tax gross-up provisions.
Requisite Lenders: Lenders holding at least a majority of
----------------- total loans and commitments under the
Bank Facilities, with certain customary
modifications or amendments requiring
the consent of Lenders holding a greater
percentage (or all) of the total loans
and commitments under the Bank
Facilities.
Governing Law and Forum: The laws of the State of New York. Each
----------------------- party to the Bank Documentation will
waive the right to trial by jury and
will consent to jurisdiction of the
state and federal courts located in The
City of New York.
Counsel to UBSW and
the Administrative Agent: Skadden, Arps, Slate, Xxxxxxx & Xxxx
------------------------ LLP.
ANNEX II
--------
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
-----------------------------------------
The following is an outline of basic terms and conditions of the proposed
financing to be arranged by UBS Warburg LLC. This Summary of Principal Terms and
Conditions does not attempt to include all the terms and conditions, but instead
provides a structural outline of the subject transaction as proposed by UBS
Warburg LLC and UBS AG, Stamford Branch.
Bridge Facility(1)
---------------
Borrower: A U.S. borrower to be designated by
-------- AcquisitionCo and reasonably acceptable
to UBS and UBSW ("Borrower").
Arranger: UBS Warburg LLC ("UBSW" or the
-------- "Arranger").
Lenders: A syndicate of banks, financial
------- institutions and other entities,
including UBS AG, Stamford Branch,
arranged by the Arranger in consultation
with Borrower.
Administrative Agent: UBS AG, Stamford Branch (the
-------------------- "Administrative Agent").
Type and Amount of Bridge Facility: $238.0 million senior subordinated
---------------------------------- unsecured bridge loan facility (subject
to adjustment as set forth below under
"Funded Debt Test") (the "Bridge
Facility").
Funded Debt Test: The Lenders' commitments are conditioned
---------------- upon the ratio of debt for borrowed
money (calculated on a pro forma basis,
after giving effect to the transactions
contemplated hereby (including, without
limitation, taking into account the
funded amount under the Bank Facilities,
the full amount of the Bridge Facility,
any Holdco Securities (as defined in the
Bridge Fee Letter) and any other
indebtedness for borrowed money) of
Holdco and its subsidiaries to EBITDA
(with EBITDA based on underlying GAAP
data, with adjustments
____________________________________
1 All capitalized terms used but not defined herein shall have the meanings
provided in the Commitment Letter to which this summary is attached.
-2-
acceptable to UBS and UBSW (it being
acknowledged that the adjustments for
the 2001 fiscal year that resulted in a
period EBITDA of $101.0 million are
acceptable to UBS and UBSW)) of Holdco
and its subsidiaries computed for the
twelve-month period ended March 31, 2002
not exceeding 3.36:1.00 (the "Funded
Debt Test"). In the event that the
Funded Debt Test is not satisfied, the
amount of the Equity Financing must
increase by an amount necessary to
satisfy the Funded Debt Test (and the
Bridge Facility shall be decreased as
determined by UBS).
Available Currencies: The Bridge Facility will be denominated
-------------------- in U.S. dollars.
Purpose: Proceeds of borrowings under the Bridge
------- Facility (the "Initial Loans") will be
used to finance a portion of the
Acquisition and the Refinancing and to
pay fees and expenses in connection
therewith.
Closing Date: The date of consummation of the
------------ Acquisition.
Maturity/Exchange: All the Initial Loans will mature on the
----------------- date that is one year following the
Closing Date (the "Maturity Date"). If
any Initial Loan has not been previously
repaid in full on or prior to the
Maturity Date, subject to the conditions
outlined below under "Conditions to
Conversion of the Initial Loans," such
Initial Loan shall be converted into a
term loan (each, a "Term Loan", and
together with the Initial Loans, the
"Loans") maturing on the eighth
anniversary of the Closing Date (the
"Final Maturity Date"). The Lenders in
respect of the Initial Loans and the
Term Loans will have the option (i) in
the case of Initial Loans, at the
Maturity Date or (ii) in the case of
Term Loans, at any time or from time to
time, to receive notes (the "Exchange
Notes") in exchange for such Initial
Loans or Term Loans having the terms set
forth in the term sheet attached hereto
as Exhibit A.
Availability: Upon satisfaction or waiver in writing
------------ of conditions precedent to drawing to be
specified
-3-
in the Bridge Documentation, a single
drawing may be made on the Closing Date
of the full amount of the Bridge
Facility.
Interest: Prior to the Maturity Date, the Initial
-------- Loans will accrue interest at a rate per
annum equal to the three-month London
Interbank Offered Rate ("LIBOR") as
determined by UBS for a corresponding
deposit amount (adjusted quarterly) plus
a spread (the "Spread"). The Spread will
initially be 1000 basis points. If the
Initial Loans are not repaid in whole
within three months following the
Closing Date, the Spread will increase
by 50 basis points at the end of such
three-month period and shall increase by
an additional 50 basis points at the end
of each three-month period thereafter.
LIBOR will be adjusted for maximum
statutory reserve requirements (if any).
Interest on the Initial Loans will be
payable in arrears at the end of each
three-month period and at the Maturity
Date. Interest on the Initial Loans
shall not exceed 16.0% per annum. To the
extent the interest payable on the
Initial Loans exceeds 14.0% per annum,
Borrower may, at its option, cause such
excess interest to be added to the
principal amount of the Initial Loans.
Following the Maturity Date, all
outstanding Term Loans will accrue
interest at the rate provided for in the
Exchange Notes in Exhibit A hereto,
subject to the absolute and cash caps
applicable to the Exchange Notes and
excluding the option to elect to have
interest accrue at a fixed rate.
Calculation of interest shall be on the
basis of actual days elapsed in a year
of 360 days.
Default Interest: At the election of the Requisite
---------------- Lenders, upon the occurrence and during
the continuance of an event of default,
interest will accrue on any amount of a
loan or other amount payable under the
Bridge Facility at a rate equal to (i)
2.0% per annum in excess of the rate
(including the
-4-
Spread), if any, otherwise applicable to
such loan or other amount or (ii) if no
rate is then applicable to such amount,
2.0% per annum in excess of the Base
Rate plus the Spread, and will, in each
case, be payable in cash on demand.
The Base Rate is defined as the higher
of the Federal Funds Rate, as published
by the Federal Reserve Bank of New York,
plus 1/2 of 1% and the prime commercial
lending rate of UBS, as established from
time to time at its Stamford Branch.
Mandatory Redemption: Borrower will be required to prepay
-------------------- Initial Loans (and, if issued, Exchange
Notes and Term Loans, to the extent
required by the terms of such Exchange
Notes or Term Loans, as applicable) on a
pro rata basis, at par plus accrued and
unpaid interest and breakage costs, from
the net proceeds from the incurrence of
any debt or the issuance of any equity
or any asset sales, subject to (i)
exceptions to be agreed and (ii) any
requirements in the Bank Facilities.
Optional Prepayments: The Initial Loans and the Term Loans may
-------------------- be prepaid, in whole or in part, at the
option of Borrower, at any time with
prior notice, at par plus accrued and
unpaid interest and breakage costs.
Guarantees: Guaranteed on a senior subordinated
---------- basis by Herbalife International, Inc.,
AcquisitionCo and each of Borrower's
subsidiaries that guarantee the Bank
Facilities.
Security: None.
--------
Ranking: Subordinated to the Bank Facilities;
------- pari passu with or senior to all other
obligations of Borrower and the
guarantors.
Conditions to Borrowing: Conditions precedent to borrowing under
----------------------- the Bridge Facility will include
(without limitation) those set forth in
the Commitment Letter and Annex III
attached thereto.
-5-
Representations and Warranties: Will apply to AcquisitionCo and its
------------------------------ subsidiaries (with qualifications to be
negotiated) and will include (without
limitation) representations and
warranties as to: financial statements
(including pro forma financial
statements); absence of undisclosed
liabilities; no material adverse change;
corporate existence; compliance with
law; corporate power and authority;
enforceability of the Bridge
Documentation; no conflict with law or
contractual obligations; no material
litigation; no default; ownership of
property; liens; intellectual property;
no burdensome restrictions; taxes;
Federal Reserve regulations; ERISA;
Investment Company Act; subsidiaries;
environmental matters; solvency; and
accuracy of disclosure.
Affirmative Covenants: Affirmative covenants will apply to
--------------------- AcquisitionCo and its subsidiaries (with
qualifications to be negotiated) and
will include (without limitation):
Delivery of financial and other
information: certified monthly and
quarterly and audited annual financial
statements, monthly management reports,
reports to shareholders, notices of
defaults, litigation and other material
events, budgets and other information
customarily supplied in a transaction of
this type; payment of other obligations;
continuation of business and maintenance
of existence and material rights and
privileges; compliance with all
applicable laws and regulations
(including, without limitation,
environmental matters, taxation and
ERISA) and material contractual
obligations; maintenance of property and
insurance; maintenance of books and
records; right of the Lenders to inspect
property and books and records; further
assurances; and agreement to establish
an interest rate protection program
and/or have fixed rate financing on a
percentage and for a period of time to
be mutually determined of the aggregate
funded indebtedness of Borrower and its
subsidiaries.
-6-
Negative Covenants: Negative covenants will apply to
------------------ AcquisitionCo and its subsidiaries (with
qualifications and baskets to be
negotiated) and will include (without
limitation):
1. Limitation on dispositions of assets
and changes of business and
ownership.
2. Limitation on mergers and
acquisitions.
3. Limitations on dividends and other
restricted payments.
4. Limitation on indebtedness
(including guarantees and other
contingent obligations).
5. Limitation on loans and investments.
6. Limitation on liens.
7. Limitation on transactions with
affiliates (other than payments of
advisory fees and management fees
satisfactory to the Administrative
Agent).
8. Limitation of sale and leaseback
transactions.
9. Limitation on operating leases.
10. Certain financial covenants to be
determined (and to be applicable to
Borrower and its consolidated
subsidiaries and holding companies,
as determined by UBS), including,
without limitation, a minimum
interest coverage ratio, a maximum
leverage ratio, a minimum fixed
charge coverage ratio, minimum
levels of EBITDA and maximum capital
expenditures.
11. No modification of material
documents (including, without
limitation, charter documents of
Borrower and its
-7-
subsidiaries and all documents
relating to the Bank Facilities and
the Equity Financing) and no change
in accounting policies without the
consent of the Requisite Lenders.
12. No change to fiscal year of Borrower
or any of its subsidiaries.
Refinancing of Initial Loans: Borrower shall undertake to use its best
---------------------------- efforts to (i) prepare an offering
memorandum for a private placement
through resale pursuant to Rule 144A or
(ii) file a registration statement under
the Securities Act with respect to debt
and/or preferred equity securities (in
each case, the "Offering") to refinance
in full the Initial Loans and to
consummate such Offering as soon as
practicable thereafter in an amount
sufficient to refinance the Initial
Loans. Such Offering shall be on such
terms and conditions (including without
limitation covenants, events of default,
guarantees, interest and/or dividend
rates, yield and redemption prices and
dates and a maturity date no earlier
than six months after the latest
maturity of the Bank Facilities) as the
financial institutions engaged pursuant
to the Engagement Letter (the "Take-out
Banks") may in their reasonable judgment
determine to be appropriate in light of
prevailing circumstances and market
conditions and the financial condition
and prospects of Borrower and its
subsidiaries at the time of sale and
containing such other customary terms as
determined by the Take-out Banks,
subject to the limitations set forth in
the Bridge Fee Letter. If any securities
are issued in a transaction not
registered under the Securities Act, all
such securities shall be entitled to the
benefit of a registration rights
agreement to be entered into by Borrower
and any other obligor in respect of
indebtedness being refinanced in
customary form reasonably acceptable to
the Take-out Banks (which shall include
provisions for a customary registered
exchange offer with respect to any such
securities).
-8-
Borrower shall undertake to (i)
cooperate with the Take-out Banks to
refinance in full the Initial Loans,
(ii) assist the Take-out Banks in
connection with the marketing of the
Offering (including promptly providing
to the Take-out Banks any information
reasonably requested to effect the issue
and sale of the Offering and making
available senior management of Borrower
for investor meetings), and (iii)
cooperate with the Take-out Banks in the
timely preparation of any registration
statement or private placement
memorandum relating to the Offering and
other marketing materials to be used in
connection with the syndication of the
Initial Loans.
Events of Default: Will include (without limitation) (with
----------------- qualifications to be negotiated)
nonpayment, breach of covenants or
representations, cross payment default
and cross acceleration, bankruptcy,
ERISA, judgments and change of ownership
or control (to be defined).
Conditions to On the Maturity Date, unless
Conversion of Initial Loans: (i) Borrower or any significant
--------------------------- subsidiary thereof is subject to a
bankruptcy or other insolvency
proceeding, (ii) there exists a matured
default with respect to the Initial
Loans or (iii) there exists a default in
the payment when due at final maturity
of any indebtedness of Borrower or any
of its subsidiaries, or the maturity of
such indebtedness shall have been
accelerated, the Initial Loans shall
automatically be converted into Term
Loans (subject to the Lenders' rights to
convert Initial Loans into Exchange
Notes as set forth in Exhibit A hereto).
Assignments and Participations: Each Lender may assign all or a portion
------------------------------ of its Loans under the Bridge Facility,
or sell participations therein, to
another person or persons and may assign
all or a portion of its commitments
under the Bridge Facility, or sell
participations therein, to any eligible
assignee (to be defined), provided that
each such assignment shall be in minimum
amounts to be agreed upon
-9-
(or the remainder of such Lender's loans
and commitments, if less) and shall be
subject to certain conditions
(including, without limitation, the
consent of the Administrative Agent,
which consent shall not be unreasonably
withheld, and the payment of an
administrative fee to the Administrative
Agent) and no purchaser of a
participation shall have the right to
exercise or to cause the selling Lender
to exercise voting rights in respect of
the Bridge Facility (except as to
certain basic issues).
Expenses and Indemnification: All reasonable out-of-pocket expenses
---------------------------- (including but not limited to reasonable
legal fees and expenses and expenses
incurred in connection with due
diligence and travel, courier,
reproduction, printing and delivery
expenses) of the Arranger and the
Administrative Agent associated with the
syndication of the Bridge Facility and
with the preparation, execution and
delivery, administration, amendment,
waiver or modification (including
proposed amendments, waivers or
modifications) of the documentation
contemplated hereby are to be paid by
Borrower. In addition, all reasonable
out-of-pocket expenses (including but
not limited to reasonable legal fees and
expenses) of the Lenders and the
administrative agent for the Bridge
Facility for workout proceedings,
enforcement costs and documentary and
stamp taxes associated with the Bridge
Facility are to be paid by Borrower.
Borrower will indemnify the Lenders, UBS
and UBSW and their respective
affiliates, and hold them harmless from
and against all reasonable out-of-pocket
costs, expenses (including but not
limited to reasonable legal fees and
expenses) and liabilities arising out of
or relating to the proposed
transactions, including but not limited
to the Acquisition, the Merger, the
Refinancing or any transactions related
thereto and any actual or proposed use
of the proceeds of any loans made under
the Bridge Facility; provided, however,
that no such person will be indemnified
for costs, expenses or liabilities to
the extent
-10-
determined by a final judgment of a
court of competent jurisdiction to have
been incurred by reason of the bad
faith, gross negligence or willful
misconduct of such person.
Borrower will indemnify the Lenders for
withholding taxes imposed by any
governmental authorities (subject to
customary exceptions). Such
indemnification shall consist of
customary tax gross-up provisions.
Requisite Lenders: Lenders holding at least a majority of
----------------- total Loans and commitments under the
Bridge Facility, with certain customary
modifications or amendments requiring
the consent of Lenders holding a greater
percentage (or all) of the total Loans
and commitments under the Bridge
Facility.
Governing Law and Forum: The laws of the State of New York. Each
----------------------- party to the Bridge Documentation will
waive the right to trial by jury and
will consent to jurisdiction of the
state and federal courts located in The
City of New York.
Counsel to UBSW and
the Administrative Agent: Skadden, Arps, Slate, Xxxxxxx & Xxxx
------------------------ LLP.
Exhibit A to
ANNEX II
------------
Summary of Principal Terms and Conditions
-----------------------------------------
of Exchange Notes
-----------------
Capitalized terms used but not defined herein have the meanings
given (or incorporated by reference) in the Summary of Principal Terms and
Conditions of the Bridge Facility to which this Exhibit A is attached.
Issuer: Borrower will issue Exchange Notes under
------ an indenture which complies with the
Trust Indenture Act (the "Indenture").
Borrower in its capacity as issuer of
the Exchange Notes is referred to as the
"Issuer."
Guarantors: Same as Initial Loans.
----------
Principal Amount: The Exchange Notes will be available
---------------- only in exchange for the Initial Loans
(at the Maturity Date) or the Term Loans
(at any time). The principal amount of
any Exchange Note will equal 100% of the
aggregate principal amount of the
Initial Loans or the Term Loans for
which it is exchanged.
Maturity: The Exchange Notes will mature on the
-------- eighth anniversary of the Closing Date.
Interest Rate: The Exchange Notes will bear interest at
------------- a rate equal to the Initial Rate (as
defined below) plus the Exchange Spread
(as defined below). Notwithstanding the
foregoing, the interest rate in effect
at any time shall not exceed 16.0% per
annum. To the extent the interest
payable on any Exchange Note exceeds a
rate of 14.0% per annum, the Issuer may,
at its option, cause such excess
interest to be paid by issuing
additional Exchange Notes in a principal
amount equal to such excess portion of
interest. The "Initial Rate" shall be
equal to the interest rate applicable to
the Initial Loans and in effect on the
Maturity Date. "Exchange Spread" shall
mean 0 basis points during the 3 month
period commencing on the Maturity Date
and shall increase by 50 basis points at
the beginning of each subsequent 3 month
period.
Any holder of Exchange Notes may, at its
option, elect to have all or part of its
-2-
Exchange Notes accrue at a fixed
interest rate equal to the interest rate
in effect at the time of the election
(subject to minimum thresholds to be
mutually agreed).
Calculation of interest shall be on the
basis of the actual number of days
elapsed in a year of twelve 30-day
months.
Default Interest: In the event of a payment default on the
---------------- Exchange Notes, interest on the Exchange
Notes will accrue at a rate of 2.0% per
annum in excess of the rate otherwise
applicable to such Exchange Notes, and
will be payable in cash in accordance
with the provisions described above
under the heading "Interest."
Ranking: Same as Initial Loans.
-------
Mandatory Offer to Purchase: The Issuer will be required to offer to
--------------------------- purchase the Exchange Notes upon a
Change of Control (to be defined in the
Indenture) at 101% of the principal
amount thereof plus accrued interest to
the date of purchase.
Optional Redemption: Redemption of Exchange Notes will be
------------------- subject to restrictions and premiums
typical for high-yield debt securities.
Registration Rights: The Issuer will be required to:
-------------------
o within 90 days after the initial
issuance of the Exchange Notes (the
"Issue Date"), file a registration
statement for an offer to exchange
the Exchange Notes for publicly
registered notes with identical
terms (except with respect to
restrictions on transfer);
o use its reasonable best efforts to
cause the registration statement to
become effective under the
Securities Act within 180 days after
the Issue Date;
-3-
o complete the exchange offer within
30 days after the date the
registration statement becomes
effective; and
o file a shelf registration statement
for the resale of the Exchange Notes
if it cannot complete an exchange
offer within those time periods
listed above and in certain other
circumstances.
If the Issuer does not comply with these
obligations, it will be required to pay
liquidated damages to the holders of the
Exchange Notes.
In addition, unless and until the Issuer
has consummated the exchange offer and,
if required, caused the shelf
registration statement to become
effective, the holders of the Exchange
Notes will have the right to
"piggy-back" the Exchange Notes in the
registration of any debt securities
(subject to customary scale-back
provisions) that are registered by the
Issuer (other than on a Form S-4) unless
all the Exchange Notes and Term Loans
will be redeemed or repaid from the
proceeds of such securities.
Right to Transfer Exchange Notes: The holders of the Exchange Notes shall
-------------------------------- have the absolute and unconditional
right to transfer such Exchange Notes in
compliance with applicable law to any
third parties.
Covenants: Those typical for an indenture governing
--------- a high-yield note issue of a new issuer.
Events of Default: Those typical for an indenture governing
----------------- a high-yield note issue of a new issuer.
Governing Law: The laws of the State of New York.
-------------
ANNEX III
---------
CONDITIONS TO CLOSING AND DRAWDOWN(1)
-------------------------------------
The commitment of the Lenders under the Commitment Letter with
respect to each of the Facilities, UBS's and UBSW's agreements to perform the
services described in the Commitment Letter, the consummation of the
Transactions and the funding are subject to satisfaction of each of the
following conditions precedent:
(a) The negotiation, execution and delivery of the Bank Documentation,
the Bridge Documentation and the documentation relating to the Equity Financing
and the Notes Offering, including schedules, exhibits and ancillary
documentation and related guarantees, security documentation, legal and solvency
opinions and other support documentation, all in form and substance reasonably
satisfactory to UBS and the other Lenders. The Equity Financing shall be in an
amount equal to at least $176.0 million plus an amount, if any, necessary to
satisfy the Funded Debt Test (as defined in the Bridge Term Sheet).
(b) The Lenders shall have reviewed, and be reasonably satisfied with,
the final terms and conditions and the documentation relating to the Acquisition
and the Merger (the "Acquisition Documents") and the Refinancing and any
amendments or other modifications thereto, and the ownership, corporate, legal,
tax, management and capital structure of Borrower and its subsidiaries (after
giving effect to the Transactions) and any options, indemnities, warrants and
other securities issued in connection therewith (it being acknowledged that the
merger agreement draft dated April 8, 2002, version 4, is satisfactory to the
Lenders; it being further acknowledged that neither a disclosure schedule nor
exhibits to the merger agreement has been approved by the Lenders). The
Transactions shall be consummated concurrently with the initial funding of the
Facilities in accordance with the Acquisition Documents without waiver or
amendment thereof unless consented to by the Lenders.
(c) The Lenders shall have received, reviewed, and be reasonably
satisfied with, (i) the unaudited consolidated balance sheets and related
statements of income, stockholders' equity and cash flows of each of Borrower
and the Acquired Business for each fiscal quarter of the fiscal year in which
the Closing Date occurs ended prior to 30 days prior to the Closing Date and for
the comparable periods of the preceding fiscal year, (ii) the pro forma
consolidated balance sheets and statements of income and cash flows for Borrower
and the Acquired Business, as well as the pro forma levels of EBITDA and other
operating data, for the fiscal year ended December 31, 2001 and each fiscal
quarter of the fiscal year in which the Closing Date occurs ended prior to 30
days prior to the Closing Date and for the comparable periods of the preceding
fiscal year, after giving effect to the transactions contemplated hereby, and
(iii) final forecasts of the financial performance of Borrower, the Acquired
Business and their subsidiaries. The financial statements referred to in clause
(ii) of the immediately preceding sentence shall be consistent in all material
respects with the sources and uses described in Annex IV to the Commitment
Letter (the "Sources and Uses") and the forecasts provided to the Lenders and
any cost savings shall be included in such financial statements prepared in
accordance with GAAP only to the extent permitted to be included in pro forma
financial statements set forth in a registration statement filed with the
Securities and Exchange Commission.
__________________________________
1 All capitalized terms used but not defined herein shall have the meanings
provided in the Commitment Letter to which this Annex III is attached.
(d) The Sources and Uses and the assumptions relating thereto shall be
as set forth in Annex IV to the Commitment Letter (other than any increase in
the amount of the Equity Financing and related decrease in the amount of the
Notes Offering, Bridge Facility and/or Holdco Securities required to satisfy the
Funded Debt Test), and after giving effect to the transactions contemplated
hereby, none of Borrower, the Acquired Business, AcquisitionCo or any of their
respective subsidiaries shall have outstanding any indebtedness or preferred
stock other than the Equity Financing and indebtedness under the Bank
Facilities, the Notes or the Bridge Facility, and other indebtedness disclosed
to and approved by the Administrative Agent.
(e) The Lenders shall have received satisfactory evidence of
compliance with all applicable foreign and U.S. federal, state and local laws
and regulations, including, without limitation, all applicable environmental
laws and regulations and Regulations T, U and X of the Board of Governors of the
Federal Reserve System, except to the extent such noncompliance could not
reasonably be expected to have a material adverse effect on the Acquired
Business and its subsidiaries, taken as a whole; and that all material
governmental and third party approvals in connection with the execution,
delivery and performance of the Facilities, the Acquisition and the Merger have
been obtained and remain in effect.
(f) (A) No litigation by any entity (private or governmental) shall be
pending or threatened with respect to any of the Facilities or the other
financing arrangements for the Transactions and (B) no litigation (including
with respect to the Acquisition or the Merger) shall be commenced by any entity
(private or governmental), and no adverse development shall occur with respect
to any existing litigation, which, in either case, the Lenders shall reasonably
determine could have a material adverse effect on the condition (financial and
other), business, operations, assets, liabilities or prospects of Borrower, the
Acquired Business and their respective subsidiaries, taken as a whole, or the
transactions contemplated hereby, including the financing therefor.
(g) All reasonable costs, fees, expenses (including, without
limitation, reasonable legal fees and expenses and the fees and expenses of
appraisers, consultants and other advisors) and other compensation payable to
the Lenders, the Bridge Lenders, UBSW or UBS shall have been paid to the extent
due.
(h) The Investment Bank referred to in the Bridge Fee Letter shall
have marketed the Notes for such a period as is customary to complete the sale
of securities such as the Notes, but in any event not less than 15 business days
unless a shorter period is acceptable to the Investment Bank.
2
ANNEX IV
--------
SOURCES AND USES OF FUNDS(2)
----------------------------
(in millions)
(all figures are approximate)
Estimated Sources and Uses
(Dollars in Millions)
-------------------------------------------------------------------------------------
Sources Uses
-------------------------------------------------------------------------------------
Bridge Facility/Notes $238.0 Merger/Acquisition $675.7
Term Loan Facility $165.0 Refinancing $10.6
Equity Financing $176.0 Fees and Expenses $66.7
Existing Cash Balances $174.0
Total $753.0 Total $753.0
-------------------------------------------------------------------------------------
__________________________________
2 All capitalized terms used but not defined herein shall have the meanings
provided in the Commitment Letter to which this Annex IV is attached.
