Exhibit 10.2
WL ROSS & CO. LLC
CONTRARIAN CAPITAL MANAGEMENT, INC.
SATELLITE SENIOR INCOME FUND, L.L.C.
CP CAPITAL INVESTMENTS, L.L.C.
FEBRUARY 28, 2005
New Textile Holding Co.
New Textile Co.
c/o WL Ross & Co. LLC
101 East 52nd Street
New York, New York 10022
Re: Commitment Letter
Gentlemen:
In connection with the acquisition of certain assets of WestPoint
Stevens, Inc. ("WPS") and its affiliated debtors and debtors in possession
(collectively, the "Debtors") in the chapter 11 cases (the "Chapter 11 Cases")
pending in the United States Bankruptcy Court for the Southern District of New
York (the "Bankruptcy Court") pursuant to the asset purchase agreement dated the
date hereof and relating thereto (the "APA"), this Commitment Letter confirms
our agreement with respect to (i) the distribution to the Trustee (as defined in
the APA), for further distribution to the holders (the "First-Lien Holders") of
outstanding indebtedness under the Second Amended and Restated Credit Agreement
among WPS, certain of its subsidiaries, the several banks from time to time
parties thereto and NationsBank, N.A., as Administrative Agent (the "First-Lien
Debt"), of 50%(1) of the Units (as defined below) (the "First-Lien Holder
Units") of New Textile Holding Co. ("Parent") and New Textile Co. ("Purchaser"),
entities formed by Contrarian Capital Management, Inc. ("Contrarian"), Satellite
Senior Income Fund, L.L.C. ("Satellite"), CP Capital Investments, L.L.C. ("CP")
(collectively, the "Non-WLR Investors") and WL Ross & Co. LLC or an entity
controlled by it ("WLR" and collectively with the Non-WLR Investors, the
"Investors) for the purpose of purchasing certain of the Debtors' assets (the
"Designated Assets"), (ii) an offering (the "Offering"), pursuant to
subscription rights ("Subscription Rights") to be distributed to the Trustee,
for further distribution to the First-Lien Holders, of an additional 50% of
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(1) Unless otherwise indicated, the equity percentages set forth in this
Commitment Letter and the Term Sheet are calculated after giving effect
to the issuance of the First-Lien Holder Units and the Offered Units but
prior to the issuance of the WLR Warrant or any Units issuable upon
exercise of the WLR Warrant. The First-Lien Holder Units and the Offered
Units will be subject to dilution to the extent a First-Lien Holder does
not elect to make an additional investment in connection with an
additional Investor investment used to fund an increase in the cash
portion of Purchaser's bid for the Designated Assets.
the Units (the "Offered Units"), and (iii) the issuance of a warrant to WLR (the
"WLR Warrant") to purchase 10%(2) of the fully diluted Units.
Pursuant to the First Lien Direction (as defined in the APA), the
First-Lien Holder Units and the Subscription Rights will be distributed to the
Trustee in exchange for the assignment by the Trustee to Purchaser of the right
to acquire the Designated Assets (subject to certain liabilities), which right
the Trustee will receive in exchange for the Credit Bid (as defined in the APA).
The Trustee will distribute the First-Lien Holder Units and the Subscription
Rights to the First-Lien Holders on a pro rata basis. Alternately, in the event
the Trustee refuses to comply with the First Lien Direction and Section 8.6(b)
of the APA applies, Parent and Purchaser will deliver the First-Lien Holder
Units and the Subscription Rights to the Sellers under the APA in connection
with the consummation of the transactions contemplated by the APA for subsequent
distribution by such Sellers to the First-Lien Holders pursuant to such Sellers'
plan(s) of liquidation.
Each "Unit" will consist of one share of voting common stock of
Parent ("Parent Common Stock") and one share of non-voting preferred stock of
Purchaser ("Purchaser Preferred Stock"). Parent will own all the issued and
outstanding common stock of Purchaser. The Purchaser Preferred Stock will bear
an aggregate liquidation preference of not less than $30 million and a nominal
dividend, will not be redeemable for five years after issuance, will be
transferable only with the Parent Common Stock and will be convertible into
Purchaser common stock in the event Purchaser consummates an initial public
offering.
The WLR Warrant will be issued to WLR on the Closing Date (as defined
in the APA). The exercise price of the WLR Warrant will be equal to Rothschild's
WPS midpoint total enterprise value ($642.5 million) adjusted for the cash
raised in the Offering, net of the Closing DIP Amount (as defined in the APA)
and the following Assumed Liabilities (as defined in the APA): KERP, accrued and
unpaid professional fees through the Closing Date, cure amounts with respect to
executory contracts, reclamation claims and pre-petition property tax claims.
The exercise price will be subject to standard anti-dilution protection. The WLR
Warrant will have a term of 364 days.
The Units sold to the Investors and the other First-Lien Holders in
the Offering will be sold for an aggregate consideration of $207.5 million in
cash. The Units sold to the Investors and the other First-Lien Holders in the
Offering will be offered and sold at the same price per unit, which will be
equal to $207.5 million divided by the total number of Offered Units. No
consideration will be payable for the First-Lien Holder Units. In the event that
the Bankruptcy Court determines that the aggregate value of (i) the portion of
the Adequate Protection Escrow (as defined in the APA) determined to be payable
to the First-Lien Holders, (ii) 100% of the First-Lien Holder Units (prior to
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(2) Calculated on a fully diluted basis on the Closing Date after giving
effect to the issuance of the First-Lien Holder Units, the Offered Units
and the WLR Warrant.
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the exercise of the Subscription Rights), and (iii) 100% of the Subscription
Rights exceed the allowed amount of the claims of the First-Lien Holders, then
such excess, in the form of stock, warrants, Subscription Rights, or other
rights, will be distributed to the Second Lien Lenders (as defined in the APA).
For the avoidance of doubt, (a) the portion of the Adequate Protection Escrow
payable or determined to be payable to the Second Lien Lenders and the amount of
any credit bid by the First-Lien Holders shall not be considered in determining
whether any such excess exists and (b) the value of the First-Lien Holder Units
and the Subscription Rights are net of all obligations of WPS and its debtor
subsidiaries assumed by Purchaser.
The proceeds of the Offering (the "Investment") will be used by
Parent and Purchaser to fund the acquisition of the Designated Assets pursuant
to the APA, to pay liabilities assumed and certain fees and expenses incurred in
connection therewith and, to the extent proceeds remain, to provide Purchaser
with working capital.
If Parent and Purchaser decide to increase the cash portion of their
bid for the Designated Assets and additional Purchaser or Parent equity is
required to fund all or a portion of the increase, one or more of the Investors
may make an additional investment in Units in order to fund that increase. Any
such additional investment will be made at the Per Unit Price (as defined in the
Term Sheet attached hereto as Exhibit A), and, if Parent and Purchaser are the
successful bidders at the auction described in the APA and the exhibits thereto,
Parent and Purchaser will conduct a second rights offering to permit each
shareholder of Parent and Purchaser to purchase additional Units at the Per Unit
Price as necessary to permit each shareholder of Parent and Purchaser to
maintain its fully diluted percentage interest in Parent and Purchaser as of
immediately following the Offering.
Each of the Non-WLR Investors hereby agrees to fully subscribe in its
capacity as a First-Lien Holder in the Offering and to consummate the Equity
Backstop Commitment on the terms and subject to the conditions set forth in the
Term Sheet. As required pursuant to the APA, the Non-WLR Investors also hereby
agree to provide the First Lien Direction to the Trustee.
WLR hereby agrees to consummate the Equity Backstop Commitment (as
defined in the Term Sheet) on the terms and subject to the conditions set forth
in the Term Sheet.
Parent and Purchaser hereby agree to issue the First-Lien Holder
Units and the WLR Warrant and to conduct the Offering, all on the terms and
subject to the conditions set forth in the Term Sheet. Parent and Purchaser will
endeavor to offer and sell the Units and issue the WLR Warrant pursuant to the
exemption provided by Section 1145(a) of the Bankruptcy Code. To the extent such
exemption is not available, Parent and Purchaser will offer and sell the Units
and issue the WLR Warrant in a private placement in compliance with Section 4(2)
of the Securities Act of 1933 (the "Securities Act").
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Each of Parent and Purchaser agrees to reimburse the Investors for
all actual and reasonable fees and expenses (the "Expenses") incurred by or on
behalf of the Investors on or after November 1, 2004 in connection with the
negotiation, preparation, execution and delivery of this Commitment Letter and
the Term Sheet and any and all documentation or other acts relating to the
Investment, the APA or the Chapter 11 Cases including, but not limited to (i)
the actual and reasonable fees and expenses of counsel, accountants and/or
consultants to the Investors and the reasonable fees and expenses incurred by
the Investors in connection with any due diligence (including reasonable fees
and expenses payable to consultants), (ii) any fees and expenses incurred in
connection with obtaining any required approvals under the Hart-Scott-Rodino
Antitrust Improvements Act or any other state or federal law, and (iii) any fees
and expenses incurred in connection with litigation, contested matters,
adversary proceedings or negotiations necessitated by such litigation, contested
matter or adversary proceedings, relating to this Commitment Letter, the Term
Sheet, the APA or the Chapter 11 Cases. The obligations of Parent and Purchaser
under this paragraph will remain effective whether or not any of the
transactions contemplated in this Commitment Letter are consummated or any
definitive legal documentation is executed and notwithstanding any termination
of this Commitment Letter.
By its acceptance hereof, each of Parent and Purchaser agrees to
indemnify and hold harmless the Investors and their respective affiliates,
directors, officers, partners, members, employees, agents and assignees
(including affiliates thereof) (each an "Indemnified Party") from and against
any and all losses, claims, damages, liabilities or other expenses to which such
Indemnified Party may become subject, insofar as such losses, claims, damages,
liabilities (or actions or other proceedings commenced or threatened in respect
thereof) or other expenses arise out of or in any way relate to or result from
this Commitment Letter or the Term Sheet, or in any way arise from any use or
intended use of this Commitment Letter, the Term Sheet or the proceeds of the
Investment, and each of Parent and Purchaser agrees to reimburse (on an
as-incurred monthly basis) each Indemnified Party for any legal or other
expenses incurred in connection with investigating, defending or participating
in any such loss, claim, damage, liability or action or other proceeding
(whether or not such Indemnified Party is a party to any action or proceeding
out of which indemnified expenses arise), but excluding therefrom all expenses,
losses, claims, damages and liabilities to the extent they are finally
determined in a non-appealable decision of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of such
Indemnified Party. In the event of any litigation or dispute involving this
Commitment Letter or the Term Sheet, subject to the foregoing, the Investors
will not be responsible or liable to Parent and Purchaser for any special,
indirect, consequential, incidental or punitive damages.
This Commitment Letter, including the attached Term Sheet, (i) will
be governed, except to the extent that the Bankruptcy Code is applicable, by the
laws of the State of New York, without giving effect to the conflict of laws
provisions thereof, (ii) will not be assignable by Parent or Purchaser without
the prior written consent of (x) WLR and (y) a majority in number of the Non-WLR
Investors (and any purported assignment without such consent will be null and
void), (iii) except as specifically provided below, is intended to be solely for
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the benefit of the parties hereto and is not intended to confer any benefits
upon, or create any rights in favor of, any person other than the parties
hereto, and (iv) may not be amended or waived except by an instrument in writing
signed by (x) Parent or Purchaser and (y) WLR and a majority in number of the
Non-WLR Investors.
If the Second Lien Lenders do not challenge, oppose or attempt to
prevent Parent and Purchaser's proposed purchase of the Designated Assets
pursuant to the APA and if such purchase is consummated pursuant to the APA, the
Non-WLR Investors, on behalf of the First-Lien Holders, will release their claim
to receive $10 million of the Adequate Protection Escrow for the benefit of the
Second Lien Lenders.
The Non-WLR Investors hereby represent that they own or control a
majority of the First-Lien Debt.
WPS is an intended third-party beneficiary of the parties' covenants
in the fifth, sixth, eighth, ninth, tenth, fourteenth and fifteenth paragraphs
of this Commitment Letter (the "WPS Covenants"). This Commitment Letter may be
amended only with the prior written consent of WLR and Non-WLR Investors holding
a majority in number and, to the extent WPS would be adversely affected thereby,
WPS in respect of any amendment to the WPS Covenants not contemplated by an
amendment to the APA.
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This Commitment Letter may be executed in any number of counterparts,
each of which will be an original, and all of which, when taken together, will
constitute one agreement. Delivery of an executed signature page of this
Commitment Letter by facsimile transmission will be effective as delivery of a
manually executed counterpart hereof.
Very truly yours,
WL ROSS & CO. LLC
(on behalf of certain funds and managed accounts)
By: /s/ Wilbur L. Ross, Jr.
---------------------------------------------
Name: Wilbur L. Ross, Jr.
Title: Chairman
CONTRARIAN CAPITAL MANAGEMENT, L.L.C.
(on behalf of certain funds and managed accounts)
By: /s/ Jon R. Bauer
---------------------------------------------
Name: Jon R. Bauer
Title: Managing Member
SATELLITE SENIOR INCOME FUND, L.L.C.
(on behalf of certain funds and managed accounts)
By: /s/ Gene Y. Ko
---------------------------------------------
Name: Gene Y. Ko
Title: Portfolio Manager
CP CAPITAL INVESTMENTS, L.L.C.
(on behalf of certain funds and managed accounts)
By: /s/ Traci Lerner
---------------------------------------------
Name: Traci Lerner
Title: Member
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Agreed and accepted as of the date set forth above:
NEW TEXTILE HOLDING CO.
By: /s/ Wilbur L. Ross, Jr.
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Name: Wilbur L. Ross, Jr.
Title: Chairman
NEW TEXTILE CO.
By: /s/ Wilbur L. Ross, Jr.
--------------------------------------
Name: Wilbur L. Ross, Jr.
Title: Chairman
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EXHIBIT A
TERM SHEET
This Term Sheet is part of the accompanying Commitment Letter
addressed to Parent and Purchaser by WLR and the Non-WLR Investors and is
subject to the terms and conditions of the Commitment Letter. Capitalized terms
used herein have the meanings set forth in the Commitment Letter unless
otherwise defined herein.
ISSUERS: Parent and Purchaser
SECURITIES: Units, each of which will consist of one share
of Parent Common Stock and one share of
Purchaser Preferred Stock, and the WLR Warrant
to purchase 10% of the Units.(3) The shares
comprising a Unit may not be transferred
separately.
PER UNIT PRICE: The Per Unit Price will equal $207.5 million
divided by the total number of Offered Units.
The Per Unit Price will be the same for all
investors.
WLR WARRANT TERMS: The WLR Warrant will be issued on the Closing
Date. The exercise price of the WLR Warrant
will be equal to Rothschild's WPS midpoint
total enterprise value ($642.5 million)
adjusted for the cash raised in the Offering,
net of the Closing DIP Amount and the following
Assumed Liabilities: KERP, accrued and unpaid
professional fees through the Closing Date,
cure amounts with respect to executory
contracts, reclamation claims and pre-petition
property tax claims. The exercise price will be
subject to standard anti-dilution protection.
The WLR Warrant will have a term of 364 days.
RIGHTS OFFERING: General: The offer of 50% of the Units to the
First-Lien Holders for an aggregate investment
of $207.5 million. In the event that the
Bankruptcy Court determines that the aggregate
value of (i) the portion of the Adequate
Protection Escrow determined to be payable to
the First-Lien Holders, (ii) 100% of the
First-Lien Holder Units (prior to the exercise
of the Subscription Rights), and (iii) 100% of
the Subscription Rights exceed the allowed
amount of the claims of the First-Lien Holders,
then such excess, in the form of stock,
warrants, Subscription Rights, or other rights,
will be distributed to the Second Lien Lenders.
For the avoidance of doubt, (a) the portion of
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(3) Calculated on a fully diluted basis on the Closing Date after giving
effect to the issuance of the First-Lien Holder Units, the Offered Units
and the WLR Warrant.
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the Adequate Protection Escrow payable or
determined to be payable to the Second Lien
Lenders and the amount of any credit bid by the
First-Lien Holders shall not be considered in
determining whether any such excess exists and
(b) the value of the First-Lien Holder Units
and the Subscription Rights are net of all
obligations of WPS and its debtor subsidiaries
assumed by Purchaser.
Required Investor Subscription: Each of the
Non-WLR Investors will fully subscribe in their
capacities as First-Lien Holders in the
Offering.
Equity Backstop Commitment: On or before the
Closing Date, the Investors will purchase all
unsubscribed Offered Units.
Record Date: A date to be specified by Parent.
Participation in the Offering: The Offering
will be made only to the First-Lien Holders
and, if applicable, Second Lien Lenders
(collectively, "Holders") who are Qualified
Investors on the Record Date. A "Qualified
Investor" is a "qualified institutional buyer"
or "accredited investor" within the meaning of
applicable securities law. Parent and Purchaser
will make the Offering by mailing to Holders as
soon as practicable after the Record Date
subscription documentation by which each Holder
may exercise its Subscription Right to purchase
Units. The Subscription Rights will expire on
the date that is 20 days after the mailing of
the subscription documentation to the
applicable Holders (the "Subscription
Expiration Date"). The Subscription Rights will
be exercisable by each qualified Holder, and
must be exercised by the Investors who are also
First-Lien Holders, (i) for up to the Holder's
pro rata amount (based upon its holdings of
First-Lien Debt or the indebtedness under the
Second Lien Lender Agreement (the "Second-Lien
Debt"), as applicable, on the Record Date) of
the Offered Units and (ii) by (x) execution and
delivery to a subscription agent to be retained
by Purchaser (the "Subscription Agent") of a
subscription agreement (the "Subscription
Agreement") on or before the Subscription
Expiration Date, and (y) payment in full in
cash of the aggregate Per Unit Price for the
number of Offered Units proposed to be
purchased by such Holder. The Subscription
Rights will not be transferable by the Holders,
except (i) in connection with the transfer of
the underlying First-Lien Debt or Second-Lien
Debt, as applicable, and (ii) to (x) affiliates
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of any Holder provided such affiliate(s) are
Qualified Investors on the date of transfer, or
(y) other qualified Holders who are, as of the
date of transfer, Qualified Investors who held
First-Lien Debt or Second-Lien Debt, as
applicable, on the Record Date.
ESCROW OF FUNDS: All funds tendered in connection with the
Offering and the Equity Backstop Commitment
will be deposited by the Subscription Agent in
a trust account, escrow account or similar
segregated account or accounts, which account
or accounts will be (i) separate and apart from
Parent's and Purchaser's general operating
funds and any other funds and (ii) maintained
for the administration of the Offering and the
Equity Backstop Commitment until the Closing
Date. In the event a termination of this Term
Sheet and the Commitment Letter occurs before
the Closing Date, the Subscription Agent will
promptly return the escrowed amounts with any
interest earned thereon.
BOARD REPRESENTATION AND SENIOR
MANAGEMENT: Parent's and Purchaser's initial Boards of
Directors will be comprised of (i) three
directors selected by WLR, (ii) three directors
selected by the Non-WLR Investors, (iii) one
director selected by the First-Lien Holders
(other than the Non-WLR Investors), and (iv)
two directors selected by mutual agreement of
WLR and the Non-WLR Investors, each of whom
must satisfy the relevant rules and regulations
for independence and the financial literacy
requirements for audit committees. The
operative documents will contain additional
provisions concerning the corporate governance
of Parent and Purchaser, including but not
limited to a shareholders agreement providing
for, among other things, preemptive rights and
drag-along rights with respect to corporate
control transactions, all as agreed among the
Investors. Parent's and Purchaser's senior
management on the Closing Date will be (i)
selected by WLR and (ii) reasonably acceptable
to the Non-WLR Investors.
MANAGEMENT AGREEMENT: WLR will enter into a 3-year management
agreement with Purchaser for $2 million per
year.
REGISTRATION RIGHTS: On or prior to the Closing Date, Parent and
Purchaser will enter into a registration rights
agreement with WLR (the "WLR Registration
Rights Agreement") and a registration rights
agreement (the "Investor Registration Rights
Agreement") with the Investors and any other
person or entity holding as of the Closing more
than 5% of the Units (collectively,
"Registration Rights Participants").
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WLR Registration Rights Agreement: The WLR
Registration Rights Agreement will provide that
WLR will be entitled to (i) three demand
registrations and (ii) unlimited piggy-back
registration rights with respect to any Units
owned by WLR (the "WLR Equity"). No demand for
registration of its securities under the
Securities Act may be made by WLR prior to the
three-month anniversary of the Closing Date.
The WLR Registration Rights will be applicable
solely to the WLR Equity. The WLR Registration
Rights Agreement will be in form and substance
satisfactory to WLR and the Non-WLR Investors.
Investor Registration Rights Agreement: The
Investor Registration Rights Agreement will
provide that (i) each Investor will be entitled
to one demand registration and that the
Registration Rights Participants (including the
Investors), as a group, will be entitled to two
additional demand registrations and (ii) each
Registration Rights Participant will be
entitled to unlimited piggy-back registration
rights. No demand for registration may be made
(i) by any Investor, prior to the three-month
anniversary of the Closing Date, and (ii) by
any other Registration Rights Participant,
prior to the six-month anniversary of the
closing of the initial registration by Parent
or Purchaser, as the case may be, of its
securities under the Securities Act. The demand
registrations may be exercised by (i) any
Investor, as to its own demand registration,
and (ii) holders of at least 20% of the
registrable securities, with respect to the two
additional demand registrations. The Investor
Registration Rights Agreement will be in form
and substance satisfactory to the Investors.
Shelf Registration, Etc.: In the event that a
demand is made and Parent or Purchaser, as the
case may be, is eligible to use Form S-3, the
holder or holders making the request may
specify that the registration be a "shelf
registration" for an offering on a delayed or
continuous basis pursuant to Rule 415 of the
Securities Act. Any shelf registration will be
kept continuously effective for a period of at
least two years. The registration rights
agreements will contain terms and provisions
customary for transactions of this type,
including customary black-out, delay, holdback
and cut-back provisions. Parent or Purchaser,
as the case may be, will pay all fees and
expenses for any such registration, including
fees and expenses of counsel for the parties,
other than any underwriting discounts and
commissions. In the event that a demand
registration is to be an underwritten offering,
the holder or holders requesting the demand
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registration will have the right to designate
the underwriters for such offering.
CONDITIONS PRECEDENT: The obligations of Parent and Purchaser to make
the Offering and to issue the WLR Warrant, the
obligations of WLR to fulfill the Equity
Backstop Commitment, and the obligation of the
Investors to subscribe in the Offering and
provide the First Lien Direction, will be
subject to the following condition precedent
(the "Condition Precedent"): all conditions
precedent (other than closing deliveries) to
consummation of the transactions contemplated
by the APA shall have been satisfied or waived
by the entities entitled to the benefit of the
relevant conditions.
The Condition Precedent may only be waived by
the written agreement of Parent, Purchaser, WLR
and a majority in number of the Non-WLR
Investors.
TERMINATION: All provisions of this Term Sheet and the
Commitment Letter will terminate automatically
without the act of any party hereto upon the
termination of the APA, except to the extent a
particular provision specifically provides
otherwise.
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