Exhibit 99(b)(2)
BANK OF AMERICA, N.A. BEAR, STEARNS & CO. INC.
BANC OF AMERICA BRIDGE LLC BEAR STEARNS CORPORATE LENDING INC.
BANC OF AMERICA SECURITIES LLC 245 Park Avenue
100 North Tryon Street New York, New York 10167
Charlotte, North Carolina 28255
February 15, 2001
Vestar Capital Partners IV, L.P.
Seventeenth Street Plaza
1225 17th Street
Suite 1600
Denver, Colorado 80202
Attention: Mr. James P. Kelley
Amended and Restated Commitment Letter
for
MICHAEL FOODS, INC. ACQUISITION FINANCING
Dear Jim:
You have advised Bank of America, N.A. ("BANK OF AMERICA"),
Banc of America Securities LLC ("BAS"), Banc of America Bridge LLC ("BANC OF
AMERICA BRIDGE"), Bear, Stearns & Co. Inc. ("BEAR STEARNS") and Bear Stearns
Corporate Lending Inc. ("BSCL") that Vestar Capital Partners IV, L.P. (the
"SPONSOR") and certain affiliates and certain other investors (collectively with
the Sponsor, the "EQUITY INVESTORS") intend to form a corporation ("HOLDINGS")
which will (i) acquire (the "ACQUISITION") all of the outstanding capital stock
of Michael Foods, Inc., a Minnesota corporation (together with its subsidiaries,
the "ACQUIRED COMPANY"), through the merger (the "MERGER") of a newly created
wholly-owned subsidiary of Holdings (the "BORROWER") into the Acquired Company
and (ii) contemporaneously with consummation of the Acquisition and the Merger,
refinance (the "REFINANCING") all existing funded indebtedness of the Acquired
Company (except for such debt in amounts to be agreed which may remain
outstanding). After giving effect to the Acquisition, the Merger and the
Refinancing, Holdings will be a holding company that directly owns all of the
equity interests in the Acquired Company.
You have also advised us that you intend to finance the
Acquisition, the Merger, the Refinancing and the payment of transaction fees and
expenses in connection therewith from the following sources: (a) no less than
$150.0 million in equity contributed by the Equity Investors on terms reasonably
satisfactory to us (the "EQUITY FINANCING"), (b) approximately $48.0 million of
common equity and option value of the Acquired Company currently held by
existing shareholders of the Acquired Company which will be rolled over
(directly or indirectly) into common equity of Holdings and deferred
compensation arrangements of Holdings on terms reasonably acceptable to Bank of
America, BAS, Banc of America Bridge, Bear Stearns and BSCL, (c) not more than
$400.0 million from borrowings under $470.0 million senior secured
Vestar Capital Partners IV, L.P.
February 15, 2001
Page 2
credit facilities (the "SENIOR CREDIT FACILITIES") of the Borrower comprised of
term loan facilities aggregating $370.0 million (the "TERM LOAN FACILITIES") and
a $100.0 million revolving credit facility (the "REVOLVING CREDIT FACILITY") and
(d) at least $200.0 million in gross proceeds from the issuance and sale by the
Borrower of either (i) unsecured senior subordinated debt securities (the
"SENIOR SUBORDINATED NOTES") or (ii) unsecured senior subordinated bridge notes
(the "BRIDGE NOTES"). The Revolving Credit Facility will also be used to finance
the continuing operations of the Borrower and its subsidiaries after
consummation of the Transaction. The Senior Credit Facilities and Bridge Notes
are collectively referred to herein as the "FINANCINGS"; the Acquisition, the
Merger, the Refinancing, the Equity Contribution, the entering into and funding
of the Senior Credit Facilities and the issuance and sale of the Senior
Subordinated Notes or the Bridge Notes, and all related transactions, are
hereinafter collectively referred to as the "TRANSACTION"; and if you have
accepted the terms of this Commitment Letter in respect of the Senior Credit
Facilities, the day of the initial funding under the Senior Credit Facilities,
and/or if you have accepted the terms of this Commitment Letter in respect of
the Bridge Notes, the day of the issuance and sale of the Senior Subordinated
Notes or the Bridge Notes, in each case, is referred to herein as the "CLOSING
DATE".
In connection with the foregoing, (i) Bank of America is
pleased to advise you of its commitment to act as exclusive administrative agent
(in such capacity, the "ADMINISTRATIVE AGENT") and to provide 70% of the
principal amount of the Senior Credit Facilities, upon and subject to the terms
and conditions of this letter and the Summary of Terms and Conditions attached
hereto as ANNEX I (together with APPENDIX A referred to therein and attached
thereto, the "SENIOR TERM SHEET"), (ii) BSCL is pleased to advise you of its
willingness to act as exclusive syndication agent (in such capacity, the
"SYNDICATION AGENT") for the Senior Credit Facilities, upon and subject to the
terms and conditions of this letter and the Senior Term Sheet, (iii) BSCL is
pleased to advise you of its commitment to provide 30% of the principal amount
of the Senior Credit Facilities, upon and subject to the terms and conditions of
this letter and the Senior Term Sheet, (iv) BAS is pleased to advise you of its
willingness, as sole and exclusive lead arranger and sole and exclusive book
running manager for the Senior Credit Facilities (in any such capacities, the
"SENIOR LEAD ARRANGER"; and together with the Administrative Agent and the
Syndication Agent, collectively, the "AGENTS"), to use its best efforts to form
a syndicate of financial institutions (the "SENIOR LENDERS"), including Bank of
America and BSCL, reasonably acceptable to you for the Senior Credit Facilities,
(v) Banc of America Bridge is pleased to advise you of its commitment to
purchase 70% of the principal amount of the Bridge Notes, all upon and subject
to the terms and conditions set forth in this letter and in the summary of terms
attached as ANNEX II hereto (together with APPENDIX A referred to therein and
attached thereto, the "BRIDGE TERM SHEET"), (vi) BSCL is pleased to advise you
of its commitment to purchase 30% of the principal amount of the Bridge Notes,
all upon and subject to the terms and conditions set forth in this letter and
the Bridge Term Sheet, and (vii) BAS is pleased to advise you of its
willingness, as sole and exclusive lead arranger and sole and exclusive book
running manager in respect of the Bridge Notes (in any such capacities, the
"BRIDGE LEAD ARRANGER"; and, acting in such capacity, in its capacity as Senior
Lead Arranger or as Book Running Manager (as herein defined), respectively, the
"ARRANGER"), to use its best efforts, in consultation with you, to form a
syndicate of financial institutions to purchase the Bridge Notes (the "BRIDGE
NOTE PURCHASERS"), including Banc of America Bridge and BSCL as the initial
Bridge Note
Vestar Capital Partners IV, L.P.
February 15, 2001
Page 3
Purchasers (in such capacity, the "INITIAL PURCHASERS"). This amended and
restated letter, the Senior Term Sheet and the Bridge Term Sheet are
collectively referred to herein as the "COMMITMENT LETTER".
Bank of America will act as sole and exclusive administrative
agent for the Senior Credit Facilities, BAS will act as sole and exclusive lead
arranger and sole and exclusive book running manager for the Senior Credit
Facilities, BSCL will act as sole and exclusive syndication agent for the Senior
Credit Facilities, and BAS will act as sole and exclusive lead arranger and sole
and exclusive book running manager in respect of the Bridge Notes. The Arranger
will coordinate with you the appointment of any co-agents, co-managers and
additional agents for the Financings, which co-agents, co-managers and
additional agents will be acceptable to you and shall be appointed on terms
which you and the Arranger shall have agreed in writing. No additional agents,
co-agents, co-managers, arrangers or book running managers will be appointed and
no other titles will be awarded without the prior written approval of the
Arranger.
The commitments of Bank of America, Banc of America Bridge and
BSCL hereunder and the agreement of BAS and Bear Stearns to provide the services
described herein are subject to the agreement in the preceding paragraph and the
satisfaction or waiver of each of the following conditions precedent in a manner
reasonably acceptable to the Agents and the Initial Purchasers: (a) in the case
of the Senior Credit Facilities, each of the terms and conditions set forth
herein and in the Senior Term Sheet; (b) in the case of the Bridge Notes, each
of the terms and conditions set forth herein and in the Bridge Term Sheet; (c)
execution of the amended and restated fee letter of even date herewith among the
Sponsor, Bank of America, Banc of America Bridge, BAS, BSCL and Bear Stearns
(the "FEE LETTER"); (d) the absence of a material breach of any representation,
warranty or agreement of the Sponsor set forth herein; (e) the absence of any
change, occurrence or development since December 31, 1999 that has not been
previously disclosed to the Agents or the Initial Purchasers (including through
public disclosures) that could, in the Agents' or the Initial Purchasers'
reasonable opinion, have a material adverse effect on the business, assets,
liabilities (actual or contingent), operations, condition (financial or
otherwise) or prospects of the Acquired Company; (f) the Agents or the Initial
Purchasers not having become aware of any information with respect to the
Acquired Company which in the Agents' or the Initial Purchasers' reasonable
judgment is inconsistent in a material and adverse manner with any information
with respect to the Acquired Company previously disclosed to the Agents or the
Initial Purchasers; (g) prior to and during the primary syndication of the
Financings there shall be no competing offering, placement or arrangement of any
debt securities or bank financing by or on behalf of the Acquired Company (other
than the Senior Subordinated Notes); and (h) no material adverse change in or
material disruption of conditions in the financial, banking or capital markets
which the Arranger, in the Arranger's reasonable discretion after consultation
with Bear Stearns, deem material in connection with the syndication of the
Senior Credit Facilities or the Bridge Notes, as applicable, shall have occurred
and be continuing (any change, occurrence, development, inconsistency, or
disruption referred to under clauses (e) or (f) above, this clause (h), or
clause (i) of Appendix A attached to this Commitment Letter is referred to
herein as a "MATERIAL EVENT").
Vestar Capital Partners IV, L.P.
February 15, 2001
Page 4
BAS and Bear Stearns have provided you with a separate amended
and restated letter of engagement and indemnity dated the date hereof (the
"ENGAGEMENT LETTER") designating BAS as the sole lead managing underwriter, sole
book running manager, sole lead initial purchaser and sole lead book running
manager or lead placement agent (in any such capacities; the "BOOK RUNNING
MANAGER") and designating Bear Stearns as a co-managing underwriter, co-manager,
an initial purchaser, and a co-manager or co-placement agent, in each case, for
any and all Senior Subordinated Notes and other Permanent Securities (as defined
in the Fee Letter) and designating BAS as financial advisor in connection with
the Transaction. The Arranger will coordinate with you the appointment of any
additional co-managers and underwriters for the Senior Subordinated Notes and
any other Permanent Securities, which co-managers and underwriters will be
acceptable to you and shall be appointed on terms which you and the Arranger
shall have agreed in writing. It is understood that your execution and delivery
of the Engagement Letter is a condition precedent to the effectiveness of the
commitment of Banc of America Bridge and BSCL hereunder. It is further
understood to be a condition precedent to the obligation of Banc of America
Bridge and BSCL to purchase the Bridge Notes that the Engagement Letter be in
full force and effect at the time of such purchase.
The Arranger intends to commence syndication of each of the
Financings and the offering of Permanent Securities as soon as practicable after
your acceptance of this Commitment Letter, the Fee Letter and the Engagement
Letter. You agree to actively assist, and, prior to the Closing Date (as
hereinafter defined) to use your commercially reasonable efforts to cause, and
thereafter to cause, the Acquired Company to actively assist, the Arranger in
achieving a syndication of each of the Financings and the offering and sale of
Permanent Securities that is reasonably satisfactory to the Arranger and you.
Such assistance shall include (a) your providing and causing your advisors to
provide Bank of America, Banc of America Bridge, BAS, Bear Stearns, BSCL and the
other Lenders and Bridge Note Purchasers upon request with all information in
your possession which is reasonably available to you concerning the Transaction
and reasonably deemed necessary by the Arranger to complete syndication of the
Financings and the offer and sale of Permanent Securities, including, but not
limited to, information and evaluations prepared by you, the Acquired Company
and your and its advisors, or on your or their behalf, relating to the
Transaction, (b) your assistance in the preparation of an information memorandum
with respect to the Senior Credit Facilities to be used in connection with the
syndication of the Senior Credit Facilities and an information memorandum with
respect to the Bridge Notes to be used in connection with the syndication of the
Bridge Notes, (c) your assistance in the preparation of an offering memorandum
for the offer and sale of Permanent Securities in an offering pursuant to Rule
144A of the rules and regulations under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), containing such disclosures as may be required by
applicable laws, as are customary and appropriate for such a document or as may
be required by the Arranger in its reasonable judgment, (d) using your
commercially reasonable efforts to ensure that the efforts of the Arranger to
syndicate the Financings and to offer and sell Permanent Securities benefit
materially from existing lending relationships of the Sponsor and the Acquired
Company and (e) otherwise assisting the Arranger in its efforts to syndicate the
Financings and to offer and sell Permanent Securities, including by making your
officers and advisors and, to the extent reasonably practical, the officers of
the Acquired Company, available from time to time to attend and make
presentations regarding the business and prospects of the
Vestar Capital Partners IV, L.P.
February 15, 2001
Page 5
Acquired Company, as appropriate, at one or more meetings, including a roadshow,
of prospective Lenders, prospective Bridge Note Purchasers or prospective
investors in Permanent Securities, as the case may be.
It is understood and agreed that the Arranger will manage and
control all aspects of the syndications in consultation with you, including
decisions as to the selection of prospective Lenders (which shall be reasonably
acceptable to you) and the prospective Bridge Note Purchasers (in consultation
with you and Bear Stearns) and any titles offered to proposed Lenders and
proposed Bridge Note Purchasers (in coordination with you as hereinabove
provided), when commitments will be accepted and the final allocations of the
commitments among the Lenders and the Bridge Note Purchasers. It is understood
that no Lender participating in the Senior Credit Facilities and no Bridge Note
Purchaser participating in the Bridge Notes will receive compensation from you
in order to obtain its commitment, except on the terms contained in this
Commitment Letter. It is also understood and agreed that (i) the amount and
distribution of the fees among the Lenders will be at the sole discretion of the
Arranger (in consultation with Bear Stearns) and (ii) the amount and
distribution of the fees among the Bridge Note Purchasers will be at the sole
discretion of the Arranger (in consultation with Bear Stearns).
You hereby represent, warrant and covenant that (a) all
information, other than Projections (as defined below), which has been or is
hereafter made available to Bank of America, BAS, Banc of America Bridge, Bear
Stearns, BSCL, the other Senior Lenders or the other Bridge Note Purchasers by
you or any of your representatives (or on your or their behalf) or by the
Acquired Company or any of its representatives (or on their behalf) in
connection with any aspect of the Transaction (the "INFORMATION"), when taken as
a whole, is and will be complete and correct in all material respects as of the
date made and does not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
therein not materially misleading and (b) all financial projections concerning
the Acquired Company that have been or are hereafter made available to Bank of
America, BAS, Banc of America Bridge, Bear Stearns, BSCL the other Senior
Lenders or the other Bridge Note Purchasers by you or any of your
representatives (or on your or their behalf) or by the Acquired Company or any
of its representatives (or on their behalf) (the "PROJECTIONS") have been or
will be prepared in good faith based upon assumptions believed by you to be
reasonable at the time made, it being understood that Projections are inherently
uncertain and that actual results may be materially different. You agree to
furnish the Agents and the Initial Purchasers with such Information and
Projections as the Agents or the Initial Purchasers may reasonably request and
to supplement the Information and the Projections from time to time until the
Closing Date so that the representation, warranty and covenant in the
immediately preceding sentence is correct on the Closing Date. In issuing the
commitments hereunder and in arranging and syndicating each of the Financings,
Bank of America, Banc of America Bridge, BAS, Bear Stearns and BSCL are and will
be using and relying on the Information and the Projections without independent
verification thereof. It is understood and agreed that, notwithstanding anything
to the contrary set forth herein, you will have no liability to us for a breach
of representation or warranty with respect to any Information or Projections
furnished pursuant to this paragraph, and our sole remedy for any such breach
shall be limited to the termination of our respective commitments under this
Commitment Letter; PROVIDED, HOWEVER, that nothing in this
Vestar Capital Partners IV, L.P.
February 15, 2001
Page 6
sentence shall be construed to limit or restrict your other obligations under
this Commitment Letter.
You agree to reimburse, or to cause the Borrower to reimburse,
Bank of America, BAS, Bear Stearns and BSCL within 10 business days after
delivery to you of invoices and/or other reasonable documentation at any time
and from time to time after the Closing Date or termination of this Commitment
Letter, for all reasonable out-of-pocket expenses incurred before or after the
date hereof in connection with the Senior Credit Facilities, including, but not
limited to, the syndication thereof and the preparation of the definitive
documentation therefor, but only to the extent that, in the case of any such
expenses of Bank of America or BAS, such expenses do not result primarily from
the gross negligence, bad faith or willful misconduct of Bank of America or BAS
or from the breach by Bank of America or BAS of its obligations hereunder or, in
the case of any such expenses of Bear Stearns or BSCL, such expenses do not
result primarily from the gross negligence, bad faith, or willful misconduct of
Bear Stearns or BSCL or from the breach by Bear Stearns or BSCL of its
obligations hereunder; PROVIDED, HOWEVER, that you shall only be required to
reimburse, or to cause the Borrower to reimburse, for the reasonable fees,
disbursements and other charges of those outside legal counsel which are
retained by the Administrative Agent (and not the fees, disbursements or other
charges of any outside counsel to any other Agent or any of the Senior Lenders)
in connection with the Transaction, including, but not limited to, the
reasonable fees, disbursements and other charges of Moore and Van Allen, PLLC,
as counsel to the Administrative Agent, and any local counsel to the
Administrative Agent. In addition, you agree to reimburse, or to cause the
Borrower to reimburse, Banc of America Bridge, BAS, BSCL and Bear Stearns for
out-of-pocket expenses in connection with the Bridge Notes as more particularly
provided in the Fee Letter.
In the event that Bank of America, BAS, Banc of America
Bridge, BSCL or Bear Stearns becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter contemplated by this
Commitment Letter, the Sponsor will reimburse Bank of America, BAS, Banc of
America Bridge, BSCL and Bear Stearns for their reasonable legal and other
expenses (including the cost of any investigation and preparation) as they are
incurred by Bank of America, BAS, Banc of America Bridge, BSCL or Bear Stearns,
but only to the extent that, in the case of any such expenses of Bank of
America, Banc of America Bridge or BAS, such expenses do not result primarily
from the gross negligence, bad faith or willful misconduct of Bank of America,
BAS or Banc of America Bridge or from the breach by Bank of America, BAS or Banc
of America Bridge of its obligations hereunder, or in the case of any such
expenses of Bear Stearns or BSCL, such expenses do not result primarily from the
gross negligence, bad faith or willful misconduct of Bear Stearns or BSCL or
from the breach by Bear Stearns or BSCL of its obligations hereunder. The
Sponsor also agrees to indemnify and hold harmless Bank of America, BAS, Banc of
America Bridge, Bear Stearns, BSCL and their respective affiliates and their
respective directors, officers, employees and agents (the "INDEMNIFIED PARTIES")
from and against any and all actual losses, claims, damages and liabilities,
joint or several, related to or arising out of any matters contemplated by this
letter, to the extent that such losses, claims, damages or liabilities of an
Indemnified Party do not result from the gross negligence, bad faith or willful
misconduct of such Indemnified Party or any of its affiliates or any of their
respective directors, officers, employees or agents or from the breach by
Vestar Capital Partners IV, L.P.
February 15, 2001
Page 7
such Indemnified Party or any of its affiliates or any of their respective
directors, officers, employees or agents of its obligations hereunder.
This Commitment Letter, the Fee Letter and the contents hereof
and thereof are confidential and, except for the disclosure hereof or thereof on
a confidential basis to your equity holders, co-investors, boards of directors
or management committees and their respective affiliates, accountants, attorneys
and other professional advisors retained in connection with the Transaction or
as otherwise required by law, may not be disclosed in whole or in part to any
person or entity without each of our prior written consents; PROVIDED, HOWEVER,
it is understood and agreed that you may disclose this Commitment Letter but not
the Fee Letter or the Engagement Letter nor their respective contents, (i) to
the board of directors, shareholders, officers, attorneys and advisors of the
Acquired Company in connection with their consideration of the Transaction and
(ii) in filings with the Securities and Exchange Commission and other applicable
regulatory authorities and stock exchanges; and PROVIDED, FURTHER, that after
written notice to BAS and Bear Stearns of any legally required disclosure, the
Engagement Letter may be disclosed as required by applicable law.
The provisions of the immediately preceding three paragraphs
shall remain in full force and effect regardless of whether any definitive
documentation for either of the Financings shall be executed and delivered and
notwithstanding the termination of this Commitment Letter or any commitment or
undertaking of Bank of America, BAS, Banc of America Bridge, BSCL or Bear
Stearns hereunder; PROVIDED, HOWEVER, that the Sponsor shall be deemed released
of all of its obligations hereunder (other than, for the period ending on the
second anniversary of the date hereof, pursuant to the immediately preceding
paragraph), (i) in respect of the Senior Credit Facilities, at such time as
definitive financing documentation for the Senior Credit Facilities shall have
become effective and (ii) in respect of the Bridge Notes, at such time as the
definitive financing documentation for the Bridge Notes shall have become
effective or the Permanent Securities are issued in lieu of all the Bridge
Notes.
In connection with the services and transactions contemplated
hereby, you agree that each of Bank of America, BAS, Banc of America Bridge,
BSCL and Bear Stearns is permitted to access, use and share with any of its
respective bank or non-bank affiliates, agents, advisors (legal or otherwise) or
representatives, any information concerning you, the Acquired Company or any of
your or the Acquired Company's respective affiliates that is or may come into
the possession of Bank of America, BAS, Banc of America Bridge, BSCL or Bear
Stearns, as the case may be, or any of their respective affiliates so long as
such information is kept confidential and such parties agree to the terms of a
confidentiality agreement (the "CONFIDENTIALITY AGREEMENT") substantially in the
form as agreed between you and us. Each of Bank of America, BAS, Banc of America
Bridge, BSCL and Bear Stearns will, and will cause their respective affiliates
to, treat confidential information relating to you, the Acquired Company and
your and the Acquired Company's respective affiliates with the same degree of
care as they treat their own confidential information.
This Commitment Letter, the Fee Letter and the Engagement
Letter may be executed in counterparts which, taken together, shall constitute
an original. Delivery of an
Vestar Capital Partners IV, L.P.
February 15, 2001
Page 8
executed counterpart of this Commitment Letter, the Fee Letter and the
Engagement Letter by telecopier shall be effective as delivery of a manually
executed counterpart thereof.
This Commitment Letter, the Fee Letter and the Engagement
Letter shall be governed by, and construed in accordance with, the laws of the
State of New York. Each of you, Bank of America, BAS, Banc of America Bridge,
BSCL and Bear Stearns hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Commitment Letter, the Fee Letter
and the Engagement Letter, the Transaction and the other transactions
contemplated hereby and thereby or the actions of Bank of America, BAS, Banc of
America Bridge, BSCL and Bear Stearns in the negotiation, performance or
enforcement hereof.
This Commitment Letter (including the Senior Term Sheet and
Bridge Term Sheet), the Fee Letter, the Engagement Letter and the
Confidentiality Letter embody the entire agreement and understanding among Bank
of America, BAS, Banc of America Bridge, BSCL and Bear Stearns and you and your
affiliates with respect to the Financings and supersedes all prior agreements
and understandings relating to the specific matters hereof. This Commitment
Letter will not become effective until Bank of America, Banc of America Bridge,
BAS, BSCL, Bear Stearns and the Sponsor have each executed and delivered
counterparts hereof and of the Fee Letter, the Engagement Letter and our
agreement dated the date hereof with respect to the syndication of the
Financings. This Commitment Letter (including the Senior Term Sheet and the
Bridge Term Sheet) amends and restates in its entirety that certain commitment
letter dated December 20, 2000 (the "EXISTING COMMITMENT LETTER"), among you,
Bank of America, Banc of America Bridge and BAS. This Commitment Letter is not
assignable by you without each of our prior written consent and is intended to
be solely for the benefit of the parties hereto and the Indemnified Parties.
All commitments and undertakings of Bank of America, BAS, Banc
of America Bridge, BSCL and Bear Stearns hereunder will expire on the earliest
of (a) April 30, 2001, unless the Closing Date occurs on or prior thereto, (b)
the closing of the Acquisition (i) with respect to the Senior Credit Facilities,
without the use of the Senior Credit Facilities or (ii) with respect to the
Bridge Notes, without the use of the Bridge Notes and (c) the acceptance by the
Acquired Company or any of its affiliates of an offer for all or any substantial
part of the capital stock or property and assets of the Acquired Company other
than as part of the Transaction.
PURSUANT TO THE EXISTING COMMITMENT LETTER, the sponsor
ACKNOWLEDGED AND AGREED THAT (I) BANK OF AMERICA HAD OFFERED THEREUNDER TO
PROVIDE THE SENIOR CREDIT FACILITIES SEPARATE AND APART FROM THE OFFER
THEREUNDER BY BANC OF AMERICA BRIDGE TO PURCHASE THE BRIDGE NOTES, (II) BANC OF
AMERICA BRIDGE HAD OFFERED THEREUNDER TO PURCHASE THE BRIDGE NOTES SEPARATE AND
APART FROM THE OFFER THEREUNDER BY BANK OF AMERICA TO PROVIDE THE SENIOR CREDIT
FACILITIES AND (III) THE SPONSOR WAS OFFERED THE OPTION TO ELECT TO ACCEPT THE
EXISTING COMMITMENT LETTER WITH RESPECT TO EITHER THE SENIOR CREDIT FACILITIES
OR THE BRIDGE NOTES OR BOTH.
Vestar Capital Partners IV, L.P.
February 15, 2001
Page 9
We are pleased to have the opportunity to work with you on
this important financing.
Very truly yours,
BANK OF AMERICA, N.A. BEAR, STEARNS & CO. INC.
By: /s/ Elton R. Vogel By: /s/ Donald Mullen
---------------------------- ------------------------------
Elton R. Vogel Name:
Attorney-in-Fact Title:
BANC OF AMERICA SECURITIES LLC BEAR STEARNS CORPORATE
LENDING INC.
By /s/ Elton R. Vogel By: /s/ Donald Mullen
---------------------------- ------------------------------
Elton R. Vogel Name:
Managing Director Title:
BANC OF AMERICA BRIDGE LLC
By: /s/ Lynne E. Wertz
----------------------------
Lynne E. Wertz
Managing Director
ACCEPTED AND AGREED TO AS OF FEBRUARY __, 2001:
VESTAR CAPITAL PARTNERS IV, L.P.
By: Vestar Associates IV, L.P.,
its General Partner
By: Vestar Associates
corporation IV,
its General Partner
By: /s/ James P. Kelley
--------------------------------
Title:
Date:
ANNEX I
MICHAEL FOODS, INC.
SENIOR CREDIT FACILITIES
SUMMARY OF TERMS AND CONDITIONS
FEBRUARY 15, 2001
UNLESS OTHERWISE DEFINED HEREIN, CAPITALIZED TERMS SHALL HAVE THE DEFINITIONS
ASSIGNED TO THEM IN THE AMENDED AND RESTATED COMMITMENT LETTER DATED OF EVEN
DATE HEREWITH TO WHICH THIS SUMMARY OF TERMS & CONDITIONS IS ATTACHED.
================================================================================
BORROWER: Newco, a newly formed Delaware
corporation (the "BORROWER"), which
will acquire all of the outstanding
stock of and be merged with and into
Michael Foods, Inc., a Minnesota
corporation. The Borrower shall be a
wholly owned subsidiary of Holdings
following consummation of the
Acquisition.
GUARANTORS: The Senior Credit Facilities will be
guaranteed by Holdings and each of
the existing and future direct and
indirect subsidiaries of Holdings
that is not a "controlled foreign
corporation" (a "CFC") under Section
957 of the Internal Revenue Code.
All guarantees will be guarantees of
payment and not of collection.
SOLE LEAD ARRANGER
AND SOLE BOOK
RUNNING MANAGER: Banc of America Securities
LLC ("BAS") will act as sole lead
arranger and sole book running
manager (in such capacities, the
"SENIOR LEAD ARRANGER").
ADMINISTRATIVE AGENT: Bank of America, N.A. ("BANK
OF AMERICA") will act as sole and
exclusive administrative and
collateral agent (in such capacity,
the "ADMINISTRATIVE AGENT").
SYNDICATION AGENT: Bear Stearns Corporate Lending Inc.
("BSCL") will act as sole and
exclusive syndication agent (in such
capacity, the "SYNDICATION AGENT";
and together with the Administrative
Agent and the Senior Lead Arranger,
the "AGENTS").
2
LENDERS: Bank of America, BSCL and other
banks, financial institutions and
institutional lenders acceptable to
the Senior Lead Arranger and the
Borrower.
SENIOR CREDIT FACILITIES: REVOLVING CREDIT FACILITY: a
$100.0 million revolving credit
facility (the "REVOLVING CREDIT
FACILITY"), which will include a
sublimit to be determined for the
issuance of standby and commercial
letters of credit (each a "LETTER OF
CREDIT"). Letters of Credit will be
issued by Bank of America (in such
capacity, the "ISSUING BANK"), and
each of the Lenders under the
Revolving Credit Facility will
purchase an irrevocable and
unconditional participation in each
Letter of Credit.
TRANCHE A TERM LOAN FACILITY:
a $125.0 million term loan facility
(the "TRANCHE A TERM FACILITY").
TRANCHE B TERM LOAN FACILITY: a
$245.0 million term loan facility
(the "TRANCHE B TERM
FACILITY").
PURPOSE: The proceeds of the Senior Credit
Facilities shall be used to provide
a portion of proceeds required to
consummate the Transaction and to
provide for working capital and
general corporate needs (including
permitted acquisitions) of the
Borrower and its subsidiaries.
CLOSING DATE: On or before April 30, 2001.
INTEREST RATES: The Revolving Credit Facility
and the Tranche A Term Facility
shall initially bear interest at a
rate equal to LIBOR plus 300 basis
points or the Alternate Base Rate
(to be defined as the higher of (i)
the Bank of America prime rate and
(ii) the Federal Funds rate plus
.50%) plus 200 basis points. The
Tranche B Term Facility shall
initially bear interest at a rate
equal to LIBOR plus 350 basis points
or the Alternate Base Rate plus 250
basis points.
Commencing six months from the
Closing Date, the Senior Credit
Facilities shall bear interest at a
rate equal to LIBOR and/or Alternate
Base Rate plus the applicable
margins described in the Pricing
Grid hereinafter set forth.
The Borrower may select interest
periods of one, two, three, six,
nine or twelve months for LIBOR rate
advances, subject to availability.
Interest shall be payable at the end
of the selected interest period, but
no less frequently than quarterly.
3
A default rate shall apply on all
amounts not paid when due at a rate
per annum of 2% above the applicable
interest rate or letter of credit
fee.
COMMITMENT FEE: Commencing on the Closing Date,
a commitment fee of 0.50%
(calculated on a 360-day basis)
shall be payable on the unused
portions of the Revolving Credit
Facility, such fee to be payable
quarterly in arrears and on the date
of termination or expiration of the
commitments. Commencing six months
from the Closing Date, the
commitment fee will be determined
pursuant to the Pricing Grid
hereinafter set forth.
LETTER OF CREDIT FEES: The Borrower shall pay a per annum
letter of credit fee on the
outstanding amount of all Letters of
Credit. The applicable letter of
credit fee shall be (i) for standby
letters of credit, the percentage
over LIBOR (the "LIBOR MARGIN")
applicable from time to time for
LIBOR based loans outstanding under
the Revolving Credit Facility and
(ii) for trade letters of credit,
50% of the LIBOR Margin. The letter
of credit fee shall be due quarterly
in arrears and shared
proportionately by the Lenders.
In addition, the Borrower shall pay
the Issuing Lender for its own
account a per annum facing fee of
1/8% on the outstanding amount of
all Letters of Credit. The letter of
credit facing fee shall be due
quarterly in arrears.
PERFORMANCE PRICING: Commencing six months from the
Closing Date, the LIBOR and
Alternate Base Rate margins and the
commitment fee will be based upon
the Borrower's Leverage Ratio (total
funded debt/EBITDA) determined on a
quarterly basis. Set forth below are
the applicable LIBOR margins for
loans outstanding under the Senior
Credit Facilities and the commitment
fee. The applicable Alternate Base
Rate margin shall be 1.00% less than
the applicable LIBOR margin for the
Revolving Loan Facility, Tranche A
Term Loan Facility or Tranche B Term
Loan Facility, as appropriate.
------------------- ------------------ ---------------- ----------------
REVOLVING CREDIT
FACILITY AND
TRANCHE A TERM TRANCHE B TERM
LEVERAGE RATIO LOAN FACILITY LOAN FACILITY COMMITMENT FEE
------------------- ------------------ ---------------- ----------------
4
> 4.25 3.00% 3.50% 0.50%
------------------- ------------------ ---------------- ----------------
< 4.25 and > 3.75 2.75% 3.50% 0.50%
--
------------------- ------------------ ---------------- ----------------
< 3.75 and > 3.25 2.50% 3.25% 0.50%
--
------------------- ------------------ ---------------- ----------------
< 3.25 and > 2.75 2.25% 3.25% 0.375%
--
------------------- ------------------ ---------------- ----------------
< 2.75 2.00% 3.00% 0.375%
--
------------------- ------------------ ---------------- ----------------
CALCULATION OF
INTEREST AND FEES: Other than calculations in
respect of interest at the Alternate
Base Rate (which shall be made on
the basis of actual number of days
elapsed in a 365/366 day year), all
calculations of interest and fees
shall be made on the basis of actual
number of days elapsed in a 360 day
year.
MATURITY: REVOLVING CREDIT FACILITY: Six (6)
years after the Closing Date.
TRANCHE A TERM LOAN FACILITY:
Six (6) years after the Closing
Date.
TRANCHE B TERM LOAN FACILITY:
Seven (7) years after the Closing
Date.
AVAILABILITY/
SCHEDULED
AMORTIZATION: REVOLVING CREDIT FACILITY:
Extensions of credit under the
Revolving Credit Facility shall be
subject to availability under the
aggregate committed amount for the
Revolving Credit Facility.
TERM LOAN FACILITIES: Loans made
under the Tranche A Term Facility
and loans made under the Tranche B
Term Facility will be available in a
single borrowing on the Closing
Date. The Term Loan Facilities will
be subject to quarterly amortization
of principal according to the
following schedule (the "SCHEDULED
AMORTIZATION"):
5
---------------- ----------------------- ---------------------
Year Tranche A Tranche B
---------------- ----------------------- ---------------------
1 $15 million $2.45 million
---------------- ----------------------- ---------------------
2 $15 million $2.45 million
---------------- ----------------------- ---------------------
3 $20 million $2.45 million
---------------- ----------------------- ---------------------
4 $20 million $2.45 million
---------------- ----------------------- ---------------------
5 $25 million $2.45 million
---------------- ----------------------- ---------------------
6 $30 million $2.45 million
---------------- ----------------------- ---------------------
7 NA $230.3 million
---------------- ----------------------- ---------------------
MANDATORY
PREPAYMENTS: The Senior Credit Facilities
will be prepaid by an amount equal
to (a) 100% of the net cash proceeds
of all non-ordinary course sales of
assets (including stock of
subsidiaries) by Holdings, the
Borrower or any subsidiary, subject
to baskets and reinvestment
provisions to be agreed upon; (b)
75% (if the Leverage Ratio (to be
defined) is equal to or greater than
3.5:1.0) or 50% (if the Leverage
Ratio is less than 3.5:1.0) of
Excess Cash Flow (to be defined in
the loan documentation) pursuant to
an annual cash sweep arrangement,
provided solely with respect to the
fiscal year ending on December 31,
2001, Excess Cash Flow shall be
calculated for the period commencing
on the Closing Date and ending on
December 31, 2001; (c) 100% of the
net cash proceeds from the issuance
of any funded debt for borrowed
money by Holdings, the Borrower or
any subsidiary (other than certain
permitted funded debt to be
determined or Permanent Securities
(as defined in the Fee Letter) or
other subordinated debt issued to
refinance amounts outstanding under
the Bridge Notes) and (d) 50% of the
net cash proceeds from the issuance
of equity (other than equity from
shareholders on or about the Closing
Date, management, officers or
directors and in connection with
permitted acquisitions, equity
issued to refinance amounts
outstanding under the Bridge Notes
and other exceptions to be
determined) by Holdings, the
Borrower or any subsidiary.
Prepayments shall be applied to
reduce the Term Loan Facilities, pro
rata with respect to each remaining
installment of principal; PROVIDED,
HOWEVER, that with respect to clause
(a), solely for purposes of
determining the pro rata shares of
the Lenders under the Tranche A Term
Loan Facility, the outstanding
principal amount of each Lender's
loans under Revolving Credit
Facility and participation interests
in outstanding letters of credit
shall be deemed to be additional
outstanding loans under the Tranche
A Term Loan Facility owing to such
Lender, and with respect to clause
(b) above, 25% of such
6
prepayment shall first be applied to
reduce the remaining principal
amortization payments of the Term
Loan Facilities in direct order of
maturity. In the event that the Term
Loan Facilities shall have been
fully repaid, the mandatory
prepayments described above shall be
applied to the Revolving Credit
Facility (without any corresponding
commitment reductions except in the
case of prepayments pursuant to
clause (a) above).
OPTIONAL
PREPAYMENTS: The Senior Credit Facilities
may be prepaid at any time in whole
or in part without premium or
penalty, except that any prepayment
of LIBOR rate advances other than at
the end of the applicable interest
periods therefor shall be made with
reimbursement for any funding losses
and redeployment costs of the
Lenders resulting therefrom. Each
such prepayment of the Term Loan
Facilities shall be applied to the
Tranche A Term Loan Facility and the
Tranche B Term Loan Facility on a
pro rata basis (ratably to the
remaining principal amortization
payments thereof); PROVIDED,
HOWEVER, 25% of such prepayment
shall first be applied to reduce the
remaining principal amortization
payments of the Term Loan Facilities
in direct order of maturity.
The unutilized portion of any
commitment under the Senior Credit
Facilities may be reduced or
terminated by the Borrower at any
time without penalty.
SECURITY: First priority, perfected security
interest (subject to no other liens
except for permitted liens to be
determined) in (i) 100% of the
issued and outstanding capital stock
of the Borrower, (ii) 100% of the
issued and outstanding capital stock
of each of the direct and indirect
domestic subsidiaries of the
Borrower, (iii) 65% (or such greater
percentage allowable which would not
result in a material adverse tax
consequences) of the voting capital
stock and 100% of the non-voting
capital stock of each direct foreign
subsidiary of the Borrower or any of
its domestic subsidiaries and (iv)
substantially all other present and
future assets and properties of
Holdings, the Borrower and the
direct and indirect domestic
subsidiaries of the Borrower
(including, without limitation,
accounts receivable, inventory, real
property, machinery, equipment,
contracts, trademarks, copyrights,
patents, license agreements, and
general intangibles), except for
assets
7
which are not assignable by their
terms and other exceptions to be
agreed.
The priority of the liens and
security interests of the
Administrative Agent shall be
supported by such landlord and
mortgagee waivers, warehousemen and
bailee letters, third party
consents, intercreditor agreements
and other agreements as shall be
requested by the Administrative
Agent, in each case in form and
substance reasonably satisfactory to
the Administrative Agent; PROVIDED,
the Borrower's obligations to obtain
such agreements shall be limited to
using commercially reasonable
efforts
The foregoing security shall ratably
secure the Senior Credit Facilities
and any interest rate swap/foreign
currency swap or similar agreements
with a Lender or its affiliates
under the Senior Credit Facilities.
CONDITIONS PRECEDENT
TO CLOSING: The closing and the initial
extension of credit under the Senior
Credit Facilities will be subject to
the satisfaction of the conditions
precedent provided in APPENDIX A
attached hereto.
REPRESENTATIONS AND
WARRANTIES: Usual and customary for
leveraged financings generally and
for this transaction in particular
(subject to appropriate materiality
and reasonableness limitations),
including, but not limited to, the
following: (i) corporate existence
and status; (ii) corporate power and
authority/enforceability; (iii) no
violation of law or contracts or
organizational documents; (iv) no
material litigation; (v) correctness
of specified financial statements
and other information and no
material adverse change; (vi) no
required governmental or third party
approvals; (vii) use of
proceeds/compliance with margin
regulations; (viii) status under
Investment Company Act; (ix) ERISA
matters; (x) environmental matters;
(xi) perfected liens and security
interests; (xii) payment of taxes;
(xiii) accuracy of disclosure; and
(xiv) consummation of the
Transaction.
COVENANTS: Usual and customary for leveraged
financings generally and for this
transaction in particular (subject
to materiality limitations, baskets
and carve-outs to be negotiated),
including, but not limited to, the
following: (i) delivery of financial
statements and other reports; (ii)
delivery of compliance certificates;
(iii) delivery of notices of
default,
8
material litigation and material
governmental and environmental
proceedings; (iv) compliance with
laws (including environmental laws
and ERISA matters) and material
contractual obligations; (v) payment
of taxes; (vi) maintenance of
insurance; (vii) limitation on liens
and negative pledges; (viii)
limitation on mergers,
consolidations and sales of assets;
(ix) limitation on incurrence of
debt; (x) limitation on dividends,
stock redemptions and the redemption
and/or prepayment of other debt;
(xi) limitation on investments
(including loans and advances) and
acquisitions; (xii) limitation on
capital expenditures; and (xiii)
limitation on transactions with
affiliates.
The loan documentation for the
Senior Credit Facilities shall
include the following financial
covenants:
- Maintenance of a minimum
Interest Coverage Ratio
(EBITDA/cash interest
expense) with step-up
provisions to be agreed;
- Maintenance of a maximum
Leverage Ratio (total funded
debt/EBITDA) with step-down
provisions to be determined;
and
- Maintenance of a minimum
Fixed Charge Coverage Ratio
(to be defined), with step-up
provisions to be agreed.
All of the financial covenants will
be calculated on a consolidated
basis and for each consecutive four
fiscal quarter period.
Holdings shall have agreed that it
will not engage in any business,
activity or operation other than
owning and holding the capital stock
of the Borrower and activities
directly related thereto. Holdings
shall not be permitted to merge with
or into any other person.
EVENTS OF DEFAULT: Usual and customary for
leveraged financings generally and
for this transaction in particular
(subject to materiality and grace
periods to be negotiated),
including, but not limited to, the
following: (i) nonpayment of
principal, interest, fees or other
amounts; (ii) violation of
covenants; (iii) inaccuracy of
representations and warranties; (iv)
cross-default to other material
agreements and indebtedness; (v)
bankruptcy and other insolvency
events;
9
(vi) material judgments; (vii) ERISA
matters; (viii) actual or asserted
invalidity of any loan documentation
or security interests; (ix) Holdings
engaging in any business or activity
other than holding 100% of the
capital stock of the Borrower; or
(x) change of control.
ASSIGNMENTS AND
PARTICIPATIONS: Each Lender will be permitted to
make assignments in minimum amounts
of $2.5 million to other financial
institutions approved by the
Borrower and the Administrative
Agent, which approval shall not be
unreasonably withheld or delayed;
PROVIDED, HOWEVER, that neither the
approval of the Borrower nor the
Administrative Agent shall be
required in connection with
assignments to other Lenders or any
of their affiliates. Each Lender
will also have the right, without
consent of the Borrower or the
Administrative Agent, to assign (i)
as security all or part of its
rights under the loan documentation
to any Federal Reserve Bank and (ii)
all or part of its rights or
obligations under the loan
documentation to any of its
affiliates. Lenders will be
permitted to sell participations
with voting rights limited to
significant matters such as
decreasing amounts of principal
repayment, reduction in rate,
extension of commitments and
extension of maturity date. Any
assignment by a Lender of any
portion of its commitments or loans
outstanding under the Revolving Loan
Facility shall be accompanied by an
equal portion of its loans
outstanding under the Tranche A Term
Loan Facility and vice versa.
WAIVERS AND
AMENDMENTS: Amendments and waivers of the
provisions of the loan agreement and
other definitive credit
documentation will require the
approval of Lenders holding loans
and commitments representing more
than 50% of the aggregate amount of
loans and commitments under the
Senior Credit Facilities, except
that (i) the consent of all of the
Lenders affected thereby shall be
required with respect to (a)
increases in the commitment of such
Lenders, (b) reductions of
principal, interest, or fees, (c)
extensions of scheduled maturities
or times for payment, (d) releases
of all or substantially all of the
collateral, and (e) releases of all
or substantially all of the
Guarantors, and (ii) the consent of
the Lenders holding at least 50% of
the Tranche A Term Loan Facility and
the Lenders holding at least 50% of
the Tranche B Term Loan Facility
shall be required with
10
respect to any amendment that
changes the allocation of any
payments between the Term Loan
Facilities.
INDEMNIFICATION: In the definitive documentation
for the Senior Credit Facilities,
the Borrower shall indemnify the
Agents and the Lenders from and
against all losses, liabilities,
claims, damages or expenses relating
to their loans, the Borrower's use
of loan proceeds or the commitments,
including but not limited to
reasonable attorneys' fees and
settlement costs, but only to the
extent that such losses,
liabilities, claims, damages or
expenses do not result primarily
from the gross negligence, bad faith
or willful misconduct of the
Indemnified Party or from the breach
by the Indemnified Party of its
obligations under the definitive
documentation for the Senior Credit
Facilities.
GOVERNING LAW: New York.
EXPENSES: The Borrower will pay all reasonable
out-of-pocket costs and expenses of
the Agents associated with the
preparation, due diligence,
administration, syndication and
enforcement of all loan
documentation; PROVIDED, HOWEVER,
that the Borrower shall only be
required to pay the reasonable fees,
disbursements and other costs of
those outside legal counsel which
are retained by the Administrative
Agent in connection with the
Transaction (and not any fees,
disbursements or costs of any
outside counsel to any of the other
Agents). The Borrower will also pay
the reasonable out-of-pocket
expenses of each Lender in
connection with the enforcement of
any of the loan documentation.
COUNSEL TO
ADMINISTRATIVE AGENT: Moore & Van Allen, PLLC.
MISCELLANEOUS: This term sheet is intended as an
outline only and does not purport to
summarize all the other conditions,
covenants, representations,
warranties and other provisions
which would be contained in loan
documentation not specifically set
forth herein and which will be
subject to the mutual agreement of
the Agents and the Borrower. Each of
the parties shall (i) waive its
right to a trial by jury and (ii)
submit to New York jurisdiction. The
loan documentation will contain
customary increased cost,
withholding tax, capital adequacy
and yield protection provisions.
ANNEX II
MICHAEL FOODS, INC.
SENIOR SUBORDINATED BRIDGE NOTES
SUMMARY OF TERMS AND CONDITIONS
FEBRUARY 15, 2001
UNLESS OTHERWISE DEFINED HEREIN, CAPITALIZED TERMS SHALL HAVE THE DEFINITIONS
ASSIGNED TO THEM IN THE AMENDED AND RESTATED COMMITMENT LETTER DATED OF EVEN
DATE HEREWITH TO WHICH THIS SUMMARY OF TERMS & CONDITIONS IS ATTACHED.
===============================================================================
ISSUER: Same entity as borrower under
Senior Credit Facilities.
BRIDGE NOTE
PURCHASERS: Banc of America Bridge LLC or an
affiliate thereof ("BANC OF AMERICA
BRIDGE"), Bear Stearns Corporate
Lending Inc. or an affiliate thereof
("BSCL"; and, together with Banc of
America Bridge, collectively, the
"INITIAL PURCHASERS") and other
purchasers arranged by the Bridge
Lead Arranger in consultation with
the Issuer (together with the
Initial Purchasers, the "BRIDGE NOTE
PURCHASERS").
SOLE LEAD ARRANGER
AND SOLE BOOK
RUNNING MANAGER: Banc of America Securities
LLC ("BAS") will act as sole and
exclusive lead arranger and sole and
exclusive book running manager (in
such capacities, the "BRIDGE LEAD
ARRANGER").
CO-MANAGER: Bear, Stearns & Co. Inc.
("BEAR STEARNS").
BRIDGE NOTES: Senior Subordinated Bridge
Notes (the "BRIDGE NOTES"), to be
issued under a Note Purchase
Agreement (the "NOTE PURCHASE
AGREEMENT").
PRINCIPAL AMOUNT: Up to $200,000,000.
MATURITY: Ten (10) years after the Closing
Date.
2
PURPOSE: Together with borrowings under the
Senior Credit Facilities, to provide
a portion of proceeds required to
consummate the Transaction.
RANKING: The obligations of the Issuer under
the Bridge Notes will be unsecured
senior subordinated obligations,
subordinated to the Senior Credit
Facilities and ranking pari passu
with all other unsecured senior
subordinated obligations of the
Issuer.
GUARANTEES: Same guarantors as under Senior
Credit Facilities. The Guarantees
will be subordinated to guarantees
under the Senior Credit Facilities
and will rank pari passu with all
other senior subordinated
obligations of the Guarantors.
CLOSING DATE: On or before April 30, 2001.
AVAILABILITY: In one drawing upon consummation
of the Acquisition.
INTEREST RATES, FEES
AND WARRANTS: As set forth in the Fee Letter.
OPTIONAL REDEMPTION: As set forth in the Fee Letter.
MANDATORY
REDEMPTION: The Bridge Notes will be redeemed
with 100% of the net proceeds from
the sale of any Permanent Securities
(or any other subordinated debt
securities of the Issuer) at par
plus accrued and unpaid interest to
the date of redemption.
The Note Purchase Agreement will
also contain a provision customarily
found in high yield debt securities,
providing that the Issuer will offer
to purchase Bridge Notes from all
Bridge Note Purchasers with the net
cash proceeds from certain asset
sales by the Issuer and its
subsidiaries.
REGISTRATION RIGHTS: Holders of 33% or more of
the aggregate principal amount of
the Bridge Notes may demand one
registration under the Securities
Act (which may be a shelf
registration with customary
exceptions to be negotiated);
PROVIDED that, notwithstanding any
such demand, the Issuer shall not be
required to file any applicable
registration statement prior to the
six month anniversary of the Closing
Date.
CHANGE OF CONTROL: In the event of a Change
of Control, the Issuer will be
required to commence, within 30 days
of such occurrence,
3
an offer to repurchase all
outstanding Bridge Notes at a
repurchase price of 101% of the
principal amount thereof, PLUS
accrued and unpaid interest to the
repurchase date.
CONDITIONS PRECEDENT
TO FUNDING: The closing of the purchase
of the Bridge Notes by the Initial
Purchasers (and any other Bridge
Note Purchasers) will be subject to
the satisfaction of the conditions
precedent provided in APPENDIX A
ATTACHED HERETO.
COVENANTS: Usual and customary for leveraged
financing transactions of this type
and for the particular financing
transaction contemplated hereby
(subject to materiality limitations
and carve-outs to be negotiated),
and similar to those contained in a
high yield debt securities offering,
including (without limitation):
1. Limitations on incurrence of
debt.
2. Limitations on liens.
3. Limitations on asset
dispositions and
sale/leaseback transactions.
4. Limitations on the issuance
and sale of capital stock of
restricted subsidiaries.
5. Limitations on restrictions
on distributions from
subsidiaries.
6. Limitations on transactions
with affiliates.
7. Limitations on restricted
payments.
8. Limitations on layered debt.
9. Limitations on mergers,
consolidations, sales of
substantially all assets.
FINANCIAL COVENANTS: The Note Purchase
Agreement shall include the
following financial covenants (which
shall be defined the same as in the
Senior Credit Facilities, but shall
be less restrictive in amounts to be
agreed):
4
- Maintenance of a minimum
Interest Coverage Ratio
(EBITDA/cash interest
expense) with step-up
provisions to be agreed;
- Maintenance of a maximum
Leverage Ratio (total funded
debt/EBITDA) with step-down
provisions to be determined;
and
- Maintenance of a minimum
Fixed Charge Coverage Ratio
(to be defined), with step-up
provisions to be agreed.
All of the financial covenants will
be calculated on a consolidated
basis and for each consecutive four
fiscal quarter period.
REPRESENTATIONS
AND WARRANTIES,
EVENTS OF DEFAULT,
WAIVERS AND CONSENTS: Usual and customary for leveraged
financing transactions of this type
and for the particular financing
transaction contemplated hereby
(subject to materiality limitations
and carve-outs to be negotiated),
and similar to those contained in a
high yield debt securities offering.
ASSIGNMENTS: After the first anniversary of the
Closing Date (or any earlier date
designated by the Arranger), each
Bridge Note Purchaser shall have the
absolute and unconditional right to
assign its rights under the Note
Purchase Agreement and in respect of
the Bridge Notes in whole or in part
to any third parties in compliance
with applicable law and, unless such
Bridge Notes have been registered,
in consultation with the Issuer.
Each Initial Purchaser may share its
commitment with any third party in
consultation with the Issuer only as
the Arranger and the other Initial
Purchaser may agree and prior to the
first anniversary of the Closing
Date (or any earlier date designated
by the Arranger) may assign its
rights under the Note Purchase
Agreement and in respect of the
Bridge Notes, unless such Bridge
Notes have been registered, in
consultation with the Issuer, and
only as the Arranger and the other
Initial Purchaser may agree.
INDEMNIFICATION: In the Note Purchase Agreement,
the Issuer shall indemnify the
Bridge Note Purchasers from and
against all losses, liabilities,
claims, damages or expenses relating
to their purchase of Bridge Notes,
the Issuer's use of Bridge Note
5
proceeds or the commitments,
including but not limited to
reasonable attorneys' fees and
settlement costs, but only to the
extent that such losses,
liabilities, claims, damages or
expenses do not result primarily
from the gross negligence, bad faith
or willful misconduct of the
Indemnified Party or from the breach
by the Indemnified Party of its
obligations under the Note Purchase
Agreement.
GOVERNING LAW: New York.
EXPENSES: The Issuer will pay out-of-pocket
costs and expenses of the Initial
Purchasers and the Bridge Lead
Arranger associated with the Bridge
Notes as provided in the Fee Letter.
The Issuer will also pay the
reasonable out-of-pocket expenses of
each Bridge Note Purchaser in
connection with the enforcement of
the Note Purchase Agreement and any
other documentation in respect of
the Bridge Notes.
COUNSEL TO
BANC OF AMERICA
BRIDGE AND BAS: Shearman & Sterling.
MISCELLANEOUS: This term sheet is intended as an
outline only and does not purport to
summarize all the other conditions,
covenants, representations,
warranties and other provisions
which would be contained in the Note
Purchase Agreement and other
documentation in respect of the
Bridge Notes not specifically set
forth herein and which will be
subject to the mutual agreement of
the Initial Purchasers and the
Issuer. Each of the parties shall
(i) waive its right to a trial by
jury and (ii) submit to New York
jurisdiction.
APPENDIX A
MICHAEL FOODS, INC.
CONDITIONS PRECEDENT TO EACH OF THE FINANCINGS
FEBRUARY 15, 2001
UNLESS OTHERWISE DEFINED HEREIN, CAPITALIZED TERMS SHALL HAVE THE DEFINITIONS
ASSIGNED TO THEM IN THE AMENDED AND RESTATED COMMITMENT LETTER DATED OF EVEN
DATE HEREWITH TO WHICH THIS SUMMARY OF TERMS & CONDITIONS IS ATTACHED.
================================================================================
The closing (and the initial funding) of the Senior Credit Facilities
and the Bridge Notes will be subject to satisfaction of the following conditions
precedent:
(i) Reasonably satisfactory completion of legal, environmental,
pension and regulatory due diligence review with respect to
the business, assets, liabilities (actual and contingent),
operations, condition (financial or otherwise), of the
Acquired Company.
(ii) In the case of the Senior Credit Facilities, the negotiation,
execution and delivery of definitive documentation for the
Senior Credit Facilities consistent with the Term Sheet and
otherwise satisfactory to the Agents, the Initial Purchasers
and the Borrower.
(iii) In the case of the Bridge Notes, the negotiation, execution
and delivery of the Note Purchase Agreement and other
definitive documentation for the Bridge Notes consistent with
the Bridge Term Sheet and otherwise satisfactory to the
Initial Purchasers, the Agents and the Borrower.
(iv) Execution by the Borrower and the Acquired Company and/or
other appropriate parties of a definitive purchase agreement
and other related documentation for the Transaction
(collectively, the "TRANSACTION DOCUMENTS"), which Transaction
Documents shall be in form and substance reasonably
satisfactory to the Agents, the Initial Purchasers and the
Arranger. The Agents and the Initial Purchasers shall have
received true and complete executed copies of the Transaction
Documents.
(v) Consummation of the Transaction in accordance in all material
respects with the terms the Transaction Documents and in
compliance in all material respects with applicable law and
regulatory approvals.
(vi) Satisfactory capitalization, shareholders' arrangements,
management, ownership structure and corporate structure of
Holdings and its subsidiaries (in the case of
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the Senior Credit Facilities, including, without limitation,
the term, amortization and coupon, subordination, standstill
and remedies provisions, covenants, representations and events
of default of the Senior Subordinated Notes or the Bridge
Notes, as applicable).
(vii) (A) Receipt by the Borrower of (1) not less than
$150.0 million in cash equity contributed through Holdings by
the Equity Investors (at least $125.0 million of which shall
be provided by the Sponsor), (2) in the case of the Senior
Credit Facilities, not less than $200.0 million of cash
proceeds from the issuance by the Borrower of the Senior
Subordinated Notes or the Bridge Notes and (3) in the case of
the Bridge Notes, not more than $400.0 million of cash
proceeds from borrowings by the Borrower under the Senior
Credit Facilities and (B) the roll over (directly or
indirectly) into common equity of Holdings and deferred
compensation arrangements of Holdings on terms reasonably
acceptable to the Agents, the Initial Purchasers and the
Arranger of not less than $48.0 million of existing common
equity and option value of the Acquired Company.
(viii) Absence of material pending or threatened litigation,
investigations or proceedings with respect to the Acquired
Company.
(ix) Receipt by the Agents, the Initial Purchasers and the
Arranger of (A) monthly consolidated and consolidating
financial statements (including balance sheets, income and
cash flow statements) of the Acquired Company for each month
ending on or after September 30, 2000 and prior to the Closing
Date as the same become available in accordance with past
practices and (B) a pro forma consolidated balance sheet and
income statement of the Acquired Company giving effect to the
Transaction prepared as of the Closing Date by independent
public accountants of recognized national standing (but using
the most recently available financial statements) and meeting
the requirements of Regulation S-X under the Securities Act of
1933, as amended, applicable to a Registration Statement under
such Act on Form S-1. The financial statements referred to in
clause (B) above shall evidence minimum EBITDA (to be defined)
of at least $134.0 million.
(x) Payment of all outstanding indebtedness for borrowed money,
notes payable and loans payable of the Acquired Company, and
cancellation of all other credit facilities and lines of
credit, other than surviving capitalized leases and purchase
money indebtedness disclosed on the most recently completed
audited financial statements of the Acquired Company prior to
the date hereof and other indebtedness to be agreed.
(xi) Satisfactory solvency certification and opinion from a third
party reasonably acceptable to the Agents, the Initial
Purchasers and the Arranger.
(xii) In the case of the Senior Credit Facilities, evidence of
perfection of liens and security interests, together with (A)
endorsements on the appropriate insurance
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policies of the Borrower and its subsidiaries naming the
Administrative Agent as the loss payee or additional insured
thereunder and (B) such title policies, surveys, landlord
waivers and access letters as shall be agreed.
(xiii) Receipt of requisite material governmental and material
third-party approvals and consents (and expiration, without
the imposition of conditions, of all applicable waiting
periods) in connection with the Transaction.
(xiv) Holdings and its subsidiaries shall be in compliance with all
existing material financial obligations (after giving effect
to the Transaction).
(xv) Reasonably satisfactory legal opinions, corporate
certificates and other customary closing documentation.
(xvi) Payment by the Borrower to the Lenders, the Agents, the Bridge
Note Purchasers and the Arranger of all fees and expenses due
and payable at closing of the Financings (including reasonable
fees and expenses of counsel to the Administrative Agent and
the Senior Lead Arranger and counsel to the Bridge Lead
Arranger).
(xvii) In the case of the Bridge Notes, (a) not later than 30 days
prior to the Closing Date, the Borrower shall have completed
and made available to the Arranger, Bear Stearns and potential
investors copies of an offering memorandum for the offer and
sale of the Permanent Securities pursuant to Rule 144A of the
rules and regulations under the Securities Act containing such
disclosures as may be required by applicable laws, as are
customary and appropriate for such a document or as maybe
required by the Arranger (including all audited, pro forma and
other financial statements and schedules of the Borrower of
the type that would be required in a registered public
offering of the Permanent Securities) and (b) senior
management of the Acquired Company and officers of the Sponsor
shall have made themselves available for a roadshow and other
meetings with potential investors for the Permanent Securities
as required by the Arranger in its reasonable judgement to
market such Permanent Securities.