Exhibit (b)(2)
January 27, 2002
J Acquisition Corp.
900 Third Avenue
26th Floor
New York, New York 10022
Re: Junior Subordinated Debt Commitment
Gentlemen:
Reference is made to that certain Agreement and Plan of Merger
(the "Agreement"), dated as of the date hereof, by and between J Holdings Corp.,
a Delaware corporation ("Parent"), J Acquisition Corp., a Delaware corporation
and wholly owned subsidiary of Parent (the "Borrower"), and Jenny Craig, Inc., a
Delaware corporation (the "Company"), which agreement contemplates the
acquisition by Parent of 100% of the outstanding shares of the Company (such
acquisition, together with agreements related thereto or contemplated thereby,
representing the "Transaction"). In connection therewith and in order to finance
in part the Transaction, ACI Capital Co., Inc. (the "Lender") is pleased to
advise you that it hereby commits to provide the Borrower with a Junior
Subordinated Debt Financing in an aggregate principal amount of $9 million (the
"Subdebt Financing"). The obligations of the Borrower under the Subdebt
Financing will be secured by a second priority lien on, and security interest
in, substantially all assets of the Borrower (it being understood that the
Company will become the Borrower upon consummation of the Acquisition), the
Parent and all domestic subsidiaries of the Borrower, in each case subject to
such exclusions as the Lender (in its sole and absolute discretion) may agree.
The Lender's commitment to provide the Subdebt Financing is subject in all
respects to satisfaction of the terms and conditions contained in this
commitment letter and in the Outline of Terms and Conditions attached hereto as
Exhibit A (the "Term Sheet").
The Borrower acknowledges that the Term Sheet is intended as an
outline only and does not purport to summarize all the conditions, covenants,
representations, warranties and other provisions which would be contained in
definitive legal documentation for the Subdebt Financing. The loan documentation
for the Subdebt Financing will include, in addition to the provisions that are
summarized in this commitment letter and the Term Sheet, provisions that, in the
reasonable opinion of the Lender, are customary or typical for this type of
financing transaction and other provisions that the Lender reasonably requires
in the context of the proposed transaction.
The Lender's commitment to provide the Subdebt Financing is
subject to (i) the negotiation, execution and delivery of definitive loan
documentation in form and substance satisfactory to the Lender, the Borrower and
their respective counsel, (ii) the satisfaction of the conditions precedent to
the closing of the Transaction set forth in Sections 6.1 and 6.3 (other than
Section 6.3(c) of the Agreement), (iii) all conditions precedent to the
obligation of the Senior Lender (as defined in the Agreement) to consummate the
Senior Financing (as defined in the Agreement) having been met and the Senior
Lender shall intend to and shall be willing and prepared to consummate the
Senior Financing, in each case other than with respect to any conditions
relating to the debt capital investment contemplated by this commitment letter,
the debt capital commitment letter of DB Capital Investors, L.P. of even date
herewith or the equity capital commitment letter of SJF Enterprises, Inc., of
even date herewith, and (iv) satisfaction of the conditions as set forth in the
Term Sheet.
The offer made by the Lender in this commitment letter is
contingent upon execution of the Agreement, and should the Agreement be
executed, the commitment by Lender to provide the Subdebt Financing shall expire
immediately upon the earlier of (i) the termination of the Agreement and (ii)
the Expiration Date (as defined in the Agreement), as may be extended in
accordance with the terms of the
Agreement.
Should the terms and conditions of the offer contained herein
meet with your approval, please indicate your acceptance by signing and
returning a copy of this commitment letter to the Lender.
This commitment letter, including the attached Term Sheet (i)
supersedes all prior discussions, agreements, commitments, arrangements,
negotiations or understandings, whether oral or written, of the parties with
respect to the subject matter hereof and thereof, (ii) shall be governed by the
law of the State of New York, (iii) shall be binding upon the parties and their
respective successors and assigns, (iv) may not be relied upon or enforced by
any other person or entity other than the parties hereto and Parent, and (v) may
be signed in multiple counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same instrument. If this
commitment letter becomes the subject of a dispute, each of the parties hereto
hereby waives trial by jury. This commitment letter may be amended, modified or
waived only in a writing signed by the parties hereto.
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Please confirm that the foregoing is in accordance with your understanding by
signing and returning to the Lender the enclosed copy of this Commitment Letter
on or before the close of business on the date hereof, whereupon this Commitment
Letter shall become a binding agreement between us.
Very truly yours,
ACI CAPITAL CO., INC.
By: /s/ KEVIN S. PENN
--------------------------
Name: Kevin S. Penn
Title: Managing Director
Agreed and accepted on this
27th day of January, 2002:
J ACQUISITION CORP.
By: /s/ KEVIN S. PENN
------------------------------
Name: Kevin S. Penn
Title: President
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EXHIBIT A
OUTLINE OF TERMS AND CONDITIONS FOR PROPOSED SUBDEBT FINANCING
This Outline of Terms and Conditions is part of the Commitment Letter, dated
January 27, 2002 (the "Commitment Letter"), addressed to J Acquisition Corp. by
ACI Capital Co., Inc. (together with the other lenders party to the definitive
Subdebt Financing agreement, the "Lenders") and is subject to the terms and
conditions of the Commitment Letter. Capitalized terms used herein shall have
the meanings set forth in the Commitment Letter unless otherwise defined herein.
BORROWER: J Acquisition Corp. Upon consummation of the
Merger, Jenny Craig, Inc. and certain of its
subsidiaries, as required by the Lenders
(collectively the "Borrower").
GUARANTORS: All domestic subsidiaries of the Borrower that
are not included in the "Borrower," as required
by the Lenders (together with the Borrower, each
a "Loan Party" and collectively, the "Loan
Parties").
LENDERS: The Lenders or their respective affiliates
thereof, to be designated at closing.
FINANCING FACILITY: Junior Subordinated Debt Financing of up to $24
million (the "Subdebt Financing"). The Subdebt
Financing will be funded in a single draw on the
Closing Date (as defined below) and will be
structured as a term loan which may not, once
repaid, be drawn upon again.
ACI will fund $9 million of the Subdebt
Financing and DB Capital Investors, L.P. will
fund $15 million thereof.
TERM: The Subdebt Financing will have a term of five
(5) years (the "Maturity Date").
AMORTIZATION: The Subdebt Financing will be payable in full on
the Maturity Date.
MANDATORY Customary mandatory prepayments to be included
AND OPTIONAL PREPAYMENT: in definitive loan documentation (e.g., issuance
of equity, debt, sale of assets, tax refunds,
casualty events, etc.). Optional prepayments on
the Subdebt Financing will be permitted in whole
or in part, and from time to time. Prepayments
will be subject to a one-year interest penalty
in the first three years following the closing
of the Transaction; a half-year interest penalty
in the fourth year following the closing of the
Transaction; and no prepayment penalty in the
fifth year following the closing of the
Transaction. Such penalties will be computed
based on the interest rate in effect at the time
of the prepayment.
CLOSING DATE: On or prior to the closing date of, and
immediately prior to, the Transaction (the
"Closing Date").
COLLATERAL: All obligations of the Loan Parties to the
Lenders shall be secured by a perfected, second
priority lien on and security interest in
substantially all of the now owned and hereafter
acquired assets of the Loan Parties, including,
but not limited to, accounts receivable,
inventory, machinery and equipment, trademarks
and tradenames, copyrights, patents and other
intellectual property, general intangibles,
chattel paper, all shares of all capital stock
of domestic subsidiaries of the Borrower and 65%
of the shares of capital stock
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of all foreign subsidiaries of the Borrower, and
all proceeds thereof, and such other assets,
tangible or intangible, as may be required, in
the Lenders' opinion, as security for the
contemplated Subdebt Financing (the
"Collateral"). All borrowings by the Borrower,
all costs, fees and expenses of the Lenders and
all other obligations owed to the Lenders shall
be secured as described above and shall be
charged to the loan account to be established
under the Subdebt Financing.
INTEREST: The Subdebt Financing shall bear interest at a
rate calculated in the same manner as the rate
payable on the Ableco Term B loan (including,
for the purposes of determining the rate payable
on the Ableco Term B loan, the facility fee
payable thereunder). If the Ableco Term Loan B
is no longer outstanding, the rate on the
Subdebt Financing shall continue to be the rate
that would have been payable had such Ableco
Term Loan B continued to be outstanding. The
interest shall be payable quarterly, and
in-kind, in whole or in part, at the option of
Borrower.
All interest shall be computed on the basis of a
year of 360 days for the actual days elapsed. If
any Event of Default shall occur and be
continuing, interest shall accrue at a rate per
annum equal to 3% in excess of the prevailing
rate.
WARRANTS: In connection with and consideration for the
Subdebt Financing, the Lenders shall be issued
warrants (the "Warrants") to acquire 15% of the
common equity of Parent on a fully diluted
basis, at an exercise price per share equal to
the price per share of the Parent's common
stock. The Warrants shall be allocated to the
Lenders ratably to their capital contributions
to the Subdebt Financing.
FEES: Closing Fee equal to 3% of the Subdebt
Financing.
USE OF PROCEEDS: The Loans under the Subdebt Financing will be
used solely (i) to consummate the Transaction,
(ii) for the general working capital
requirements of the Borrower and (iii) to pay
fees and expenses related to the Subdebt
Financing.
CONDITIONS
PRECEDENT: The obligation of the Lenders to fund the
Subdebt Financing on the Closing Date will be
subject to customary conditions precedent
including, without limitation, the following:
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(a) Execution and delivery of appropriate
legal documentation in form and
substance satisfactory to and as
required by the Lenders and their
respective counsel (including, without
limitation, the Subdebt Financing
agreement, the security and pledge
agreements, the mortgages and title
insurance policies, the guaranties, the
landlord waivers, other collateral
access agreements, and the satisfaction
of the conditions precedent contained
therein).
(b) Satisfaction of all conditions precedent
to Parent's and Purchaser's obligations
to close under the Agreement (other than
the conditions set forth in Section
6.3(c) of the Agreement; provided,
however, that all conditions precedent
to the obligation of the Senior Lender
(as defined in the Agreement) to
consummate the Senior Financing (as
defined in the Agreement) have been met
and the Senior Lender shall intend to
and shall be willing and prepared to
consummate the Senior Financing, in each
case other than with respect to any
conditions relating to the debt capital
investment contemplated by the
Commitment Letter, the debt capital
commitment letter of DB Capital
Investors, L.P. of even date herewith,
or the equity capital commitment letter
of SJF Enterprises, Inc., of even date
herewith).
(c) The Lenders shall have been granted a
perfected, second priority lien on all
Collateral, and shall have received UCC,
tax and judgment lien searches and other
appropriate evidence (including title
reports and surveys relating to all
owned real property comprising
Collateral), evidencing the absence of
any other liens on the Collateral,
except existing liens acceptable to the
Lenders and the lien securing the Senior
Financing.
(d) Opinions from the Loan Parties' counsel
as to such matters as the Lenders and
the respective counsel to the Lenders
may reasonably request.
REPRESENTATIONS
AND WARRANTIES: Bring-down of representations and warranties in
the Agreement, plus authority to enter into
Subdebt Financing documentation, non-violation
of other agreements, and enforceability and
priority of the Lenders' liens.
COVENANTS: Usual covenants, including, but not limited to,
provision of financial statements, notices of
litigation, defaults and unmatured defaults and
other information, compliance with pension,
environmental and other laws, inspection of
properties, books and records, maintenance of
insurance, limitations with respect to liens and
encumbrances, dividends and retirement of
capital stock, guarantees, sale and lease back
transactions, consolidations and mergers,
investments, capital expenditures, loans and
advances, indebtedness, operating leases,
transactions with affiliates, prepayment of
other indebtedness and amendments to material
agreements.
The loan documentation will contain the same
financial covenants as those contained in the
Senior Financing loan documents.
Financial reporting to include: (i) annual,
audited financial statements, (ii) quarterly,
internally prepared, financial statements, (iii)
monthly, internally prepared, financial
statements, (iv) annual projections, including
monthly balance sheet, profit and loss and cash
flow figures, and (v) other reporting as
required by the Lenders.
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EVENTS OF DEFAULT: Usual events of default, including, but not
limited to, payment, cross-default, violation of
covenants, breach of representations or
warranties, bankruptcy or insolvency, judgment,
ERISA, environmental and change of control;
provided, that so long as the Borrower has
outstanding indebtedness under the Senior
Financing and to the extent the Subdebt
Financing is held by the original Lenders (or
their respective affiliates), the only events of
default that will permit the Lenders to exercise
their rights to accelerate the maturity of the
Subdebt Financing or foreclose on any security
will be bankruptcy and insolvency and an event
of default under Senior Financing pursuant to
which the Senior Lender accelerates and
forecloses on the security.
GOVERNING LAW: All documentation in connection with the Subdebt
Financing shall be governed by the laws of the
State of New York.
ASSIGNMENTS, PARTICIPATIONS: The Lenders may sell or assign their respective
loans under the Subdebt Financing without the
consent of the other Loan Parties. The Lenders
may also sell participations in their respective
loans under the Subdebt Financing without the
consent of the other Loan Parties, provided that
such participants shall be limited to customary
voting rights.
FEES & EXPENSES: Upon closing of the Transaction, the Borrower
shall be fully obligated to pay, and shall
immediately, reimburse the Lenders for all their
out-of-pocket expenses incurred in connection
with the Transaction and pay the Lenders a fee
of 3% of the Subdebt Financing.
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