EXHIBIT (d)(5)
DB CAPITAL INVESTORS, L.P.
31 WEST 52ND STREET
26TH FLOOR
NEW YORK, NEW YORK 10019
EQUITY COMMITMENT LETTER
January 27, 2002
J Holdings Corp.
J Acquisition Corp.
ACI Capital Co., Inc.
c/o ACI Capital Co., Inc.
900 Third Avenue
26th Floor
New York, New York 10022
Ladies and Gentlemen:
We are pleased to confirm the arrangements under which DB Capital Investors,
L.P. ("DBCI") is committed to provide equity capital in connection with the
transactions described herein in the amount, on the terms and subject to the
conditions set forth in this letter (together, the "COMMITMENT LETTER") and the
Fee Letter (as defined below).
We understand that J Holdings Corp., a Delaware company ("PARENT", which is a
newly formed, wholly owned subsidiary of ACI Capital Co., Inc. ("ACI")), and J
Acquisition Corp., a Delaware company and a wholly owned subsidiary of Parent
("PURCHASER"), will sign, concurrently herewith, a merger agreement, dated the
date hereof, and in the form attached hereto as EXHIBIT A (along with any other
agreements or documents entered into in connection therewith or delivered
pursuant thereto, the "ACQUISITION AGREEMENT") to acquire (the "ACQUISITION")
all of the issued and outstanding common stock of Jenny Craig, Inc., a Delaware
corporation (the "COMPANY"). In addition, in connection with the Acquisition,
Parent, Purchaser, Sidney Craig, Jenny Craig, SJF Enterprises, Inc., DA
Holdings, Inc., Craig Enterprises, Inc. and the Company will enter into a
Stockholders' Voting Agreement, dated the date hereof and substantially in the
form attached hereto as EXHIBIT B (along with any other agreements or documents
entered into in connection therewith or delivered pursuant thereto, the "VOTING
AGREEMENT"). We have confirmed that the total purchase price and financing
requirements (including equity financing
January 27, 2002
Page 2
being provided by ACI, Company stockholders and management) for the Acquisition
will be financed as set forth on EXHIBIT C hereto (the "FINANCINGS").
1. Commitment. DBCI is pleased to confirm its commitment (the "COMMITMENT") to
invest $10 million in the equity capital of Parent, of which $9 million shall be
invested in the preferred stock of Parent and $1 million shall be invested in
the common stock of Parent, on the terms and subject to the conditions contained
in this Commitment Letter and in the outline of terms and conditions attached
hereto as Exhibit D (the "TERM SHEET"). DBCI's Commitment is subject, in its
discretion, to the conditions set forth in this Commitment Letter and in the
Term Sheet and to the negotiation, execution and delivery of definitive
documentation evidencing the Financings (along with any other agreements or
documents entered into in connection therewith or delivered pursuant thereto,
the "FINANCING Agreements"), satisfactory to DBCI and its counsel and the
satisfaction of the terms, conditions and covenants contained therein.
2. Fees and Expenses. The fees for these services, among others, are to be set
forth in a separate letter (the "FEE LETTER"), to be entered into prior to the
closing of the Acquisition by and among ACI, DBCI, Parent and Purchaser.
3. Conditions Precedent. DBCI's obligations hereunder are conditioned on the
following:
a. The transactions contemplated by the Acquisition Agreement and the
Voting Agreement shall have been consummated concurrently with, or shall
be ready for consummation immediately after, DBCI's equity financing
hereunder on the terms and conditions set forth in such agreements
without modification, amendment or waiver, except as previously
consented to in writing by DBCI. All conditions precedent to the
obligations of Parent and Purchaser under such agreements (other than
Section 6.3(c) of the Acquisition Agreement) shall have been satisfied
without modification, amendment or waiver, except as previously
consented to in writing by DBCI.
b. The transactions contemplated by the Financing Agreements shall have
been consummated prior to or concurrently with DBCI's equity financing
hereunder in accordance with their terms, without modification,
amendment or waiver, except as previously consented to in writing by
DBCI. All conditions precedent to the obligations of the lenders or
investors under the Financing Agreements shall have been satisfied,
other than any conditions relating to the equity capital contemplated by
this letter, the equity capital commitment letters from SJF Enterprises,
Inc. and ACI and the junior subordinated debt commitment letter from ACI
and DBCI, each of even date herewith.
c. ACI, Parent and Purchaser shall have complied with their obligations
hereunder.
4. Covenants. DBCI, ACI, Parent and Purchaser agree as follows:
a. DBCI shall, and shall be permitted to, consummate the investment
contemplated by the Commitment in accordance with the terms hereof.
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b. Parent and Purchaser shall, and ACI shall cause them to, consummate the
transactions contemplated by the Acquisition Agreement and the Voting
Agreement and satisfy their obligations thereunder, without amendment,
modification or waiver except as previously consented to in writing by
DBCI.
c. ACI, Parent and Purchaser shall, and ACI shall cause Parent and
Purchaser to, consummate the transactions contemplated by the Financing
Agreements without amendment, modification or waiver, except as
previously consented to in writing by DBCI. Without limiting the
generality of the foregoing, there shall be no equity, debt or other
financing of any type other than as set forth on EXHIBIT C hereto,
without the prior written consent of DBCI.
d. Parent and Purchaser shall, and ACI shall cause them to, to the extent
commercially reasonable, enforce their respective rights and the
obligations of the Company and other parties to the Acquisition
Agreement or Voting Agreement (such other parties to the Voting
Agreement, the "JC PARTIES"), including any rights to compensation or
payments of any kind from any of the Company or the JC Parties whether
or not the Acquisition is consummated, whether in respect of damages for
breach, payments of termination fees, payments of expenses, gains owing
under the Voting Agreement or otherwise.
e. ACI, Parent and Purchaser shall promptly keep DBCI informed of, consult
and confer with DBCI on all matters relating to the Acquisition,
Acquisition Agreement, Voting Agreement, Financing and Financing
Agreements and any discussions, communications or negotiations by and
between ACI, Parent and Purchaser on the one hand and any of the Company
or the JC Parties on the other hand in respect thereof. Such obligation
shall include provision of copies of material correspondence, documents
and other information and adequate notice and opportunity to attend
conferences and meetings in respect thereof. In addition ACI, Parent and
Purchaser shall apprise DBCI of, and consult with DBCI concerning all
actions they may take or consider pursuant to or as contemplated by the
Acquisition Agreement, Voting Agreement and Financing Agreements
including exercise of rights thereunder regarding termination,
information, further assurances, covenants, conditions, rights upon
breach, enforcement of nonsolicitation and other rights.
f. Without limiting DBCI's other rights in this Commitment Letter, in the
event that an alternate bidder for the Company emerges or for some other
reason an altered or improved bid for the Company is necessary or
contemplated, DBCI will be given the opportunity, but will not be
obligated, to participate in any transactions contemplated in order to
improve the terms of the Acquisition Agreement or make an alternative
offer for the Company on the same percentage basis relative to ACI as
the percentage resulting from dividing DBCI's original commitment to
purchase debt and equity capital in Parent hereunder by ACI's original
commitment to purchase debt and equity capital in Parent.
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5. Acknowledgment. Each of ACI and DBCI has, independently and without reliance
on the other party, based on such information and due diligence it has conducted
as it has deemed appropriate, made its own analysis and decision to enter into
its commitment to invest in Parent and to enter into the other documents and
transactions contemplated by the Acquisition and the Acquisition Agreement. Each
of ACI and DBCI will independently and without reliance upon the other party,
continue to make its own decisions and to conduct its own due diligence with
respect to the operation of the Company and the matters, transactions and any
related agreements contemplated by the Acquisition and the Acquisition
Agreement. ACI represents and warrants that it has made available to DBCI all
the due diligence materials which ACI has received from the Company.
6. Confidentiality. Please note that this Commitment Letter, the Fee Letter, the
transactions contemplated hereby and any written or oral information provided by
DBCI in connection with this arrangement is exclusively for the information of
ACI, Parent, Purchaser and the Company and may not be disclosed to any other
party or circulated or referred to publicly without DBCI's prior written
consent, except that you may disclose such information to your and the Company's
officers, directors, agents and advisors who are directly involved in the
consideration of the transactions contemplated hereby to the extent such persons
are obligated to hold such advice in confidence or if otherwise required by law
or in the event such information or documents are made public through no fault
of ACI, Parent or Purchaser.
7. Assignment. None of DBCI, ACI, Parent or Purchaser may assign any of their
respective rights or be relieved of any of their respective obligations
hereunder without the prior written consent of the other parties hereto.
8. Termination. The Commitment will terminate upon the first to occur of (i) the
closing of the Acquisition, (ii) the abandonment or termination of the
Acquisition Agreement, (iii) a material breach by ACI, Parent or Purchaser under
this Commitment Letter or the Fee Letter, provided, however, that DBCI shall
notify ACI in writing of such breach, whereupon ACI shall have a commercially
reasonable period of time (not to exceed twenty (20) calendar days) after ACI's
receipt of such notice to cure such breach or (iv) the Expiration Date (as
defined in the Acquisition Agreement), as may be extended in accordance with the
terms of the Acquisition Agreement.
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Please confirm that the foregoing is in accordance with your understanding by
signing and returning to DBCI 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 among us.
Very truly yours,
DB CAPITAL INVESTORS, L.P.
By: /s/ ROBERT SHARP
------------------------------
Authorized Signatory
Confirmed as of the date above:
ACI CAPITAL CO., INC.
By:/s/ KEVIN S. PENN
----------------------------
Name: Kevin S. Penn
Title: Managing Director
Confirmed as of the date above:
J HOLDINGS CORP.
By:/s/ KEVIN S. PENN
----------------------------
Name: Kevin S. Penn
Title: President
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Confirmed as of the date above:
J ACQUISITION CORP.
By: /s/ KEVIN S. PENN
-----------------
Name: Kevin S. Penn
Title: President
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EXHIBIT D
OUTLINE OF TERMS AND CONDITIONS FOR PROPOSED EQUITY FINANCING
This Outline of Terms and Conditions is part of the Equity Commitment Letter,
dated January 27, 2002 (the "Commitment Letter"), addressed to J Holdings Corp.,
J Acquisition Corp. and ACI Capital Co., Inc. ("ACI") by DB Capital Investors,
L.P. (the "Investor"), 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.
ISSUER: J Holdings Corp.
TOTAL ISSUANCE
OF PREFERRED: $18 million
TOTAL ISSUANCE
OF COMMON: $2 million
COMMITMENT
BY INVESTOR: $9 million in senior preferred stock (the "Preferred"),
having an aggregate liquidation preference of $9 million,
and $1 million in shares of Common Stock (the "Common"),
at a price of $0.10 per share.
MANDATORY
REDEMPTION
OF PREFERRED: Five years.
PREFERRED Cumulative undeclared dividends (declarable only in cash),
DIVIDENDS: payable at the rate of 15% per annum, or such lower rate
as would ensure for any time in which ACI remains a holder
of the Preferred that the combined interest + dividend
rate payable on the Issuer's capital (which shall be an
amount equal to the sum of the Purchaser Debt Financing
(as defined in the Acquisition Agreement), Preferred and
Common (which includes paid in capital and additional paid
in capital)) does not exceed 15% for any annual period
(the applicable rate at any time being the "Base Rate");
provided, however, that the foregoing limitation shall
only apply to the extent that ACI remains subject to
applicable limitations prescribed by the Small Business
Administration ("SBA"). The rate paid on the Issuer's
capital shall be calculated in a manner consistent with
applicable regulations of the SBA.
USE OF PROCEEDS: To finance the Acquisition and the general working capital
needs of the Issuer.
OPTIONAL At the option of the Issuer, with no penalty.
REDEMPTION:
TRANSFERABILITY: Subject to restrictions contained in the Stockholders'
Agreement.
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COVENANTS: Standard for this type of security, including, but not
limited to, reporting requirements, change of control
restrictions, approval of mergers, acquisitions, equity
issuances, payment of dividends, debt incurrence,
redemption of equity or debt, amendments to the preferred
stock, amendments of equity rights, amendments to the
Issuer's charter and bylaws, changes in the Issuer's
management, material changes in business strategy,
increase in size of Board, etc. Such covenants will not
restrict the Issuer's ability to incur debt for the sole
purpose of prepaying Preferred.
CONDITIONS: Customary conditions precedent, including, without
limitation:
1) Negotiation, execution, delivery of definitive
documentation.
2) Closing of the Acquisition contemplated by the
Acquisition Agreement.
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