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EXHIBIT 4.9
January 6, 1995
Food 4 Less Supermarkets, Inc.
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attention: Mr. Ronald W. Burkle
Mr. Patrick Graham
Re: Acquisition of Ralphs Supermarkets, Inc.
Gentlemen:
You have advised us that Food 4 Less Supermarkets, Inc.
("F4L"), a wholly-owned subsidiary of Food 4 Less Holdings, Inc. ("F4L
Holdings"), proposes to acquire (the "Acquisition") all of the outstanding
capital stock of Ralphs Supermarkets, Inc. ("RSI"). RSI owns all of the issued
and outstanding capital stock of Ralphs Grocery Company ("RG"). Immediately
prior to the Acquisition, Food 4 Less, Inc. ("FFL") will merge with F4L
Holdings, its wholly-owned subsidiary (the "FFL Merger"), with F4L Holdings
being the surviving corporation (such surviving corporation being referred to
herein as "Holdings"), and, immediately following the FFL Merger, Holdings will
merge with its newly-formed wholly-owned subsidiary incorporated in Delaware,
with such subsidiary being the surviving corporation (such surviving
corporation being referred to herein as "New Holdings"; the merger of Holdings
with and into New Holdings, together with the FFL Merger, being referred to
herein as the "Holdings Mergers"). The Acquisition will be consummated by
merging RSI with and into F4L with RSI being the surviving corporation (the
"F4L Merger"). Upon consummation of the F4L Merger, RG will be merged with and
into RSI with RSI being the surviving corporation (the "RG Merger"; the F4L
Merger and the RG Merger are hereinafter collectively referred to as the
"Mergers"). Upon the consummation of the Holdings Mergers and the Mergers, all
of F4L's current subsidiaries will initially be direct or indirect wholly-owned
subsidiaries of RSI and RSI will be a wholly-owned subsidiary of New Holdings
which will be controlled, directly or indirectly, by an affiliate of The
Yucaipa Companies ("Yucaipa").
We are pleased to confirm that Bankers Trust Company ("Bankers
Trust") is prepared to commit to provide all of the senior bank financing which
is required to consummate the
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Acquisition, the Mergers and related transactions on the terms and conditions
described in this letter up to a maximum aggregate amount of $1,075 million.
Bankers Trust welcomes the opportunity to continue its relationship with the
F4L companies. Bankers Trust's long-term experience with each of F4L and RG,
currently as a Co-Agent and the Agent on their existing bank credit agreements,
respectively, provides strong support for its willingness and ability to
provide the senior bank financing described herein.
The senior bank facilities will consist of a term loan
facility of up to $750 million (the "Term Loan Facility") and a six year
revolving credit facility of up to $325 million with a $150 million sublimit
for letters of credit (the "Revolving Credit Facility"; the Term Loan Facility
and the Revolving Credit Facility are hereinafter collectively referred to as
the "Bank Facilities"). Based on the assumptions described below, we propose
that the Term Loan Facility will consist of a six year Tranche A Loan of up to
$375 million, a seven year Tranche B Loan of up to $125 million, an eight year
Tranche C Loan of up to $125 million and a nine year Tranche D Loan of up to
$125 million. We reserve the right to propose changes in the actual amount,
maturity and amortization of each such tranche, however, in the event those
assumptions are not met, including the successful consummation of certain
consent solicitations and exchange and redemption offers with respect to the
existing F4L and RG debt securities described below, or if we determine that to
do so would enhance the successful syndication of the Bank Facilities.
With respect to the existing public debt securities of F4L,
Holdings and RG, you have advised us that F4L currently has outstanding $175
million in aggregate principal amount of 10.45% Senior Notes due April 15, 2000
(the "10.45% Senior Notes") and $145 million in aggregate principal amount of
13.75% Senior Subordinated Notes due June 15, 2001 (the "13.75% Subordinated
Notes"); that Holdings currently has outstanding $103.6 million in aggregate
face amount ($64 million in estimated accreted value at closing) of 15.25%
Senior Discount Notes, Series B due December 15, 2004 (the "15.25% Discount
Notes"; the 10.45% Senior Notes, the 13.75% Subordinated Notes and the 15.25%
Discount Notes are hereinafter collectively referred to as the "Existing F4L
Debt Securities"); and that RG currently has outstanding $150 million in
aggregate principal amount of 9% Senior Subordinated Notes due April 1, 2003
(the "9% Subordinated Notes") and $300 million in aggregate principal amount of
10-1/4% Senior Subordinated Notes due July 15, 2002 (the "10-1/4% Subordinated
Notes"; the 9% Subordinated Notes and the 10-1/4% Subordinated Notes are
hereinafter collectively referred to as the "Existing RG Debt Securities"). To
consummate the Acquisition, the Holdings Mergers and the Mergers as proposed,
you have advised us that F4L and Holdings intend to undertake consent
solicitations and exchange offers (the "F4L Solicitations") with respect to the
Existing F4L Debt Securities
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to obtain the necessary amendments to the terms of the Existing F4L Debt
Securities, including such covenants in the indentures pursuant to which the
Existing F4L Debt Securities have been issued as may be mutually agreed upon,
to permit the Acquisition, the Holdings Mergers, the Mergers and related
transactions to occur as described herein. You have also advised us that (i)
you intend to offer to exchange the Existing RG Debt Securities for an
equivalent principal amount of new senior subordinated notes to be issued by
F4L and a cash payment as described below and (ii) you intend to solicit
certain consents with respect to the Existing RG Debt Securities (the offer and
solicitation described in clauses (i) and (ii) are collectively referred to
herein as the "RG Solicitations"). You have further advised us that, in order
to provide a portion of the financing to consummate the Acquisition and the
other transactions contemplated thereby, F4L is offering up to $400 million
principal amount of new Senior Notes due 2004 (the "New F4L Senior Notes") in a
public offering (the "Public Offering") registered under the Securities Act of
1933, as amended. Following the consummation of the Mergers, it is anticipated
that RSI will, if required, make an offer to redeem (the "Change of Control
Offer") any then outstanding Existing RG Debt Securities in accordance with the
provisions of the indentures governing such securities at a purchase price of
101% of the principal amount thereof plus accrued interest thereon, and RSI
will utilize a portion of the Tranche A Term Loan Facility to finance such
redemption. Finally, you have advised us that you expect to repay the entire
amount of the approximately $175 million in aggregate principal amount of
outstanding real estate mortgages of RG (the "Mortgage Debt") plus accrued
interest and premiums thereon.
The proceeds of (w) the Term Loan Facility, (x) approximately
$24 million of the Revolving Credit Facility, (y) the Public Offering, together
with (z) not less than $10 million in cash contributions to New Holdings
invested by the management of RG (in the form of a cancellation of their rights
to receive certain cash payments at closing), and not less than $150 million in
other cash contributions to New Holdings (the "Equity Contributions"), will be
used (i) to pay a $425.9 million cash purchase price for the RSI common stock,
(ii) to refinance certain existing bank indebtedness of RG of approximately
$296 million, (iii) to refinance certain existing bank indebtedness of F4L of
approximately $170 million, (iv) to repay in full the approximately $175
million in principal amount of Mortgage Debt, (v) to pay up to $22.8 million in
equity appreciation rights of RSI, (vi) to make cash payments to redeem
Existing RG Debt Securities in the Change of Control Offer, and (vii) to pay
approximately $143 million in fees, expenses, premiums, accrued interest and
other costs in connection with the Acquisition, the Holdings Mergers, the
Mergers, the F4L Solicitations, the RG Solicitations, the prepayment of the
Mortgage Debt and the related transactions. In addition, (i) F4L will issue
(x) additional New F4L Senior Notes, and make a cash payment in an
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aggregate amount to be mutually agreed upon, in exchange for an equivalent
principal amount of its 10.45% Senior Notes, (y) new senior subordinated notes
due 2005 (the "New F4L Senior Subordinated Notes"), and make a cash payment in
an aggregate amount to be mutually agreed upon, in exchange for an equivalent
principal amount of its 13.75% Subordinated Notes, and (z) up to $450 million
in aggregate principal amount of new senior subordinated notes (the "F4L Senior
Subordinated Notes"), and make a cash payment in an aggregate amount to be
mutually agreed upon, in exchange for an equivalent principal amount of
Existing RG Debt Securities. As part of the F4L Solicitations, Holdings will
seek consents from the holders of the 15.25% Discount Notes to certain
amendments to the indenture pursuant to which such securities were issued and
will make a cash payment to the holders thereof in an aggregate amount to be
mutually agreed upon. The amount of the New F4L Senior Notes and the 10.45%
Senior Notes outstanding at any time will not exceed $575 million in aggregate
principal amount; the amount of the New F4L Senior Subordinated Notes and the
13.75% Subordinated Notes outstanding at any time will not exceed $145 million
in aggregate principal amount; and the aggregate principal amount of the Term
Loans the proceeds of which are used to redeem the Existing RG Debt Securities,
plus the amount of the F4L Senior Subordinated Notes and of the Existing RG
Debt Securities outstanding at any time will not exceed $450 million in
aggregate principal amount. You have also advised us that in addition to the
$425.9 million in cash to be paid for the RSI common stock, the shareholders of
RSI will receive $100 million in initial principal amount of New Holdings 13%
Senior Subordinated Pay-In-Kind Debentures Due 2007 (the "Seller Debentures").
The Seller Debentures will not mature or amortize prior to the twelfth
anniversary of the date of the consummation of the Acquisition (the "Closing
Date") and will pay interest through the issuance of additional Seller
Debentures for not less than five years following the Closing Date. The RSI
common stock purchased with the proceeds of the Equity Contributions and in
consideration of the issuance of the Seller Debentures shall be contributed as
equity capital to F4L by New Holdings.
The Bank Facilities as described in this letter and on Annex A
attached hereto assume (i) that the F4L Solicitations and RG Solicitations are
obtained on terms that are satisfactory to you and to Bankers Trust, (ii) that
the New F4L Senior Notes issued in the Public Offering are issued on terms that
are satisfactory to you and to Bankers Trust, (iii) that not less than 80% of
the 10.45% Senior Notes and of the 13.75% Subordinated Notes are exchanged for
the additional New F4L Senior Notes and the New F4L Senior Subordinated Notes,
respectively, (iv) that not less than 80% of the 9% Subordinated Notes and the
10-1/4% Subordinated Notes are exchanged for F4L Senior Subordinated Notes, and
(v) that the Mortgage Debt is repaid in full. In the event that such
assumptions are not accurate, we reserve the right to suggest alternative
financing
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structures, including without limitation, modifying the amounts, maturities and
amortization of the Term Loan Facility. Upon consummation of the Acquisition
and the Mergers, total other indebtedness for borrowed money of RSI and its
subsidiaries expected to be outstanding will not exceed $158 million in
aggregate principal amount, including approximately $137 million in capital
lease obligations and approximately $21 million in mortgage debt and all other
indebtedness. Upon consummation of such Acquisition and the Mergers, the
remaining portion of the Revolving Credit Facility will be available to be used
by RSI (as the surviving corporation in the Mergers) and certain of its
subsidiaries to provide for the working capital requirements and other
corporate purposes of RSI and its subsidiaries and the Letter of Credit
Facility will be available to be used for commercial letters of credit and
standby letters of credit for RSI and its subsidiaries.
Bankers Trust intends to arrange for other banks, financial
institutions and other "accredited investors" (as defined in Securities and
Exchange Commission regulations; each such bank, financial institution and
accredited investor, including Bankers Trust, being a "Lender" and
collectively, the "Lenders") to provide a portion of the Bank Facilities and
Bankers Trust will act as agent for the Lenders (in such capacity, the
"Administrative Agent"). Certain of the terms of each of the Bank Facilities
are set forth in Annex A attached hereto (the "Term Sheet").
We have reviewed certain historical and pro forma financial
statements of RSI and F4L and their respective subsidiaries and met with
representatives of F4L and with members of management of F4L and we are pleased
to advise you that the results of our business and financial due diligence
investigation of RSI and F4L and their respective subsidiaries to date are
satisfactory. However, Bankers Trust's commitment to provide the financings
described in this letter is subject to our continuing satisfaction that there
has not occurred a material adverse change in the business, operations,
condition (financial and otherwise) and prospects of RSI and F4L and their
respective subsidiaries, our continuing satisfaction with the structure of the
Acquisition, including the tax, accounting and legal consequences thereof, and
the satisfaction of the conditions to be set forth in the definitive
documentation relating to the Bank Facilities including, without limitation,
those conditions set forth in the Term Sheet. It is understood that you (and
your advisors) will continue to fully cooperate with Bankers Trust with respect
to its ongoing due diligence analysis and review (including, but not limited
to, by providing adequate access to the records and management of RSI and F4L
and their respective subsidiaries). In the event that such ongoing due
diligence review discloses information relating to conditions or events not
previously disclosed to us or relating to new information or additional
developments concerning conditions or events
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previously disclosed to us which we believe may have a material adverse effect
on the condition (financial or otherwise), assets, properties, business or
prospects of RSI and F4L and their respective subsidiaries, taken as a whole,
or any such conditions set forth in such definitive documentation are not
satisfied, we may, in our sole discretion, suggest alternative financing
amounts or structures that ensure adequate protection for the Lenders or
decline to participate in the proposed financing.
F4L hereby represents and covenants that based on its review
and analysis, to its knowledge (a) all information, other than Projections (as
defined below), which has been or is hereafter made available to Bankers Trust
or the Lenders by F4L or RSI or any of their representatives in connection with
the transactions contemplated hereby (the "Information") has been reviewed and
analyzed by F4L in connection with the performance of its own due diligence and
is, or in the case of Information made available after the date hereof will be,
complete and correct in all material respects 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, in light of the
circumstances under which such statements were or are made, not materially
misleading and (b) all financial projections concerning RSI and F4L and their
respective subsidiaries that have been or are hereafter made available to
Bankers Trust or the Lenders by RSI or F4L or any of their representatives in
connection with the transactions contemplated hereby (the "Projections") have
been or, in the case of Projections made available after the date hereof, will
be prepared in good faith based upon reasonable assumptions (it being
understood that the Projections are subject to significant uncertainties and
contingencies, many of which are beyond the control of F4L and/or RSI, and that
no assurance can be given that such Projections will be realized). F4L agrees
to supplement the Information and the Projections from time to time until the
Closing Date so that the representation and warranty made in the preceding
sentence is correct on the Closing Date. In arranging and syndicating the Bank
Facilities, Bankers Trust will be using and relying on the Information and the
Projections without independent verification thereof. The representations and
covenants contained in this paragraph shall remain effective until a definitive
financing agreement is executed and thereafter the representations contained
herein shall be superseded by those contained in such definitive financing
agreement.
The reasonable costs and expenses (including the reasonable
fees and expenses of counsel to Bankers Trust, reasonable professional fees of
consultants and other experts and reasonable out-of-pocket expenses of Bankers
Trust, including without limitation syndication expenses) arising in connection
with the preparation, execution and delivery of this letter and the definitive
financing agreements and the syndication of the Bank Facilities shall be for
the account of F4L. F4L further
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agrees to indemnify and hold harmless each of the Lenders (including Bankers
Trust) and each director, officer, employee and affiliate thereof (each an
"indemnified person") from and against any losses, claims, damages, liabilities
or other expenses to which a Lender or such indemnified persons may become
subject, insofar as such losses, claims, damages, liabilities (or actions or
other proceedings commenced or threatened in respect thereof) or other expenses
arise out of or in any way relate to the Acquisition, the Holdings Mergers, the
Mergers and related transactions, or any of the statements contained in this
letter or relating to the extension of the financing contemplated by this
letter, or any use or intended use of the proceeds of any of the loans and
other extensions of credit contemplated by this letter, and to reimburse each
of the Lenders and each indemnified person for any reasonable legal or other
expenses incurred in connection with investigating, defending or participating
in any such investigation, litigation or other proceeding (whether or not such
Lender or any such person is a party to any investigation, litigation or
proceeding out of which any such expenses arise); provided, however, that the
indemnity contained herein shall not apply to the extent that such losses,
claims, damages, liabilities or other expenses result from the gross negligence
or willful misconduct of such Lender or indemnified person. The obligations to
indemnify each Lender and such indemnified persons and pay such legal and other
expenses shall remain effective until a definitive financing agreement is
executed and thereafter the indemnification and expense reimbursement
obligations contained herein shall be superseded by those contained in such
definitive financing agreement. Neither Bankers Trust nor any other Lender
shall be responsible or liable to any other party or any other person for
consequential damages which may be alleged as a result of this letter.
In connection with the services to be provided hereunder by
Bankers Trust, Bankers Trust may employ the services of its affiliates,
including, without limitation, BT Securities Corporation. Bankers Trust may
share with such affiliates, and such affiliates may share with Bankers Trust,
any information concerning F4L and RSI; provided that Bankers Trust and such
affiliates agree to hold any non-public information confidential in accordance
with their respective customary policies relating to non-public information.
Any such affiliate so employed (and its directors, officers, employees and
affiliates) shall be entitled to all of the benefits afforded to Bankers Trust
hereunder.
This letter is confidential and shall not be disclosed by you
to any person other than your accountants, attorneys and, to the extent
approved by Bankers Trust, other advisors, and to RSI and its attorneys and, to
the extent approved by Bankers Trust, other advisors, and then only on a
confidential basis and in connection with the Acquisition, the Mergers and the
related transactions contemplated herein. Additionally, you may make
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such disclosures of this letter as are required by law or judicial process or
as may be required or appropriate in response to any summons or subpoena or in
connection with any litigation. This letter supersedes any prior letters from
Bankers Trust with respect to the subject matter hereof including without
limitation our letters dated August 25, 1994 and November 14, 1994.
Our offer will terminate on January 10, 1995, unless on or
before that date you sign and return an enclosed counterpart of this letter
together with an executed copy of the accompanying letter concerning certain
fee arrangements. The Bank Facilities referred to herein shall in no event be
available unless the Acquisition and related transactions have been consummated
on or prior to March 15, 1995.
This letter agreement shall be construed in accordance with
the internal laws of the State of New York. This letter agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument.
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We appreciate having been given the opportunity by you to be
involved in this transaction and we look forward to continuing our relationship
with the F4L companies in the future.
Very truly yours,
BANKERS TRUST COMPANY
By: __________________________
Title: _______________________
AGREED AND ACCEPTED THIS
___ day of January, 1995
FOOD 4 LESS SUPERMARKETS, INC.
By:_____________________
Title:__________________
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ANNEX A
FOOD 4 LESS SUPERMARKETS, INC.
SUMMARY OF TERMS
BANK FACILITIES
The following summarizes certain terms for a senior bank term
loan facility and a senior bank revolving credit facility to be utilized in
connection with the proposed acquisition of Ralphs Supermarkets, Inc. by Food 4
Less Supermarkets, Inc. All terms defined in the financing letter to which
this Annex A is attached and not otherwise defined herein shall have the same
meanings when used herein.
I. THE BANK FACILITIES
Borrowers:
Food 4 Less Supermarkets, Inc. ("F4L") will be the borrower under the Term Loan
Facility and a borrower under the Revolving Credit Facility; in connection with
the consummation of the Acquisition, Ralphs Supermarkets, Inc. ("RSI") will be
merged with and into F4L with RSI being the surviving corporation (the "F4L
Merger"); upon consummation of the F4L Merger, Ralphs Grocery Company ("RG")
will be merged with and into RSI, with RSI being the surviving corporation;
after such mergers, extensions of credit under the Revolving Credit Facility
will be incurred by RSI and certain of its subsidiaries.
The Lenders:
Bankers Trust and a syndicate of banks, financial institutions and other
accredited investors (the "Lenders").
Co-Agents for the Lenders:
Bankers Trust and such other Lenders as may be mutually agreed upon by Bankers
Trust and F4L (the "Co-Agents").
Administrative Agent for the Lenders:
Bankers Trust (in such capacity, the "Administrative Agent").
Type and Amount:
The Bank Facilities shall consist of the Term Loan Facility and the Revolving
Credit Facility.
Term Loan Facility. The Term Loan Facility will consist of Tranche A Loans,
Tranche B Loans, Tranche C Loans and Tranche D Loans. The Lenders' commitments
to lend the Tranche A Loans, the Tranche B Loans, the Tranche C Loans and the
Tranche D Loans will terminate
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immediately upon the consummation of the Acquisition; provided that up to $90
million of the Tranche A Term Loan Facility may be available for up to 90 days
after the Closing Date to redeem the Existing RG Debt Securities in the event
that any Change of Control Offer is required to be made for such securities.
Tranche A Loans. The Tranche A Loans will mature on the date six years from
the Closing Date and be in an original principal amount of up to $375 million.
If the amount of the Existing RG Debt Securities exchanged in the RG
Solicitations exceeds $360 million, then the amount available for borrowing
under the Tranche A Term Loan Facility shall be reduced, on a dollar-for-dollar
basis, to the extent that the amount of proceeds from the Public Offering is
not reduced from $400 million. The Tranche A Loans will be required to be
amortized, commencing in the fifteenth month after the Closing Date, in
quarterly installments in aggregate annual amounts of $45 million in the second
year; $75 million in the third year; $80 million in the fourth year; $85
million in the fifth year; and $90 million in the sixth year; provided that in
the event that less than $375 million of the Tranche A Loans are utilized, the
annual amounts of amortization payments set forth above shall be reduced on a
pro rata basis.
Tranche B Loans. The Tranche B Loans will mature on the date seven years from
the Closing Date and be in an original principal amount of up to $125 million.
The Tranche B Loans will be required to be amortized in equal quarterly
installments in aggregate annual amounts of $1.25 million for the first six
years and $117.5 million in the seventh year.
Tranche C Loans. The Tranche C Loans will mature on the date eight years from
the Closing Date and be in an original principal amount of up to $125 million.
The Tranche C Loans will be required to be amortized in equal quarterly
installments in aggregate annual amounts of $1.25 million for the first seven
years and $116.25 million in the eighth year.
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Tranche D Loans. The Tranche D Loans will mature on the date nine years from
the Closing Date and be in an original principal amount of up to $125 million.
The Tranche D Loans will be required to be amortized in equal quarterly
installments in aggregate annual amounts of $1.25 million for the first eight
years and $115 million in the ninth year.
The amounts, amortization payments and maturities of the Term Loan Facility are
subject to modification in the event that the F4L Solicitations, the RG
Solicitations and the Public Offering are not consummated on mutually agreeable
terms as described in "Certain Conditions Precedent to Initial
Funding--Issuance of F4L Senior Subordinated Notes;--Public Offering;--F4L
Solicitations" below, or Bankers Trust believes that such modification would
enhance the successful syndication of the Bank Facilities.
Revolving Credit Facility. The Revolving Credit Facility will mature on the
same date as the Tranche A Loan and be in an amount of up to $325 million under
which working capital loans may be made and commercial or standby letters of
credit in the maximum aggregate amount of up to $150 million may be issued. Up
to $30 million of the Revolving Credit Facility will be available as a
swingline facility.
Use of Proceeds:
The proceeds of (v) the Term Loan Facility, (w) approximately $24 million of
the Revolving Credit Facility, (x) the Public Offering, together with (y) not
less than $10 million in cash contributions invested by the RG management (in
the form of a cancellation of their rights to receive certain cash payments at
closing), and not less than $150 million in proceeds from the issuance of
preferred stock, all of which shall be contributed by New Holdings to F4L as
common equity and (z) the issuance of up to $450 million of F4L Senior
Subordinated Notes shall be used as follows:
1. to pay the cash component of the purchase price for the stock of RSI
of approximately $425.9 million; the remaining purchase price will be
paid through the issuance of the Seller Debentures by New Holdings;
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2. to refinance approximately $296 million of existing bank indebtedness
of RG and approximately $170 million of existing bank indebtedness of
F4L;
3. to exchange up to $450 million principal amount of Existing RG Debt
Securities for F4L Senior Subordinated Notes plus a cash payment, and
to redeem Existing RG Debt Securities in any Change of Control Offer
(provided that the aggregate outstanding principal amount of F4L
Senior Subordinated Notes, Existing RG Debt Securities and Term Loans
the proceeds of which are used to redeem Existing RG Debt Securities
shall not exceed $450 million);
4. to repay in full the approximately $175 million in principal amount of
the Mortgage Debt;
5. to pay up to $22.8 million in RSI equity appreciation rights;
6. to pay up to $143 million of fees, expenses, premiums, accrued
interest and other costs associated with the Acquisition and the
Mergers (including without limitation the payment of a $9 million
consulting fee to Edward J. DeBartolo Corporation, Inc.), the Bank
Facilities, the F4L Solicitations, the RG Solicitations, the Public
Offering, the Change of Control Offer, if any, the prepayment of the
Mortgage Debt and the related transactions described herein.
A portion of the Tranche A Term Loan Facility, equal to the principal amount of
Existing RG Debt Securities not exchanged in the RG Solicitations, but in no
event to exceed $90 million, may be available in a single draw as soon as
practicable (but not later than 90 days) after the Closing Date to redeem any
such Existing RG Debt Securities tendered in any Change of Control Offer. The
Revolving Credit Facility will be available to provide for the working capital
requirements and general corporate purposes of RSI and its subsidiaries and to
issue commercial letters of credit and standby letters of credit to support
workers' compensation contingencies
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and for other corporate purposes to be agreed upon.
Security:
All extensions of credit to RSI and guaranties of subsidiaries of RSI will be
secured by all personal property of RSI and its subsidiaries, including a
pledge of the stock of all subsidiaries of RSI. The guaranty of New Holdings
will be secured by a pledge of the stock of F4L and, upon consummation of the
merger of F4L into RSI, RSI.
In an abundance of caution, the Bank Facilities shall also be secured by first
priority liens on all unencumbered real property fee interests of RSI and its
subsidiaries and RSI and its subsidiaries shall use their reasonable economic
efforts to provide the Lenders with a first priority lien on all unencumbered
leasehold interests of RSI and its subsidiaries.
To effect liens securing the Bank Facilities, F4L and its subsidiaries
(including, upon consummation of the Mergers, RSI and its subsidiaries) shall
execute and deliver to Administrative Agent all security agreements, financing
statements, deeds of trust, mortgages and other documents and instruments as
are necessary to grant a first priority perfected security interest in and lien
upon all their respective properties, subject to customary permitted liens to
be agreed upon.
Negative pledge on all assets of RSI and its subsidiaries, subject to
exceptions to be agreed upon.
Guarantors:
New Holdings and all active subsidiaries of F4L. The aggregate assets and
revenues of inactive subsidiaries that are not guarantors shall be de minimis
in amount.
Interest Rates:
All amounts outstanding under the Bank Facilities shall bear interest, at F4L's
option, as follows:
A. With respect to the Tranche A Loans and loans made under the Revolving
Credit Facility:
(i) at the Base Rate plus 1.25% per annum; or
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(ii) at the reserve adjusted Euro-Dollar Rate plus 2.50% per annum.
B. With respect to the Tranche B Loans:
(i) at the Base Rate plus 1.75% per annum; or
(ii) at the reserve adjusted Euro-Dollar Rate plus 3.00% per annum.
C. With respect to the Tranche C Loans:
(i) at the Base Rate plus 2.125% per annum; or
(ii) at the reserve adjusted Euro-Dollar Rate plus 3.375% per annum.
D. With respect to the Tranche D Loans:
(i) at the Base Rate plus 2.50% per annum; or
(ii) at the reserve adjusted Euro-Dollar Rate plus 3.75% per annum.
The foregoing interest rates on the Tranche A Loans and the Revolving Credit
Facility and the fees payable under the Revolving Credit Facility on letters of
credit, will be reduced in increments of 0.25% per annum (but not more than
.50% per annum for all such reductions in the aggregate) after the Term Loan
Facility has been reduced by such amounts, and during such times as the ratio
of EBITDA (to be defined) to cash interest expense for the four most recently
concluded fiscal quarters exceeds such ratios, as are mutually agreed upon.
Loans outstanding under the swingline facility shall bear interest at the Base
Rate plus .75% per annum (subject to adjustment as described in the preceding
paragraph) and such outstanding loans shall not constitute usage of the
Revolving Credit Facility for purposes of calculating the commitment fee.
As used herein, the terms "Base Rate" and "reserve adjusted Euro-Dollar Rate"
shall have meanings customary and appropriate for
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financings of this type, and the basis for calculating accrued interest and the
interest periods for loans bearing interest at the reserve adjusted Euro-Dollar
Rate shall be customary and appropriate for financings of this type. After the
occurrence of a default, interest shall accrue at a rate equal to the rate on
loans bearing interest at the rate determined by reference to the Base Rate
plus an additional two percentage points (2.00%) per annum and shall be payable
on demand.
Interest Payments:
Quarterly for Base Rate Loans; on the last day of selected interest periods
(which shall be 1, 2, 3 and 6 months) for Euro-Dollar Loans (and at the end of
every three months, in the case of interest periods of longer than three
months); and upon prepayment, in each case payable in arrears and computed on
the basis of a 360-day year.
Interest Rate Protection:
Within 120 days of the Closing Date, RSI will obtain interest rate protection
by interest rate swaps, caps or other agreements satisfactory to Administrative
Agent against increases in interest rates with respect to a notional amount
equal to not less than one-third of the Term Loans outstanding on the Closing
Date for a period of not less than two years.
Letter of Credit Fees:
The fees payable on the standby letters of credit shall be equal to the sum of
(i) an amount, to be shared by all Lenders pro rata, equal to the applicable
margin over the reserve adjusted Euro-Dollar Rate under the Revolving Credit
Facility (as the same may be adjusted) plus (ii) an additional .25% per annum
to be retained by the Lender issuing the standby letter of credit. The fees
payable on the commercial letters of credit shall be equal to the sum of (i) an
amount, to be shared by all Lenders pro rata, equal to the applicable margin
over the reserve adjusted Euro-Dollar Rate under the Revolving Credit Facility
(as the same may be adjusted) minus 1.00% per annum plus (ii) an additional
.25% per annum to be retained by the Lender issuing the commercial letter of
credit. Fees on all letters of credit shall be based upon the amount available
for drawing under such outstanding letters of credit.
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Commitment Fees:
Commitment fees equal to .50% per annum times the undrawn portion of the
Tranche A Term Loan Facility shall accrue from the Closing Date to the date of
drawing thereof or the date of termination of such undrawn commitment (which
shall be no later than 90 days after the Closing Date) and shall be payable
upon such drawing or termination. Commitment fees equal to .50% per annum
times the daily average unused portion of the Revolving Credit Facility shall
accrue from the Closing Date and shall be payable quarterly in arrears and at
maturity.
Voluntary Prepayments:
The Bank Facilities may be prepaid in whole or in part without premium or
penalty (Euro-Dollar Rate Loans prepayable only on the last days of related
interest periods) and the Lenders' commitments relative thereto reduced or
terminated upon such notice and in such amounts as may be agreed upon.
Voluntary prepayments of the Term Loan Facility shall be applied ratably among
Tranche A Loans, Tranche B Loans, Tranche C Loans and Tranche D Loans and shall
be applied to scheduled amortization payments pro rata.
Mandatory Prepayments:
RSI shall make the following mandatory prepayments (subject to certain basket
amounts to be negotiated in the definitive financing agreements):
1. prepayments in the amount of all of the net after-tax cash proceeds of
the sale or other disposition of any property or assets of RSI or its
subsidiaries, other than net cash proceeds of sales or other
dispositions of inventory or obsolete equipment in the ordinary course
of business, reinvestment of the proceeds from the sale of any store
in like assets within 9 months of such sale and the sale/ leaseback of
any store within 6 months of the completion of such store and other
exceptions to be negotiated, payable no later than the third Business
Day following the date of receipt or other date such payment becomes
due;
2. prepayments in the amount of the net cash proceeds received from the
issuance of certain debt securities of New Holdings or its
subsidiaries with exceptions to be
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agreed upon, payable no later than the first Business Day following
the date of receipt;
3. prepayments in an amount equal to 50% (the "Equity Repayment Amount"),
of the net cash proceeds received from the issuance of equity
securities of New Holdings, payable no later than the first Business
Day following the date of receipt; provided that a portion of the
Equity Repayment Amount may be used to redeem, retire or repurchase
other indebtedness of New Holdings or RSI in an amount to be mutually
agreed upon;
4. prepayments in the amount of all proceeds received from any pension
plan reversion, payable upon receipt; and
5. prepayments in an amount equal to 75% (the "Cash Flow Repayment
Amount") of excess cash flow (to be defined), payable within 90 days
of fiscal year-end; provided that a portion of the Cash Flow Repayment
Amount may be used to redeem, retire or repurchase other indebtedness
of New Holdings or RSI in an amount to be mutually agreed upon.
All mandatory prepayments shall be applied ratably between Tranche A Loans,
Tranche B Loans, Tranche C Loans and Tranche D Loans and to scheduled
amortization payments of the Tranche A Loans, Tranche B Loans, Tranche C Loans
and Tranche D Loans pro rata. Mandatory prepayments allocated to the Tranche B
Loans, Tranche C Loans and Tranche D Loans will be used to make an offer for
such Loans and, to the extent not accepted by the holders of such Loans, 50%
may be retained by RSI and the remaining 50% will be applied to the prepayment
of the Tranche A Loans.
Clean-Down:
Loans outstanding under the Revolving Credit Facility shall be reduced to $75
million for not less than 30 consecutive days during each consecutive
twelve-month period.
Representations and Warranties:
Customary and appropriate, including without limitation due organization and
authorization, financial condition, no material adverse changes, title to
properties, liens,
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litigation, payment of taxes, no material adverse agreements, compliance with
laws, environmental liabilities and full disclosure.
Covenants:
Customary and appropriate affirmative and negative covenants, including but not
limited to financial covenants related to minimum fixed charge coverage,
minimum EBITDA, maximum leverage (to be defined as the ratio of total debt to
EBITDA) and minimum net worth. Other covenants will include limitations on
other indebtedness, liens, investments, guarantees, restricted junior payments
(dividends, redemptions and payments on subordinated debt), prepayment or
repurchase of other indebtedness (other than from the proceeds of Equity
Repayment Amounts and Cash Flow Repayment Amounts or from the proceeds of
certain refinancing indebtedness as mutually agreed upon), mergers and
acquisitions, sales of assets, cash capital expenditures, leases, transactions
with affiliates and other provisions customary and appropriate for financings
of this type, including exceptions and baskets to be mutually agreed upon.
Events of Default:
Customary and appropriate, including without limitation failure to make
payments when due, defaults under other agreements or instruments of
indebtedness, noncompliance with covenants, breaches of representations and
warranties, bankruptcy, judgments in excess of specified amounts, impairment of
security interests in collateral, invalidity of guarantees, and "changes of
control" (to be defined in a mutually agreed upon manner).
II. CONDITIONS TO LOANS
Certain Conditions Precedent to Initial Funding:
Conditions precedent to the initial funding of the Bank Facilities will
include, without limitation, the following:
1. Satisfactory Bank Documentation. The definitive documentation
evidencing the Bank Facilities (the "Definitive Financing Documents")
shall be prepared by counsel to Bankers Trust and shall be in form and
substance satisfactory to Bankers Trust and Lenders.
2. Structure and Other Related Documentation. The tax, accounting and
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legal aspects of the structure utilized to consummate the Acquisition,
the Holdings Mergers, the Mergers and the financings and other
transactions related thereto and the definitive documentation
evidencing such transactions shall be in form and substance
satisfactory to Bankers Trust and Lenders.
3. New Equity. Prior to or concurrently with the Closing Date, New
Holdings shall have received cash contributions of not less than $10
million contributed by the RG management (in the form of a
cancellation of their rights to receive certain cash payments), plus
not less than $150 million in proceeds from the issuance of preferred
stock to new equity investors, the aggregate proceeds of which shall
be used to purchase RSI common stock in connection with the
Acquisition, which common stock shall be contributed to the equity
capital of F4L. The terms and conditions of the preferred stock
issued by New Holdings, including the type and amount of dividend
payments and any redemption provisions, shall be satisfactory to
Bankers Trust;provided that such preferred stock shall not be subject
to any mandatory redemption and no payments of cash dividends shall be
required thereon.
4. Seller Debentures. Prior to or concurrently with the Closing Date,
New Holdings shall have issued the Seller Debentures in the aggregate
initial principal amount of $100 million. The Seller Debentures may
not mature, and amortization payments may not be made on the Seller
Debentures, prior to the twelfth anniversary of the Closing Date.
Interest shall be payable through the issuance of additional Seller
Debentures until the fifth anniversary of the Closing Date and
thereafter may be paid in cash. The Seller Debentures shall be
structurally subordinate to the Bank Facilities and may not be secured
or guaranteed. The interest rate, covenants, defaults, subordination
terms, remedies and all other terms of the Seller Debentures shall be
satisfactory
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to Bankers Trust and Lenders and shall be consistent with the terms of
the F4L Senior Subordinated Notes. In addition, without limitation of
the foregoing, Bankers Trust and the Lenders shall be satisfied with
the appropriateness of the definition of a "Change of Control"
contained in the Seller Debentures in light of all of the relevant
circumstances on the Closing Date, including the equity ownership of
Yucaipa and its affiliates and the other major shareholders and the
terms of all shareholder agreements. Bankers Trust has reviewed a
draft dated September 1, 1994 of the Indenture pursuant to which the
Seller Debentures are to be issued and except for provisions of the
Indenture which are not yet completed and subject to our satisfaction
with such consistency and such matters related to a Change of Control,
the terms of such Indenture are satisfactory to Bankers Trust. The
RSI common stock purchased in consideration of the issuance of the
Seller Debentures shall be contributed to the equity capital of F4L by
New Holdings.
5. Issuance of F4L Senior Subordinated Notes. Not less than 80% of the
9% Subordinated Notes and of the 10-1/4% Subordinated Notes shall have
been tendered for exchange as a result of the RG Solicitations and F4L
shall have obtained all such consents and amendments as may be
required to permit the Acquisition, the Holdings Mergers, the Mergers,
the borrowings under the Bank Facilities and the related transactions
to occur as described herein, the terms and conditions of such
consents to be in form and substance satisfactory to Bankers Trust and
Lenders. Prior to or concurrently with the Closing Date, F4L shall
have issued not less than $360 million of F4L Senior Subordinated
Notes in exchange for a like principal amount of Existing RG Debt
Securities and an aggregate cash payment in an amount to be mutually
agreed upon. The F4L Senior Subordinated Notes shall be unsecured and
shall have no scheduled principal
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payments payable prior to the tenth anniversary of the Closing Date.
The interest rate, covenants, defaults, subordination provisions,
remedies and all other terms of the F4L Senior Subordinated Notes
shall be satisfactory to Bankers Trust and the Lenders. All such
negative covenants and defaults shall be less restrictive than those
contained in the Definitive Financing Documents. The principal amount
of the F4L Senior Subordinated Notes, when aggregated with the
principal amount of the Term Loans the proceeds of which are used to
redeem the Existing RG Debt Securities for cash and the principal
amount of the Existing RG Debt Securities, shall not exceed $450
million outstanding at any time.
6. Public Offering. Prior to or concurrently with the Closing Date, F4L
shall have received cash proceeds of not less than $400 million from
the Public Offering, the proceeds of which shall be applied to the
purposes specified under "Use of Proceeds" above; provided that such
$400 million may be reduced if the amount of Existing RG Debt
Securities exchanged in the RG Solicitations exceeds $360 million.
The terms and conditions of the New F4L Senior Notes issued in the
Public Offering shall be as described under "F4L Solicitations" below.
7. Payment of Purchase Price. Concurrently with the Closing Date, New
Holdings shall have acquired 100% of the capital stock of RSI at a
purchase price not to exceed a payment of $525.9 million, comprised of
a $425.9 million cash payment and the issuance of $100 million of
Seller Debentures by New Holdings, not including any refinancing or
assumption of existing indebtedness as described below. Upon
consummation of the Acquisition, the Holdings Mergers and the Mergers,
all shares of the capital stock of RSI shall be owned by New Holdings
and Yucaipa shall, directly or indirectly, control New Holdings.
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8. Discharge of Bank Indebtedness. Concurrently with the Acquisition,
all existing bank indebtedness of RG in the approximate aggregate
principal amount of $296 million and of F4L and its subsidiaries in
the approximate aggregate principal amount of $170 million shall be
repaid in full and all commitments thereunder shall have been
terminated.
9. F4L Solicitations. Prior to or concurrently with the Closing Date,
F4L shall have issued additional New F4L Senior Notes and the New F4L
Senior Subordinated Notes in exchange for not less than 80% of the
10.45% Senior Notes and the 13.75% Subordinated Notes and an aggregate
cash payment to be mutually agreed upon, and Holdings and F4L shall
have obtained all such consents and amendments as may be required to
permit the Acquisition, the Holdings Mergers, the Mergers, the
borrowings under the Bank Facilities and the related transactions to
occur as described herein, the terms and conditions of such consents
to be in form and substance satisfactory to Bankers Trust and Lenders.
The New F4L Senior Notes and the New F4L Senior Subordinated Notes
shall be unsecured and shall have no scheduled principal payments
prior to 2004 and 2005, respectively. The interest rate, covenants,
defaults, remedies, subordination provisions (in the case of the New
F4L Senior Subordinated Notes) and all other terms of the New F4L
Senior Notes and New F4L Senior Subordinated Notes shall be
satisfactory to Bankers Trust and the Lenders. All such negative
covenants and defaults shall be less restrictive than those contained
in the Definitive Financing Documents. The aggregate principal amount
of the 10.45% Senior Notes and the New F4L Senior Notes shall not
exceed $575 million at any time outstanding, and the aggregate
principal amount of the 13.75% Subordinated Notes and the New F4L
Senior Subordinated Notes shall not exceed $145 million at any time
outstanding. Holdings and its subsidiaries shall otherwise be in
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compliance with their respective obligations under the indentures or
other agreements pursuant to which their respective debt securities
have been issued.
10. Mortgage Debt and Other Obligations. Prior to or concurrently with
the Closing Date, RG shall have repaid in full the Mortgage Debt. RSI
and its subsidiaries may remain liable with respect to obligations
relating to existing indebtedness in the approximate aggregate
principal amount of $158 million, including approximately $137 million
in existing capital lease obligations and approximately $21 million in
mortgage debt and all other indebtedness, all such matters to be on
terms and conditions and in form and substance satisfactory to Bankers
Trust and Lenders. RSI and its subsidiaries shall have obtained all
such consents, waivers, amendments, approvals and the like as may be
required under the existing contracts and agreements of such persons
to permit the borrowing under the Bank Facilities, the Acquisition,
the Holdings Mergers, the Mergers and all related transactions and
shall otherwise be in compliance in all material respects with their
respective obligations under such agreements.
11. Security. The Administrative Agent, for the benefit of Lenders, shall
have been granted a perfected security interest in all assets to the
extent described above under the heading "Security".
12. Title Insurance. The Administrative Agent shall have received
satisfactory assurances that an ALTA title insurance policy insuring
the interest of the Lenders in certain of the real property securing
the Bank Facilities will be available in form and substance
satisfactory to Bankers Trust.
13. Appraisals. Upon request of Bankers Trust or the Lenders, the
Administrative Agent shall have received appraisals in form, scope and
substance reasonably satisfactory to Bankers Trust and
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satisfying the requirements of any applicable laws and regulations
concerning the real property security.
14. Environmental Matters. Bankers Trust and Lenders shall have received
reports and other information in form, scope and substance
satisfactory to Bankers Trust and Lenders concerning environmental
liabilities of F4L, RG and their respective subsidiaries.
15. No Material Adverse Change. Other than with respect to such
information as is disclosed in the filing on Form 10Q made on July 17,
1994 with respect to RSI and its subsidiaries, there shall have
occurred no material adverse change in the condition (financial or
otherwise), business, assets, liabilities, properties, results of
operations or prospects of F4L, RG and their respective subsidiaries,
individually and taken as a whole, since June 25, 1994, in the case of
Holdings and its subsidiaries, and January 30, 1994, in the case of
RSI and its subsidiaries.
16. No Disruption of Financial and Capital Markets. There shall have been
no material adverse change after the date hereof to the syndication
markets for credit facilities similar in nature to the Bank Facilities
and there shall not have occurred and be continuing a material
disruption of or material adverse change in financial, banking or
capital markets that would have an adverse effect on such syndication
market, in each case as determined by Bankers Trust in its sole
discretion.
17. Financial Statements. Bankers Trust and the Lenders shall have
received the unaudited financial statements for F4L, RG and their
respective subsidiaries for most recently ended fiscal periods. If
unaudited, Bankers Trust and the Lenders may review such unaudited
financial statements with the independent certified public accountants
for F4L and the cost of such review shall be for the account of F4L.
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18. Due Diligence. The results of Bankers Trust's business and financial
due diligence investigations, and any supplemental business or
financial due diligence that Bankers Trust reasonably determines has
become necessary, shall be satisfactory in all respects to Bankers
Trust. Bankers Trust and Lenders shall also have received any
information reasonably necessary to conduct such due diligence.
Bankers Trust completed such due diligence by October 14, 1994.
19. Solvency. Bankers Trust and Lenders shall have received a solvency
opinion from a nationally recognized valuation firm satisfactory to
Bankers Trust and a certificate from the chief financial officer of
F4L in form and substance satisfactory to Bankers Trust and Lenders,
supporting the conclusions that, after giving effect to the
Acquisition, the Mergers and related transactions, F4L will not be
insolvent or will not be rendered insolvent by the indebtedness
incurred in connection therewith, or be left with unreasonably small
capital with which to engage in its businesses or have incurred debts
beyond its ability to pay such debts as they mature.
20. Customary Closing Documents. All documents required to be delivered
under the Definitive Financing Documents, including customary legal
opinions, corporate records and documents from public officials and
officers' certificates, shall have been delivered.
Conditions to All Borrowings:
The conditions to all borrowings will include requirements relating to prior
written notice of borrowing, the accuracy of representations and warranties,
and the absence of any default or potential event of default, and will
otherwise be customary and appropriate for financings of this type.
III. MISCELLANEOUS
Syndication:
A syndicate of financial institutions will be arranged by Bankers Trust. RG
and F4L shall cooperate with Bankers Trust in the syndication of the Bank
Facilities (including,
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but not limited to, participation in meetings with Lenders and assisting in the
preparation of a Confidential Information Memorandum and other materials to be
used in connection with such syndication) and shall provide and cause its
advisors to provide all information reasonably deemed necessary by Bankers
Trust to complete a successful syndication. RG and F4L also agree to assist in
coordinating Bankers Trust's primary syndication efforts with those of other
financings contemplated by RG and F4L in this transaction.
The Lenders may assign all or, in an amount of not less than $5 million, any
part of their share of the Bank Facilities to affiliates or one or more banks
or other entities that are eligible assignees (to be described in the loan
documentation) which, in the case of assignments made by Lenders other than
Bankers Trust, are acceptable to Administrative Agent and RSI, such consent not
to be unreasonably withheld, and upon such assignment, such affiliate, bank or
entity shall become a Lender for all purposes of the loan documentation;
provided that assignments made to affiliates and other Lenders shall not be
subject to the $5 million minimum assignment requirement. Lenders will have
the right to sell participations, subject to customary limitations on voting
rights, in their share of the Bank Facilities.
Requisite Lenders:
Requisite Lenders shall mean Lenders holding in the aggregate 51% of the
commitments under the Bank Facilities.
Taxes, Reserve Requirements & Indemnities:
All payments are to be made free and clear of any taxes (other than franchise
taxes and taxes on overall net income), imposts, assessments, withholdings, or
other deductions whatsoever. Foreign lenders shall furnish to Administrative
Agent (for delivery to RSI) appropriate certificates or other evidence of
exemption from U.S. federal tax withholding.
RSI is to indemnify the Lenders against all increased costs of capital
resulting from reserve requirements or otherwise imposed, in each case subject
to customary increased costs, capital adequacy and similar provisions to the
extent not taken into account in the
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calculation of the Base Rate or the Euro-Dollar Rate.
Governing Law and Jurisdiction:
RSI will submit to the non-exclusive jurisdiction and venue of the federal and
state courts of the State of New York and will waive any right to trial by
jury. New York law shall govern loan documentation.
Bankers Trust's Counsel:
O'Melveny & Myers.
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