Exhibit 99.2
UBS LOAN FINANCE LLC BEAR, STEARNS & CO. INC.
677 Washington Boulevard 383 Madison Avenue
Stamford, Connecticut 06901 New York, New York 10179
UBS SECURITIES LLC BEAR STEARNS CORPORATE
299 Park Avenue LENDING INC.
New York, New York 10171 383 Madison Avenue
New York, New York 10179
November 7, 2005
Laundry Holding Co.
Laundry Merger Sub Co.
c/o Apollo Management, L.P.
9 West 57th Street
43rd Floor
New York, NY 10019
Attention: Andrew Jhawar
Bank Commitment Letter
----------------------
Ladies and Gentlemen:
Apollo Management, L.P. (together with its affiliates, "Sponsor") has
advised UBS Loan Finance LLC ("UBS"), UBS Securities LLC ("UBSS"), Bear, Stearns
& Co. Inc. ("Bear Stearns") and Bear Stearns Corporate Lending Inc. ("BSCL" and,
together with UBS, UBSS and Bear Stearns, "we" or "us") that Laundry Holding
Co., a newly formed corporation formed by Sponsor ("Holdings"), proposes to
acquire (the "Acquisition") Linens `n Things, Inc. (the "Acquired Business").
The Acquisition will be effected pursuant to a merger agreement (the
"Acquisition Agreement") among Holdings, a wholly owned subsidiary of Holdings
("Borrower" and, together with Holdings, "you") and the Acquired Business. All
references to "dollars" or "$" in this agreement and the attachments hereto
(collectively, this "Commitment Letter") are references to United States
dollars. All references to "Borrower" or "Borrower and its subsidiaries" for any
period from and after consummation of the Acquisition shall include the Acquired
Business.
We understand that the sources of funds required to fund the
Acquisition consideration, to repay all indebtedness under existing domestic and
foreign credit and trade payables facilities and terminate all commitments for
undrawn lines of credit of the Acquired Business and its subsidiaries thereunder
(the "Refinancing"), to pay fees, commissions and expenses of up to $71.8
million in connection with the Transactions (as defined below) and to provide
ongoing working capital requirements of Borrower and its subsidiaries following
the Transactions will include:
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o a senior secured asset-based revolving credit facility to
Borrower of up to $600.0 million (the "Revolving Credit
Facility"), as described in the Summary of Principal Terms
and Conditions attached hereto as Annex I (the "Term
Sheet"), of which an amount (not to exceed $100.0 million)
equal to (i) the net working capital (current assets, other
than cash, less current liabilities) of the Acquired
Business as of the last completed month's balance sheet
prior to the Closing Date less (ii) $470.0 million will be
drawn immediately after giving effect to the Transactions
(in addition, in connection with the Transactions, (x) up to
$150.0 million face amount of letters of credit will be
issuable under the Revolving Credit Facility to replace
outstanding letters of credit of the Acquired Business and
(y) up to $10.0 million face amount of letters of credit
will be issuable under the Revolving Credit Facility to
secure certain indemnity obligations in favor of CVS
Corporation and certain affiliated entities);
o the issuance by Borrower of up to $650.0 million aggregate
gross proceeds of secured or unsecured senior notes (the
"Notes") pursuant to a public offering or Rule 144A or other
private placement (the "Notes Offering") or, in the event
the Notes are not issued at the time the Transactions are
consummated, borrowings by Borrower of up to $650.0 million
under a senior secured credit facility (the "Bridge
Facility" and, together with the Revolving Credit Facility,
the "Facilities"), as described in the Senior Bridge Loans
Commitment Letter of even date herewith among you and us
(the "Bridge Commitment Letter"); and
o (i) a cash equity investment of not less than $633.4 million
by Sponsor and one or more other investors reasonably
satisfactory to us (the "Equity Investors") in Holdings,
which investment shall be contributed to Borrower in cash as
common equity (the "Equity Financing") and (ii) common
equity retained in the Acquired Business on terms and
conditions reasonably satisfactory to us (the "Rollover
Equity").
No other financing will be required for the uses described above.
Immediately following the Transactions, neither Holdings nor any of its
subsidiaries will have any indebtedness or preferred equity other than the
Revolving Credit Facility, the Notes or the Bridge Facility, the Equity
Financing and other indebtedness to be mutually agreed consistent with the
information regarding the Acquired Business and the Transactions previously
disclosed to us. As used herein, the term "Transactions" means the Acquisition,
the Refinancing, the initial borrowings or other credit extensions under the
Revolving Credit Facility, the issuance of the Notes or the borrowings under the
Bridge Facility, the Equity Financing, the Rollover Equity and the payments of
fees, commissions and expenses in connection with each of the foregoing.
Commitments.
------------
You have requested that UBS commit to provide 75% of the Revolving
Credit Facility, that BSCL commit to provide 25% of the Revolving Credit
Facility and that UBSS and Bear Stearns agree to structure, arrange and
syndicate the Revolving Credit Facility.
UBS and BSCL are pleased to advise you of their commitment to provide
75% and 25%, respectively, of the commitments under the Revolving Credit
Facility to Borrower upon the terms and subject to the conditions set forth or
referred to in this Commitment Letter (the "Commitments"). You agree that the
closing date of the Acquisition and the concurrent closing of the Revolving
Credit Facility (the "Closing Date") shall not occur until the terms and
conditions hereof and in the Term Sheet and the Conditions to Closing set forth
in Annex II hereto (the "Conditions Annex") (including the conditions to initial
funding) have been satisfied.
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Syndication.
------------
It is agreed that UBSS will act as the sole lead arranger and a joint
book-runner for the Revolving Credit Facility, will exclusively manage the
syndication of the Revolving Credit Facility and will, in such capacities,
perform the duties and exercise the authority customarily associated with such
roles. It is further agreed that Bear Stearns will act as a joint book-runner
and syndication agent for the Revolving Credit Facility and will, in such
capacity, perform the duties and exercise the authority customarily associated
with such role.
It is further agreed that no additional advisors, agents, co-agents,
arrangers or bookmanagers will be appointed and no Lender (as defined below)
will receive compensation with respect to the Revolving Credit Facility outside
the terms contained herein and in the letter of even date herewith addressed to
you providing, among other things, for certain fees relating to the Revolving
Credit Facility (the "Fee Letter") in order to obtain its commitment to
participate in the Revolving Credit Facility unless you and we so agree.
UBS and BSCL reserve the right, prior to or after execution of the
Bank Documentation (as defined in the Conditions Annex), to syndicate all or a
portion of their respective Commitments to one or more institutions (other than
certain institutions designated in writing by you on or prior to the date of the
Commitment Letter) that will become parties to the Bank Documentation (UBS, BSCL
and the institutions becoming parties to the Bank Documentation, the "Lenders").
UBS will, in consultation with you, exclusively manage all aspects of
the syndication of the Revolving Credit Facility, including selection of
additional Lenders, determination of when UBS will approach potential additional
Lenders, any naming rights and the final allocations of the commitments in
respect of the Revolving Credit Facility among the additional Lenders. You agree
to, and to use commercially reasonable efforts to cause the Acquired Business
to, actively assist UBS in achieving a timely syndication of the Revolving
Credit Facility. To assist UBS in its syndication efforts, you agree that you
will, and will cause your representatives and advisors to, and will use
commercially reasonable efforts to cause the Acquired Business and its
representatives and advisors to, (a) promptly prepare and provide all financial
and other information as we may reasonably request with respect to you, the
Acquired Business, your and their respective subsidiaries and the transactions
contemplated hereby, including but not limited to financial projections (the
"Projections") relating to the foregoing, (b) provide copies of any due
diligence reports or memoranda prepared at the direction of Sponsor or any of
its affiliates by legal, accounting, tax or other advisors in connection with
the Acquisition (subject to the delivery of agreements customarily required by
such advisors), (c) use commercially reasonable efforts to ensure that the
syndication efforts benefit materially from existing lending relationships of
Sponsor, the Acquired Business and their respective subsidiaries, (d) make
available to prospective Lenders senior management and advisors of Holdings,
Borrower and the Acquired Business and their respective subsidiaries, (e) host,
with UBS, one or more meetings with prospective Lenders under the Revolving
Credit Facility, (f) assist UBS in the preparation of one or more confidential
information memoranda and other marketing materials to be used in connection
with the syndication of the Revolving Credit Facility which are customary for
syndication of such Revolving Credit Facility, and (g) assist the Lenders in
conducting the review and appraisal referred in condition #15 in the Conditions
Annex, which review shall be concluded and which appraisal shall be delivered no
later than 30 days prior to the Closing Date.
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At our request, you agree to prepare a version of the information
package and presentation and other marketing materials to be used in connection
with the syndication that do not contain material non-public information
concerning Holdings, Borrower or the Acquired Business, their respective
affiliates or their securities. In addition, you agree that unless specifically
labeled "Private -- Contains Non-Public Information," no information,
documentation or other data disseminated to prospective Lenders in connection
with the syndication of the Revolving Credit Facility, whether through an
Internet website (including, without limitation, an IntraLinks workspace),
electronically, in presentations at meetings or otherwise, will contain any
material non-public information concerning Holdings, Borrower or the Acquired
Business, their respective affiliates or their securities.
Information.
------------
You hereby represent and covenant that (a) all information (other than
the Projections) that has been or will be made available to us by you and
Borrower or any of your or its respective representatives and, to the best of
your knowledge, by the Acquired Business or any of its representatives in
connection with the transactions contemplated hereby (the "Information"), when
taken as a whole, is and 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 are made, not
misleading, and (b) the Projections that have been or will be made available to
us by you, the Acquired Business or any of your or their respective
representatives in connection with the transactions contemplated hereby have
been and will be prepared in good faith based upon assumptions believed by you
to be reasonable at the time made, it being understood that actual results may
vary materially from the Projections. You agree to supplement the Information
and the Projections from time to time until the Closing Date to the extent
necessary so that the representations and warranties in the preceding sentence
remain correct. You acknowledge that we may share with any of our affiliates,
and such affiliates may share with us, any information related to Holdings,
Borrower, the Acquired Business, or any of their respective subsidiaries or
affiliates (including, without limitation, in each case information relating to
creditworthiness) and the transactions contemplated hereby.
Compensation.
-------------
As consideration for the Commitments and the agreements of UBSS and
Bear Stearns to structure, arrange and syndicate the Revolving Credit Facility
and to provide advisory services in connection therewith, in each case as
provided herein, you agree to pay, or cause to be paid, the fees set forth in
the Term Sheet and the Fee Letter. Once paid, such fees shall not be refundable
under any circumstances, except as provided therein.
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Conditions.
-----------
The Commitments and UBSS' and Bear Stearns' agreements to perform the
services described herein may be terminated by UBS or BSCL if: (i) any
information submitted to us by or on behalf of Holdings, Borrower, the Acquired
Business or any of their respective subsidiaries or affiliates is inaccurate,
incomplete or misleading in any respect reasonably determined by UBS or BSCL to
be material; (ii) the representations in "Information" above shall not be
correct or the representations and warranties in the Acquisition Agreement shall
not be accurate and complete in all material respects; (iii) subsequent to the
date hereof, in the reasonable determination of UBS or BSCL, there occurs any
change, effect, event, occurrence or state of facts that is or would be
materially adverse to the business, condition (financial or otherwise), assets,
properties or results of operations of the Acquired Business and its
subsidiaries taken as a whole, other than any changes, effects, events,
occurrences or state of facts relating to or resulting from (a) changes in
general economic, financial or securities market conditions in the United States
or elsewhere, (b) general changes or developments in the industry in which the
Acquired Business and its subsidiaries operate, (c) the announcement of the
Acquisition Agreement and the transactions contemplated thereby, (d) any actions
required under the Acquisition Agreement to obtain any approval or authorization
under applicable antitrust or competition laws for the consummation of the
transactions contemplated by the Acquisition Agreement, (e) the effect of
incurring and paying expenses to the Acquired Business's financial advisor and
other advisors to the Acquired Business in connection with negotiating, entering
into, performing and consummating the transactions contemplated by the
Acquisition Agreement, (f) changes in any applicable foreign, federal, state,
provincial or local civil or criminal law, statute, code, ordinance, regulation,
legally binding rule or other legally enforceable obligation imposed by a court
or other any federal, state or local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental United States or foreign self-regulatory agency,
commission or authority or any arbitral tribunal or the interpretation thereof
after the date of the Acquisition Agreement, (g) changes in GAAP or the
interpretation thereof after the date of the Acquisition Agreement and (h) any
outbreak of major hostilities in which the United States is involved or any act
of insurrection, sabotage or terrorism within the United States or directed
against its facilities or citizens wherever located; provided in the case of the
immediately preceding clauses (a), (b) and (h) that such changes do not affect
the Acquired Business or its subsidiaries disproportionately relative to other
companies operating in the same economies or industries; and (iv) any condition
set forth in the Term Sheet or the Conditions Annex is not satisfied or any
covenant or agreement in this Commitment Letter or the Fee Letter is not
complied with.
Clear Market.
-------------
From the date of this Commitment Letter until our completion of
syndication (as determined by UBS and notified in writing to you, but in no
event later than the Closing Date) of the Revolving Credit Facility, you will
ensure that no debt or preferred equity financing for Holdings, Borrower, the
Acquired Business or any of your or their respective subsidiaries (other than
the Bridge Facility and the Notes Offering) is announced, syndicated or placed
without the prior written consent of UBS if such financing, syndication or
placement would have, in the reasonable judgment of UBS, a detrimental effect
upon such syndication.
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Indemnity.
----------
By your acceptance below, you hereby agree to indemnify and hold
harmless us and the other Lenders and our and their respective affiliates
(including, without limitation, controlling persons) and the directors,
officers, employees, advisors and agents of the foregoing (each, an "Indemnified
Person") from and against any and all losses, claims, costs, expenses, damages
or liabilities (or actions or other proceedings commenced or threatened in
respect thereof) that arise out of or in connection with this Commitment Letter,
the Term Sheet, the Conditions Annex, the Fee Letter, the Revolving Credit
Facility or any of the transactions contemplated hereby or the providing or
syndication of the Revolving Credit Facility, and to reimburse each Indemnified
Person upon its demand for any legal or other expenses incurred in connection
with investigating, preparing to defend or defending against, or participating
in, any such loss, claim, cost, expense, damage, liability or action or other
proceeding (whether or not such Indemnified Person is a party to any action or
proceeding), other than any of the foregoing of any Indemnified Person (i) to
the extent determined by a final, non-appealable judgment of a court of
competent jurisdiction to have resulted primarily by reason of the gross
negligence or willful misconduct of such Indemnified Person, (ii) to the extent
determined by a final, non-appealable judgment of a court of competent
jurisdiction, those losses, claims, costs, expenses, damages or liabilities that
resulted from a breach of our obligations under this Commitment Letter or (iii)
arising out of any claim, litigation, investigation or proceeding that does not
involve any act or omission of you or any of your affiliates and that is brought
by an Indemnified Person against any other Indemnified Person. You shall not be
liable for any settlement of any such proceeding effected without your written
consent, but if settled with such consent or if there shall be a final judgment
for the plaintiff, you shall indemnify the Indemnified Persons from and against
any loss or liability by reason of such settlement or judgment, subject to the
limitations on your indemnity obligations in clauses (i), (ii) and (iii) in the
preceding sentence. You shall not, without the prior written consent of any
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which such Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement (i) includes an unconditional release of such Indemnified
Person from all liability or claims that are the subject matter of such
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability, or a failure to act by or on behalf of any Indemnified Person. None
of us or any other Lender (or any of their respective affiliates) shall be
responsible or liable to Sponsor, Holdings, Borrower, the Acquired Business or
any of their respective subsidiaries, affiliates or stockholders or any other
person or entity for any consequential damages which may be alleged as a result
of this Commitment Letter, the Term Sheet, the Conditions Annex, the Fee Letter,
the Revolving Credit Facility or the transactions contemplated hereby. In
addition, you hereby agree to reimburse each of the Lenders, UBS, UBSS, BSCL and
Bear Stearns upon the Closing Date (if the Closing Date occurs) for all
reasonable out-of-pocket costs and expenses (including, without limitation,
reasonable legal fees and expenses of UBS, UBSS, BSCL and Bear Stearns,
appraisal fees and printing, reproduction, document delivery, travel and
communication costs) incurred in connection with the syndication and execution
of the Revolving Credit Facility, and the preparation, review, negotiation,
execution and delivery of this Commitment Letter, the Term Sheet, the Conditions
Annex, the Fee Letter, the Financing Documentation (as defined in the Conditions
Annex) upon the Closing Date (if the Closing Date occurs).
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Confidentiality.
----------------
This Commitment Letter is furnished for your benefit, and may not be
relied on by any other person or entity. This Commitment Letter is entered into
upon the condition that neither the existence of this Commitment Letter, the
Term Sheet, the Conditions Annex or the Fee Letter nor any of their contents
shall be disclosed by us or any of our affiliates, or by you or any of your
affiliates, directly or indirectly, to any other person, except that such
existence and contents may be disclosed (i) as may be compelled in a judicial or
administrative proceeding or as otherwise required by law and (ii) to us and our
affiliates' directors, officers, employees, advisors and agents and to your
directors, officers, employees, advisors and agents, in each case on a
confidential and "need-to-know" basis and only in connection with the
transactions contemplated hereby, and as reasonably required for the
syndication. In addition, this Commitment Letter, the Term Sheet, the Conditions
Annex and the Fee Letter (redacted in a manner acceptable to UBS to omit
economic terms) may be disclosed to the Acquired Business and its directors,
officers, employees, advisors and agents, in each case on a confidential and
"need-to-know" basis and only in connection with the transactions contemplated
hereby; provided that this Commitment Letter, the Term Sheet and the Conditions
Annex (but not the Fee Letter) may be attached to, or filed with, the
Acquisition Agreement if and when the Acquisition Agreement is filed or
furnished as an exhibit to a report filed by the Acquired Business under the
Securities Exchange Act of 1934, as amended.
Notwithstanding the foregoing, the existence and contents of this
Commitment Letter, the Term Sheet, the Conditions Annex and the Fee Letter may
be disclosed by each of us and our affiliates (a) to the extent requested by any
regulatory authority purporting to have jurisdiction over such person and (b)
subject to an agreement containing confidentiality provisions substantially the
same as those set forth in this paragraph and the foregoing paragraph, to (i)
any Lender, assignee of or participant in, or any prospective Lender, assignee
of or participant in, the Revolving Credit Facility, (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction
relating to Holdings and the Borrower and their obligations thereunder or (iii)
any rating agency for the purpose of obtaining a credit rating applicable to
Borrower, Holdings or any of their respective subsidiaries.
Other Services.
---------------
You acknowledge and agree that we and/or our affiliates may be
requested to provide additional services with respect to Sponsor, Holdings,
Borrower, the Acquired Business and/or their respective affiliates or other
matters contemplated hereby. Any such services will be set out in and governed
by a separate agreement(s) (containing terms relating, without limitation, to
services, fees and indemnification) in form and substance satisfactory to the
parties thereto. Nothing in this Commitment Letter is intended to obligate or
commit us or any of our affiliates to provide any services other than as set out
herein.
You acknowledge that we and our affiliates may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. We will not
use confidential information obtained from you by virtue of the transactions
contemplated by this Commitment Letter or our other relationships with you in
connection with the performance by us of services for other companies, and,
except as expressly otherwise permitted by the terms of this Commitment Letter,
we will not furnish any such information to other companies. You also
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acknowledge that we and our affiliates have no obligation to use in connection
with the transactions contemplated by Commitment Letter, or to furnish to you or
the Sponsor (or any of your or their respective affiliates), confidential
information obtained from other companies. You further acknowledge that both UBS
and BSCL are full service securities firms and may from time to time effect
transactions, for their own or their affiliates' account or the account of
customers, and hold positions in loans, securities or options on loans or
securities of Holdings, Borrower, the Acquired Business, their affiliates and
other companies that may be the subject of the transactions contemplated by this
Commitment Letter.
Governing Law, Etc.
-------------------
This Commitment Letter and the commitment of the Lenders shall not be
assignable by you without the prior written consent of us and the Lenders, and
any purported assignment without such consent shall be void. This Commitment
Letter may not be amended or modified except by an instrument in writing signed
by us and you. No provision of this Commitment Letter may be waived except by an
instrument in writing signed by the party to this Commitment Letter benefiting
from the applicable provision. This Commitment Letter may be executed in any
number of counterparts, each of which shall be an original and all of which,
when taken together, shall constitute one agreement. Delivery of an executed
counterpart of a signature page of this Commitment Letter by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Commitment Letter. Headings are for convenience only. This Commitment
Letter is intended to be for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any
person other than the parties hereto, the Lenders and, with respect to the
indemnification provided under the heading "Indemnity," each Indemnified Person.
This Commitment Letter shall be governed by, and construed in accordance with,
the laws of the State of New York without regard to principles of conflicts of
law to the extent that the application of the laws of another jurisdiction will
be required thereby. Any right to trial by jury with respect to any claim or
action arising out of this Commitment Letter is hereby waived. You hereby submit
to the exclusive jurisdiction of the federal and New York State courts located
in The City of New York (and appellate courts thereof) in connection with any
dispute related to this Commitment Letter or any of the matters contemplated
hereby, and agree that service of any process, summons, notice or document by
registered mail addressed to you shall be effective service of process against
you for any suit, action or proceeding relating to any such dispute. You
irrevocably and unconditionally waive any objection to the laying of such venue
of any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. A final judgment in any such suit, action or proceeding brought in any
such court may be enforced in any other courts to whose jurisdiction you are or
may be subject by suit upon judgment.
Patriot Act.
------------
We hereby notify you that pursuant to the requirements of the USA
Patriot Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the
"Patriot Act"), we and the other Lenders are required to obtain, verify and
record information that identifies Holdings, Borrower and the Acquired Business,
which information includes the name, address and tax identification number of
Holdings, Borrower and the Acquired Business and other information regarding
Holdings, Borrower and the Acquired Business that will allow us or such Lender
to identify Borrower in accordance with the Patriot Act. This notice is given in
accordance with the requirements of the Patriot Act and is effective as to us
and the other Lenders.
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Please indicate your acceptance of the terms hereof and of the Term
Sheet, the Conditions Annex and the Fee Letter by returning to us executed
counterparts of this Commitment Letter and the Fee Letter not later than 5:00
p.m., New York City time, on November 9, 2005 (the "Deadline"). This Commitment
Letter and our agreement to provide the services described herein are also
conditioned upon your acceptance hereof and of the Fee Letter, and our receipt
of executed counterparts hereof and thereof on or prior to the Deadline. Upon
the earliest to occur of (A) the execution and delivery of the Financing
Documentation by all of the parties thereto, (B) April 18, 2006, if the
Financing Documentation shall not have been executed and delivered by all such
parties prior to that date, or (C) if earlier than (B), the date of termination
of the definitive agreement pertaining to the Acquisition, this Commitment
Letter and our agreement to provide the services described herein shall
automatically terminate unless we shall, in our discretion, agree to an
extension. The compensation, expense reimbursement, confidentiality,
indemnification and governing law and forum provisions hereof and in the Term
Sheet and the Fee Letter shall survive termination of this Commitment Letter (or
any portion hereof) or the commitments of the Lenders hereunder. The provisions
under the headings "Syndication" and "Clear Market" above shall survive the
execution and delivery of the Financing Documentation.
[Signature Page Follows]
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We are pleased to have been given the opportunity to assist you in
connection with the financing for the Transactions.
Very truly yours,
UBS LOAN FINANCE LLC
By: /s/ David A. Juge
--------------------------------
Name: David A. Juge
Title: Managing Director
By: /s/ Barbara S. Wang
--------------------------------
Name: Barbara S. Wang
Title: Director and Counsel
Region Americas Legal
UBS SECURITIES LLC
By: /s/ Brendan Connolly
--------------------------------
Name: Brendan Connolly
Title: Executive Director
By: /s/ Barbara S. Wang
--------------------------------
Name: Barbara S. Wang
Title: Director and Counsel
Region Americas Legal
BEAR, STEARNS & CO. INC.
By: /s/ Lawrence B. Alletto
--------------------------------
Name: Lawrence B. Alletto
Title: Senior Managing Director
BEAR STEARNS CORPORATE LENDING INC.
By: /s/ Lawrence B. Alletto
--------------------------------
Name: Lawrence B. Alletto
Title: Vice President
Accepted and agreed to as of the date first writted above:
LAUNDRY HOLDING CO.
By: /s/ Andrew S. Jhawar
-----------------------------------------
Name: Andrew S. Jhawar
Title: Vice President
LAUNDRY MERGER SUB CO.
By: /s/ Andrew S. Jhawar
-----------------------------------------
Name: Andrew S. Jhawar
Title: Vice President
ANNEX I
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SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
-----------------------------------------
Revolving Credit Facility(1)
Borrower: Laundry Merger Sub Co. ("Borrower").
Arranger: UBS Securities LLC ("UBSS" or the
"Arranger").
Joint Book-Runners: UBSS and Bear, Stearns & Co. Inc. ("Bear
Stearns")
Lenders: A syndicate of banks, financial
institutions and other entities,
including UBS Loan Finance LLC ("UBS")
and Bear Stearns Corporate Lending Inc.,
arranged by the Arranger (collectively,
the "Lenders").
Administrative Agent,
Co-Collateral Agent and Issuing
Bank: UBS AG, Stamford Branch.
Syndication Agent: Bear Stearns
Co-Collateral Agent: A Lender satisfactory to UBS.
Swingline Lender: UBS Loan Finance LLC.
Type and Amount of Facility: A revolving credit facility (the
"Revolving Credit Facility") in an
aggregate principal amount of up to
$600.0 million (the "Maximum Amount").
Uncommitted Increase in
Revolving Credit Facility: The Bank Documentation will provide that
the Maximum Amount may be increased by
$100.0 million (the "Additional Amount")
to $700.0 million at the election of
Borrower and subject to the agreement of
the Lenders extending such credit as
provided below, provided that (i) no
event of default or default exists or
would exist after giving effect thereto,
(ii) all financial covenants would be
satisfied on a pro forma basis on the
date of such increase and for the most
recent determination period, after
giving effect to any borrowings and
other customary and appropriate pro
forma adjustment events and (iii) the
terms and documentation in respect
thereof shall otherwise be satisfactory
to the Arranger and the Administrative
Agent. Borrower may seek commitments
from existing Lenders (each of which
shall be entitled to agree or decline to
participate in its sole discretion) and
additional financial institutions
reasonably acceptable to the Arranger
and the Administrative Agent who shall
thereupon become Lenders. The Bank
Documentation shall be amended to give
effect to the increase in the Maximum
Amount by documentation executed by the
Lender or Lenders making the commitments
with respect to the Additional Amount,
the Administrative Agent and Borrower,
and without the consent of any other
Lender.
(1) All capitalized terms used but not defined herein shall have the
meanings provided in the committment letter to which this summary is
attached
1
Purpose: The Revolving Credit Facility will be
used by Borrower and its subsidiaries
for working capital and general
corporate purposes.
Closing Date: The date of consummation of the
Acquisition.
Definitive Documentation: Consistent with transactions for
companies owned by Sponsor.
Maturity Date: Five (5) years from the Closing Date.
Availability: Upon satisfaction of conditions
precedent to borrowings, borrowings may
be made at any time on and after the
Closing Date to but excluding the
business day preceding the maturity date
of the Revolving Credit Facility.
Borrowing availability under the
Revolving Credit Facility will be
limited to the lesser of (i) the
Borrowing Base Amount (as defined below)
and (ii) the Maximum Amount, in each
case less any applicable reserves as
determined by the Collateral Agent or
the Administrative Agent in its
Permitted Discretion (as defined below).
In addition, funded borrowings on the
Closing Date will not exceed an amount
(not to exceed $100.0 million) equal to
(i) the net working capital (current
assets, other than cash, less current
liabilities) of the Acquired Business as
of the last completed month's balance
sheet prior to the Closing Date less
(ii) $470.0 million (in addition, in
connection with the Transactions, (x) up
to $150.0 million face amount of letters
of credit will be issuable under the
Revolving Credit Facility to replace
outstanding letters of credit of the
Acquired Business and (y) up to $10.0
million face amount of letters of credit
will be issuable under the Revolving
Credit Facility to secure certain
indemnity obligations in favor of CVS
Corporation and certain affiliated
entities).
"Permitted Discretion" means a
determination made in good faith and in
the exercise of reasonable (from the
perspective of a secured asset based
lender) business judgment.
Letters of Credit: Up to an agreed amount (but not less
than $400.0 million) of the Revolving
Credit Facility will be available for
letters of credit, on customary terms
and conditions to be set forth in the
Bank Documentation.
Each letter of credit shall expire (or
be subject to non-renewal or termination
by the Administrative Agent) not later
than the earlier of (a) 12 months after
its date of issuance and (b) the fifth
day prior to the maturity date of the
Revolving Credit Facility.
2
Swing Line Facility: Up to an agreed amount of the Revolving
Credit Facility will be available for
Swing Line Loans, on terms and
conditions to be set forth in the Bank
Documentation.
Except for purposes of calculating the
commitment fee described below, any
swingline borrowings will reduce
availability under the Revolving Credit
Facility on a dollar-for-dollar basis.
Canadian Subfacility: Up to an agreed amount of the Revolving
Credit Facility may be made available as
a revolving Canadian sub-facility (the
"Canadian Subfacility"), with loans
thereunder made directly to one or more
Canadian subsidiaries of the Borrower.
The Canadian Subfacility will be subject
to a separate borrowing base (but shall
include credit for excess availability
on the domestic borrowing base) and will
otherwise be on terms and conditions
(including pricing terms) to be set
forth in the Bank Documentation.
Amortization: None.
Interest: At Borrower's option, loans will bear
interest based on the Base Rate or
LIBOR, as described below:
A. Base Rate Option
Interest will be at the Base Rate plus
the applicable Interest Margin,
calculated on the basis of the actual
number of days elapsed in a year of 365
days and payable quarterly in arrears.
The Base Rate is defined as the higher
of (a) the Federal Funds Rate, as
published by the Federal Reserve Bank of
New York, plus 1 /2 of 1 % and (b) the
prime commercial lending rate of UBS AG
for the Revolving Credit Facility, as
established from time to time at its
Stamford branch.
Base Rate borrowings will require one
business day's prior notice and will be
in minimum amounts to be agreed upon.
B. LIBOR Option
Interest will be determined for periods
("Interest Periods") of one, two, three
or six months (or nine or twelve months
if available from all relevant Lenders)
(as selected by Borrower) and will be at
an annual rate equal to the London
Interbank Offered Rate ("LIBOR") for the
corresponding deposits of U.S. dollars,
plus the applicable Interest Margin.
LIBOR will be determined by the
Administrative Agent at the start of
each Interest Period and will be fixed
through such period. Interest will be
paid at the end of each Interest Period
or, in the case of Interest Periods
longer than three months, quarterly, and
will be calculated on the basis of the
actual number of days elapsed in a year
of 360 days. LIBOR will be adjusted for
maximum statutory reserve requirements
(if any).
3
LIBOR borrowings will require three
business days' prior notice and will be
in minimum amounts to be agreed upon.
Default Interest: Upon the occurrence and during the
continuance of an event of default,
interest will accrue (i) in the case of
principal, interest or premium (if any)
on any loan at a rate of 2.0% per annum
plus the rate otherwise applicable to
such loan and (ii) in the case of any
other amount, at a rate of 2.0% per
annum plus the non-default interest rate
then applicable to Base Rate loans under
the Revolving Credit Facility. During
the continuance of an event of default,
letter of credit fees will accrue at the
rate of 2% plus the amount otherwise
payable hereunder. All default interest
and fees shall be payable on demand.
Interest Margins: The applicable Interest Margin will
initially be the basis points set forth
in the following table:
Base Rate LIBOR
Loans Loans
Initial Interest Margin 0 150
After the date that is six months after
the Closing Date (and so long as
Borrower shall have delivered financial
statements for the first full fiscal
quarter after the Closing Date), the
Interest Margin with respect to the
Revolving Credit Facility will be based
on average Excess Availability (as
defined below) as follows:
Average Excess
Availability For Base Rate LIBOR
Preceding Fiscal Loans Loans
Quarter
< $125 million 25 175
$125 million -
$350 million 0 150
$350 million -
$475 million 0 125
> $475 million 0 100
4
"Excess Availability" shall mean (a) the
lesser of (i) the commitments of all of
the Lenders under the Revolving Credit
Facility and (ii) the Borrowing Base on
the date of determination less (b) all
outstanding loans and obligations in
respect of letters of credit under the
Revolving Credit Facility.
Commitment Fee: A Commitment Fee shall accrue on the
unused amounts of the commitments under
the Revolving Credit Facility. Such
Commitment Fee will initially be 0.375%
per annum and after delivery of
financial statements for the first full
fiscal quarter ending after the Closing
Date will be reduced based on a
usage-based grid to be agreed. Accrued
Commitment Fees will be payable
quarterly in arrears (calculated on a
360-day basis) for the account of the
Lenders from the Closing Date.
Letter of Credit Fees: Borrower will pay (i) the issuing bank
(the "Issuing Bank") a fronting fee
equal to 12.5 basis points per annum and
(ii) the Lenders under the Revolving
Credit Facility letter of credit
participation fees equal to (a) in the
case of standby letters of credit, the
Interest Margin for LIBOR Loans under
the Revolving Credit Facility and (b) in
the case of trade letters of credit, the
greater of (x) the Interest Margin for
LIBOR Loans under the Revolving Credit
Facility minus 50 basis points and (y)
50 basis points, in each case, on the
undrawn amount of all outstanding
letters of credit. In addition, Borrower
will pay the Issuing Bank customary
issuance fees.
Mandatory Prepayments: An amount equal to (a) 100% of the net
proceeds received from the sale or other
disposition of all or any part of the
assets of Holdings or any of its
subsidiaries after the Closing Date
other than amounts reinvested in
Borrower's business and subject to other
exceptions to be agreed, (b) 100% of all
casualty and condemnation proceeds in
excess of amounts applied promptly to
replace or restore any properties in
respect of which such proceeds are paid
to Holdings and its subsidiaries and (c)
the amount, if any, required from time
to time, to assure that amounts
outstanding under the Revolving Credit
Facility do not exceed the Borrowing
Base.
There will be no prepayment penalties
(except LIBOR breakage costs) for
mandatory prepayments.
Optional Prepayments: Permitted in whole or in
part, with prior notice but without
premium or penalty (except LIBOR
breakage costs) and including accrued
and unpaid interest, subject to
limitations as to minimum amounts of
prepayments.
Application of Prepayments: Mandatory prepayments
(other than those made to comply with
the Borrowing Base requirements) and
optional prepayments will in each case
be applied to the Revolving Credit
Facility including cash
collateralization of letters of credit.
5
Commitment Reductions: Whenever a prepayment is made to the
Revolving Credit Facility in connection
with a sale or disposition referred to
in clause (a) of the Section above
entitled "Mandatory Prepayments", the
Collateral Agent or the Administrative
Agent shall have the right to reduce the
Revolving Credit Facility commitments by
an amount up to the amount of the
payment applied to the Revolving Credit
Facility.
Guarantees: The Revolving Credit Facility will be
fully and unconditionally guaranteed on
a joint and several basis by Holdings
and all of the existing and future
direct and indirect domestic
subsidiaries of Holdings (collectively,
the "Guarantors") and any Canadian
Subfacility will be fully and
unconditionally guaranteed on a joint
and several basis by Holdings and all of
the future direct and indirect domestic
and foreign subsidiaries of Holdings
(the "Canadian Guarantors") and, in each
case, shall be subject to typical
fraudulent conveyance savings provisions
and contribution agreements to be
coordinated with the terms in the Bridge
Facility.
Security: The Revolving Credit Facility (other
than the Canadian Subfacility which
shall be secured as described below) and
any hedging obligations or cash
management arrangements to which a
Lender or an affiliate of a Lender is a
counterparty will be secured by
perfected pledges of all of the equity
interests of Borrower and each of
Holdings' direct and indirect domestic
subsidiaries and of 65% of the equity
interests of Borrower's direct and
indirect "first-tier" foreign
subsidiaries (collectively, the "Pledged
Equity Interests"), and perfected
security interests in and mortgages on
all tangible and intangible assets
(including, without limitation, accounts
receivable, inventory, equipment
(excluding vehicles), general
intangibles, intercompany notes,
insurance policies, investment property,
intellectual property, owned real
property (but not leased real property,
except that the Borrower will use
commercially reasonable efforts to
deliver, with respect to each of its
leased distribution centers, a perfected
leasehold mortgage and landlord's
consent in favor of the Administrative
Agent (it being understood that
commercially reasonable efforts shall
not include the payment of any material
fee to obtain a landlord's consent, the
increasing of rent under any lease in a
material amount, or other material
revisions to the economic terms of any
lease)), cash and proceeds of the
foregoing) of Borrower and the
Guarantors, wherever located, now or
hereafter owned (collectively, the
"Collateral"), except, in the case of
any foreign subsidiary, to the extent
such pledge or security interest would
be prohibited by applicable law or would
result in materially adverse tax
consequences, and except to the extent
the cost of obtaining such pledge or
security interest is excessive in
relation to the benefit thereof (as
determined by the Administrative Agent
in its reasonable discretion), and
subject to such other exceptions as are
agreed. Any assets not constituting
"Collateral" will be subject to a
negative pledge.
6
Any Canadian Subfacility and related
obligations thereunder will be secured
by perfected pledges of all of the
equity interests of Borrower and each of
Holdings' direct and indirect domestic
and foreign subsidiaries and perfected
security interests in and mortgages on
all other Collateral, except to the
extent the cost of obtaining such pledge
or security interest is excessive in
relation to the benefit thereof (as
determined by the Administrative Agent
in its reasonable discretion), and
subject to such other exceptions as are
agreed.
Priorities; Intercreditor Agreement: The liens and security interests in the
Collateral and various other related
rights will be subject to the terms of
an Intercreditor Agreement to be
reasonably satisfactory to the Arranger.
That agreement will provide, among other
things, that the liens on Collateral
comprised of equipment, fixtures,
trademarks, the Pledged Equity Interests
and any interests in real property (the
"Bridge Primary Collateral" will secure
the Bridge Facility and any secured
Notes and the obligations in respect of
swap agreements provided by the Lenders
under the Bridge Facility or the holders
of such Notes (the "Bridge and Senior
Secured Floating Rate Notes
Obligations") on a first-priority basis
and the Revolving Credit Facility and
the obligations in respect of swap
agreements and cash management
arrangements provided by the Lenders
under such facility (the "Revolving
Credit Obligations") on a
second-priority basis. The liens on all
other Collateral (the "Revolving Credit
Primary Collateral") shall secure the
Revolving Credit Obligations on a
first-priority basis and the Bridge and
Senior Secured Floating Rate Notes
Obligations on a second-priority basis.
The Intercreditor Agreement shall
provide, among other things, for
customary and appropriate standstill and
default notice provisions, for access to
and use of (including licenses of
trademarks) the Bridge Primary
Collateral during an enforcement with
respect to the Revolving Credit Primary
Collateral, for procedures and
limitations on the collection of
proceeds of Collateral, the tracing of
the priorities into such proceeds and
the allocation and turn-over of any
identified proceeds of Bridge Primary
Collateral which are collected through
the cash management process, for
releases of second-priority liens upon
sale or disposition of Collateral when
the first-priority lien is released, for
waiver of various adequate protection
rights, for limitations on the rights of
the second-priority lien holder to
enforce on its Collateral if the effect
would be to interfere with the
first-priority lien holder, and for
other customary provisions dealing with
bankruptcy and enforcement issues
between first-priority and
second-priority lien holders.
7
Notwithstanding the foregoing, if the
Bridge Facility or the Notes, as
applicable, are not secured, the
Revolving Credit Facility will be
secured by a first-priority lien on all
of the Collateral.
Borrowing Base: The amount from time to time
outstanding (including any obligations
with respect to Letters of Credit) under
the Revolving Credit Facility shall not
exceed the lesser of the Maximum Amount
or the total of (the "Borrowing Base
Amount"):
1. 85% of the value of Borrower's
eligible receivables from
major credit card processors
(including, but not limited
to, VISA, Mastercard, American
Express, Diners Club and
DiscoverCard); plus
2. the lesser of (i) 80% of cost
of Borrower's eligible
inventory, or (ii) 85% of the
net orderly liquidation value
of such eligible inventory
(based on the most recent
inventory appraisal; a
seasonal over-advance of up to
90% will be provided if
necessary); plus
3. 75% of the aggregate undrawn
face amount of eligible
documentary trade letters of
credit; minus
4. any other reserves as the
Collateral Agent or the
Administrative Agent may, from
time to time, establish in
their respective Permitted
Discretion.
Eligible inventory shall include goods
in transit from suppliers, other than
goods which are being imported under
outstanding letters of credit, if bills
of lading and other customary shipping,
insurance and customs documents have
been delivered to the Collateral Agent
or its designee, if such documentation
is reasonably determined to be
acceptable by the Collateral Agent and
if such goods would otherwise qualify as
"eligible inventory." Any inventory at
locations not owned by the Borrower will
be deemed eligible subject to access
agreements and/or landlord waivers in
form and substance satisfactory to the
Collateral Agent and the Administrative
Agent being received by the Collateral
Agent or the maintenance of reserves and
appropriate procedures to assure payment
of amounts owing to landlords so that
access can be obtained.
8
Actual advance rates and details of
eligibility criteria, levels of
collateral that may be included in the
Borrowing Base from subsidiaries of
Borrower, as well as other levels of and
limitations on collateral that may be
included in the Borrowing Base, are to
be determined after the collateral audit
and appraisals are completed and
consolidating financial information has
been made available and shall be subject
to further revision, from time to time,
pursuant to procedures to be detailed in
the Bank Documentation. In addition,
each of the Collateral Agent and the
Administrative Agent shall have the
right to establish reserves with respect
to the borrowing base for such purposes
and in such amounts as each shall
determine appropriate in their
respective Permitted Discretion from
time to time, pursuant to procedures to
be detailed in the Bank Documentation.
Cash Management: All cash and cash equivalents (other
than payroll accounts and trust
accounts) of Borrower and its
subsidiaries and all proceeds of
Collateral shall (a) be deposited into
one or more bank accounts or investment
accounts for which the Collateral Agent
shall have a deposit account agreement,
securities account control agreement or
otherwise have control (in each case
pursuant to documentation acceptable to
the Collateral Agent and the
Administrative Agent) and (b) in the
event that average Excess Availability
for the preceding Fiscal Quarter is less
than $90 million, be applied one day
after receipt in the account (or if a
concentration account is used, one day
after receipt in such concentration
account) to the outstanding loan
balances in accordance with customary
collateral management procedures to be
detailed in the Bank Documentation.
Reporting and Related Requirements: Customary for facilities of this nature,
including, but not limited to the
following:
1. Annual audited financial
statements within 90 days of
each fiscal year end.
2. Quarterly financial statements
within 45 days of each quarter
end.
3. Monthly financial statements
within 30 days of each month
end.
4. Annually prepared monthly
budget for the upcoming year,
including line items for
budgeted Borrowing Base levels
and credit utilization.
5. A Collateral field audit
annually and independent
Collateral appraisals
annually, in each case at the
expense of the Borrower, and
in each case, if Excess
Availability is below $90.0
million, to be performed more
frequently at Collateral
Agent's or Administrative
Agent's reasonable request.
9
6. Borrowing Base certificates
signed by a responsible
corporate officer and
supplemental or supporting
exhibits, and other specific
supporting data requested from
time to time by the Collateral
Agent or the Administrative
Agent, all on a basis,
frequency and form to be
determined after the
Collateral Agent has been
definitively selected and has
reviewed the results of the
collateral audit and appraisal
work.
Conditions to Initial Borrowings: Conditions
precedent to initial borrowings under
the Revolving Credit Facility will be
those set forth in the Commitment Letter
and in Annex II to the Commitment
Letter.
Conditions to Each Borrowing: Conditions precedent to each borrowing
or issuance under the Revolving Credit
Facility will be the following: (1) the
absence of any continuing default or
event of default, (2) the accuracy of
all representations and warranties and
(3) continued compliance with the
Borrowing Base requirements after giving
effect to such borrowing or issuance.
Representations and Warranties: The following representations and
warranties will apply, subject to
materiality thresholds and exceptions to
be agreed, to Holdings, Borrower and its
subsidiaries: representations and
warranties as to financial statements
(including pro forma financial
statements); absence of undisclosed
liabilities; no material adverse change;
corporate existence; compliance with
law; corporate power and authority;
enforceability of the Bank
Documentation; no conflict with law or
contractual obligations; no material
litigation; no default; ownership of
property; liens; intellectual property;
taxes; Federal Reserve regulations;
ERISA; Investment Company Act;
subsidiaries; environmental matters;
solvency; accuracy and completeness of
disclosure; and creation and perfection
of security interests.
Affirmative Covenants: The following affirmative
covenants will apply, subject to
materiality thresholds and exceptions to
be agreed, to Holdings, Borrower and
their subsidiaries:
Delivery of notices of defaults,
litigation and other material events,
budgets and other information
customarily supplied in a transaction of
this type; payment of other obligations;
continuation of business and maintenance
of existence and material rights and
privileges; compliance with all
applicable laws and regulations
(including, without limitation,
environmental matters, taxation and
ERISA) and material contractual
obligations; maintenance of property and
insurance; maintenance of books and
records; right of the Lenders to inspect
property and books and records;
agreement to hold annual meetings of
Lenders; further assurances (including,
without limitation, with respect to
security interests in after-acquired
property); and, if more than 50.0% of
the Notes are floating rate, agreement
to establish an interest rate protection
program and/or have fixed rate financing
on 50.0% of the amount of the Notes.
10
Negative Covenants: The following negative covenants will
apply, subject to materiality thresholds
and exceptions to be agreed, to
Holdings, Borrower and its subsidiaries:
1. Limitation on dispositions of
assets and changes of business
and ownership.
2. Limitation on mergers and
acquisitions.
3. Limitations on dividends and
stock repurchases and
redemptions (with permitted
dividends to be agreed).
4. Limitation on indebtedness
(including guarantees and
other contingent obligations)
and preferred stock.
5. Limitation on loans and
investments.
6. Limitation on liens and
further negative pledges.
7. Limitation on transactions
with affiliates.
8. Limitation on sale and
leaseback transactions.
9. Limitation on capital
expenditures.
10. Limitation on hedging
agreements and arrangement of
non-speculative transactions.
11. Maintenance of Holdings as a
passive holding company.
12. Maintenance of any holding
company formed to hold
intellectual property as a
passive holding company.
13. Prohibition on amendments or
prepayments of subordinated
indebtedness.
14. No modification or waiver of
material documents (defined as
charter documents of Borrower
and its subsidiaries and all
documents relating to the
Bridge Facility, the Notes, if
any, and the Equity Financing)
in any manner materially
adverse to the Lenders without
the consent of the Requisite
Lenders.
15. No change to fiscal year.
Financial Covenants: Financial covenants will apply to
Borrower and its consolidated
subsidiaries at any time Excess
Availability is less than $75.0 million
and shall consist of:
11
1. Maximum leverage ratio.
2. Minimum fixed charge coverage
ratio.
Events of Default: Nonpayment, breach of
representations and covenants, cross
defaults, loss of lien on collateral,
invalidity of guarantees, bankruptcy and
insolvency events, ERISA events,
judgments and change of control (to be
defined), in each case subject to
materiality thresholds and exceptions to
be agreed.
Assignments and Participations: Each Lender may assign all or, subject
to minimum amounts to be agreed, a
portion of its loans and commitments
under the Revolving Credit Facility
(except during the continuation of any
default, other than to certain persons
designated in writing by Borrower on or
prior to the date of the Commitment
Letter). Assignments will require
payment of an administrative fee to the
Administrative Agent and the consent of
the Administrative Agent, the Issuing
Bank and Borrower, which consents shall
not be unreasonably withheld or delayed;
provided that (i) no consents shall be
required for an assignment to an
existing Lender or an affiliate of an
existing Lender and (ii) no consent of
Borrower shall be required during the
continuation of a default. In addition,
each Lender may sell participations in
all or a portion of its loans and
commitments under the Revolving Credit
Facility (other than to certain persons
designated in writing by Borrower on or
prior to the date of the Commitment
Letter); provided that no purchaser of a
participation shall have the right to
exercise or to cause the selling Lender
to exercise voting rights in respect of
the Revolving Credit Facility (except as
to certain customary issues).
Expenses and Indemnification: All reasonable out-of-pocket expenses
(including but not limited to reasonable
legal fees and expenses of not more than
one counsel plus, if necessary, one
local counsel per jurisdiction and lien
searches and title insurance charges,
appraisal fees and other expenses
incurred in connection with due
diligence and travel, courier,
reproduction, printing and delivery
expenses) of UBS, the Co-Book-Managers,
the Arranger, the Administrative Agent
and the Collateral Agent associated with
the syndication of the Revolving Credit
Facility and with the preparation,
execution and delivery, administration,
amendment, waiver or modification
(including proposed amendments, waivers
or modifications) of the documentation
contemplated hereby are to be paid by
Borrower on and after the Closing Date,
if it occurs. In addition, all
reasonable out-of-pocket expenses
(including but not limited to reasonable
legal fees and expenses of not more than
one counsel plus, if necessary, one
local counsel per jurisdiction) of the
Lenders, the Administrative Agent and
the Collateral Agent for workout
proceedings, enforcement costs and
documentary taxes associated with the
Revolving Credit Facility are to be paid
by Borrower.
12
Borrower will indemnify the Lenders,
UBS, the Co-Book-Managers, the Arranger,
the Administrative Agent and the
Collateral Agent and their respective
affiliates, and hold them harmless from
and against all reasonable out-of-pocket
costs, expenses (including but not
limited to reasonable legal fees and
expenses of not more than one counsel
plus, if necessary, one local counsel
per jurisdiction) and liabilities
arising out of or relating to the
transactions contemplated hereby and any
actual or proposed use of the proceeds
of any loans made under the Revolving
Credit Facility; provided, however, that
no such person will be indemnified for
costs, expenses or liabilities to the
extent determined by a final judgment of
a court of competent jurisdiction to
have been incurred primarily by reason
of the gross negligence or willful
misconduct of such person. Yield
Protection, Taxes and Other Deductions:
The Bank Documentation will contain
yield protection provisions, customary
for facilities of this nature,
protecting the Lenders in the event of
unavailability of LIBOR, breakage
losses, reserve and capital adequacy
requirements.
All payments are to be free and clear of
any present or future taxes,
withholdings or other deductions
whatsoever (other than income taxes in
the jurisdiction of the Lender's
applicable lending office). The Lenders
will use commercially reasonable efforts
to minimize to the extent possible any
applicable taxes and Borrower will
indemnify the Lenders and the
Administrative Agent for such taxes paid
by the Lenders or the Administrative
Agent.
Requisite Lenders: Lenders holding at least a
majority of total loans and commitments
under the Revolving Credit Facility,
with certain amendments requiring the
consent of Lenders holding a greater
percentage (or each Lender affected) of
the total loans and commitments under
the Revolving Credit Facility (subject
to a "yank-a-bank" provision).
Governing Law and Forum: The laws of the State of
New York. Each party to the Bank
Documentation will waive the right to
trial by jury and will consent to the
exclusive jurisdiction of the state and
federal courts located in The City of
New York.
Counsel to UBS, the Arranger,
the Administrative Agent
and the Collateral Agent: Latham & Watkins LLP.
13
ANNEX II
--------
CONDITIONS TO CLOSING(2)
------------------------
The Commitments of UBS, UBSS, BSCL and Bear Stearns under the
Commitment Letter are subject to the conditions set forth in the Commitment
Letter and satisfaction of each of the conditions precedent set forth below.
1. UBS shall have reviewed, and be satisfied with, the final
structure, terms and conditions and the documentation relating to the
Acquisition, including the Acquisition Agreement (collectively, the "Acquisition
Documents"), and each of the other Transactions (it being understood that UBS is
satisfied with the draft of the Acquisition Agreement received by UBS on
November 5, 2005). The Acquisition and the other Transactions shall be
consummated concurrently with the initial funding of the Facilities in
accordance with the Acquisition Documents and such other documentation without
any material waiver or amendment thereof unless consented to by UBS. In
connection with the Refinancing, any and all indebtedness outstanding under all
existing domestic and foreign credit and trade payable facilities and all
commitments for undrawn lines of credit thereunder shall be repaid in full, all
such facilities shall be terminated and all liens granted with respect thereto
shall be fully and unconditionally released.
2. The conditions to borrowing described in Exhibit B to the
Bridge Commitment Letter shall have been satisfied or waived.
3. The proceeds to Borrower from the Equity Financing shall
not be less than $633.4 million. The terms and documentation of the Equity
Financing and the Rollover Equity shall be reasonably satisfactory to the
Arranger.
4. The Arranger shall have (i) received audited consolidated
balance sheets and related statements of income, stockholders' equity and cash
flows of the Acquired Business for the fiscal year ended December 31, 2005 and
for each of the prior two fiscal years (the "Audited Financial Statements") and
(ii) received (A) unaudited consolidated balance sheets and related statements
of income, stockholders' equity and cash flows of the Acquired Business for each
fiscal quarter of the current fiscal year ending more than 20 days prior to the
Closing Date, for the period from the beginning of the current fiscal year to
the end of such fiscal quarter and for the comparable periods of the preceding
fiscal year (the "Unaudited Financial Statements") (with respect to which the
independent auditors shall have performed a SAS 100 review), (B) unaudited
consolidated balance sheets and related statements of income of the Acquired
Business for each fiscal month ending more than 20 days prior to the Closing
Date, for the period from the beginning of the current fiscal year to the end of
(2) All capitalized terms used but not defined herein shall have the
meanings provided in the Committment Letter to which this Annex II is
attached
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such month and for the comparable periods of the preceding fiscal year, and (C)
a pro forma consolidated balance sheet and related statements of income and cash
flows for Borrower (the "Pro Forma Financial Statements"), pro forma EBITDA
("Pro Forma EBITDA") and pro forma EBITDAR ("Pro Forma EBITDAR") for the last
fiscal year covered by the Audited Financial Statements and for each
twelve-month period ending after September 30, 2005 and more than 20 days prior
to the Closing Date, in each case after giving effect to the Transactions. By no
later than February 3, 2006, the Arranger shall have received financial data for
the year ended December 31, 2005 comparable to that contained in the Acquired
Business' year end earnings release. The financial statements referred to in
clauses (i), (ii)(A) and (ii)(B) shall be prepared in accordance with accounting
principles generally accepted in the United States. The Pro Forma Financial
Statements shall be consistent in all material respects with the sources and
uses described in the Commitment Letter. The Pro Forma Financial Statements
shall be prepared on a basis consistent with pro forma financial statements that
would be set forth in a registration statement filed with the Securities and
Exchange Commission.
5. Holdings, Borrower, the Acquired Business and their
subsidiaries and the transactions contemplated hereby shall be in compliance, in
all material respects, with all applicable laws and regulations, except to the
extent as would not have a material adverse effect on Holdings, Borrower, the
Acquired Business and their subsidiaries, taken as a whole. All necessary
governmental and material third party approvals in connection with the
Transactions shall have been obtained and shall be in effect, except to the
extent as would not have a material adverse effect on Holdings, Borrower, the
Acquired Business and their subsidiaries, taken as a whole.
6. Sources and uses of funds and the assumptions relating
thereto (including indebtedness or preferred equity of Holdings, Borrower, the
Acquired Business or any of their respective subsidiaries after giving effect to
the Transactions) shall be as set forth in the Commitment Letter in all material
respects.
7. The Administrative Agent shall have received a satisfactory
solvency certificate from the chief financial officer of Holdings that shall
document the solvency of Holdings and its subsidiaries on a consolidated basis
after giving effect to the Transactions.
8. Holdings, Borrower and each of the Guarantors shall have
provided the documentation and other information to the Lenders that is required
by regulatory authorities under applicable "know your customer" and
anti-money-laundering rules and regulations, including, without limitation, the
Patriot Act.
9. Pro Forma EBITDA (calculated in accordance with Schedule A)
for the fiscal year ended December 31, 2005 shall not be less than $140.0
million. The ratio of (x) pro forma total consolidated indebtedness of Holdings
as of December 31, 2005 (after giving effect to the Transactions, including any
voluntary capital contribution made in addition to the required minimum Equity
Financing, the proceeds of which are used to reduce indebtedness of Holdings and
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its subsidiaries, but excluding any amounts drawn under the Revolving Credit
Facility on the Closing Date) plus eight times rent for the fiscal year ended
December 31, 2005 (the "Rent Amount") to (y) Pro Forma EBITDAR (calculated in
accordance with Schedule A) for the fiscal year ended December 31, 2005 shall
not be greater than 6.75x. Same store sales of the Acquired Business during the
fiscal quarter ended December 31, 2005 shall not have decreased more than 6%
from same store sales during the fiscal quarter ended December 31, 2004.
10. All costs, fees, expenses and other compensation payable
to the Lenders, the Bank, the Arranger, the Administrative Agent or the
Collateral Agent shall have been paid to the extent due.
11. The Arranger shall have had not less than 30 consecutive
days to conduct the syndication of the Revolving Credit Facility. Such period
shall (i) commence upon delivery of the final confidential information
memorandum referred to in the Commitment Letter under "Syndication" to the
Arranger and (ii) not include any days in the period from and including December
16, 2005 through and including January 1, 2006.
12. There shall have occurred the negotiation, execution and
delivery of definitive documentation consistent with transactions for companies
owned by Sponsor (the "Bank Documentation"), including opinions, certificates
and other closing documentation as the Arranger shall reasonably request, with
respect to the Revolving Credit Facility reflecting and consistent with the
terms and conditions set forth herein and in the Bank Term Sheet and the Fee
Letter and otherwise reasonably satisfactory to you and us.
13. Prior to or concurrently with the initial borrowings under
the Revolving Credit Facility, Borrower shall have received gross proceeds of
the lesser of (a) an amount equal to the difference of (x) the product of (i)
6.75 and (ii) Pro Forma EBITDAR for the fiscal year ended December 31, 2005 and
(y) the Rent Amount and (b) $650.0 million, either from the issuance and sale of
the Notes or from borrowings under the Bridge Facility. The documentation and
terms of the Notes and the Bridge Facility shall be reasonably satisfactory in
form and substance to the Arranger.
14. Borrower shall have Excess Availability (as defined in the
Bank Term Sheet and after giving effect to the Transactions) of at least $325.0
million or such lesser amount as UBS, after consultation with the Lenders, may
approve on the Closing Date.
15. The Administrative Agent and the Collateral Agent shall
have (i) conducted (directly or through one or more agents) a satisfactory
review of the Collateral, including the record-keeping procedures relating to
the inventory and cash collateral reporting and the performance of the
Collateral, including a supplemental "take-over audit" to be conducted within
five (5) days prior to the Closing Date, and the results of such review shall
support the determinations of the Collateral Agent and the Administrative Agent
used in determining "Excess Availability" and the borrowing base and related
reserves, (ii) received a satisfactory appraisal of Borrower's inventory
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conducted by an appraiser to be designated by the Collateral Agent and the
Administrative Agent (which appraisal shall appraise eligible inventory at not
less than (i) 60.0% of the book value of gross inventory and (ii) 70.0% of the
liquidation value of Borrower's gross inventory as set forth in the Acquired
Business' most recent financial statements delivered pursuant to condition 4
above) and (iii) received evidence of satisfactory insurance coverage with
respect to both the Collateral and general liability exposure, including
customary loss payable endorsements recognizing the interest of the Collateral
Agent.
16. The Collateral Agent shall have perfected liens and
security interests in all assets as required in the Bank Term Sheet under the
heading "Security" and lien searches and commitments for title insurance, in
form and substance reasonable satisfactory to the Collateral Agent and the
Administrative Agent, shall have been obtained for all collateral described
therein.
SCHEDULE A
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Pro Forma EBITDA shall be defined as:
o net earnings (loss)
o plus income taxes,
o plus interest expense,
o less interest income,
o plus depreciation,
o plus amortization of intangibles,
o plus goodwill amortization.
Pro Forma EBITDA will be adjusted to exclude the following items that occurred
in the first three quarters of fiscal year 2005:
o expenses that can specifically be delineated as being attributable to this
transaction (e.g. accounting, tax, legal, and other expenses specifically
attributable to this transaction) in an amount to be no greater than $0.9
million in aggregate.
Pro Forma EBITDA will be further adjusted to exclude the following items that
occurred only during the fourth quarter of fiscal year 2005:
o expenses that can specifically be delineated as being attributable to this
transaction (e.g. accounting, tax, legal, and other expenses specifically
attributable to this transaction);
o expenses related to transaction bonus and stay compensation specifically
related to this transaction in an amount to be no greater than $1.6
million;
o shareholder reporting expenses (e.g. proxy statement preparation fees,
proxy solicitor, printing, mailing expenses, etc.);
o non-recurring non-cash goodwill and asset impairment charges (excluding any
charges related to inventory);
o restructuring reserve charges or credits related to the 2001 store closure
program;
o non-cash stock-based compensation charges;
o severance costs associated with the Greensboro distribution center closure;
and
o non-recurring gains and losses from the sale of the Greensboro, NC
distribution center; the Clifton, NJ headquarters building; the Secaucus,
NJ store; the Plano, TX store; the College Station, TX store; and the
Colorado Springs, CO store.
In addition, the calculation of Pro Forma EBITDA should:
o Incorporate the reversal of any change in accounting principles occurring
after September 30, 2005, so that Pro Forma EBITDA will be calculated in
the same manner as it would have been calculated on September 30, 2005
before such change;
o Maintain the same methodology, procedures or practices employed by the
Acquired Business related to areas of accounting estimates as used in and
consistent with past practice; and
o To the extent the Acquired Business does not comply with Section 5.1 of the
Acquisition Agreement, not reflect any resulting impact to the income
statement.
Exhibit A-1-1
UBSS and Bear Stearns and their agents will be permitted to review all work
papers and have access to the Acquired Business' auditors in order to understand
the basis for the Acquired Business' computation of Pro Forma EBITDA.
Exhibit A-1-2