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EXHIBIT 99.1
THE BANK OF NOVA SCOTIA GOLDMAN SACHS CREDIT PARTNERS L.P.
ONE LIBERTY PLAZA 85 BROAD STREET
NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10004
CONFIDENTIAL
June 19, 2000
UST Inc.
100 West Putnam Avenue
Greenwich, CT 06830
Attention: Mr. Robert T. D'Alessandro
Mr. Kenneth R. Hopson
UST Inc.
Commitment Letter
Dear Sirs:
Based on our discussions with you, we understand that you (sometimes
referred to as the "Borrower") are interested in obtaining a commitment for
$1,250,000,000 of senior, secured financing consisting of (i) a $250,000,000
revolving credit facility (the "Revolving Facility"), (ii) a maximum
$700,000,000 letter of credit facility (the "Letter of Credit Facility"), (iii)
a maximum $700,000,000 term loan facility (the "Tranche A Facility") which will
only be available following a drawing on the Letter of Credit (as defined
below), in the amount of such drawing and (iv) a $300,000,000 term loan facility
(the "Tranche B Facility", with the Tranche A Facility (if and when made) and
the Tranche B Facility collectively referred to as the "Term Facilities") that
will be available on the Closing Date (as defined below). The Term Facilities,
the Letter of Credit Facility and the Revolving Facility are collectively
referred to as the "Credit Facilities". It is our understanding that proceeds
from the Revolving Facility will be used to refinance in full amounts owing
under your existing credit agreement, dated November 8, 1996 with certain
financial institutions (as amended or otherwise modified, the "Existing
Agreement") and for your working capital and general corporate purposes
(including, without limitation, as a "back-stop" to your (unsecured) commercial
paper), the Letter of Credit Facility will be used for the issuance by The Bank
of Nova Scotia (risk participated in by the Lenders referred to below) of a
letter of credit (the "Letter of Credit") in favor of (i) if permitted by
applicable law, the District Court (as defined below), or (ii) one or more
bonding companies (the "Sureties") whose bonds (the "Surety Bonds") are required
to be posted to enable you to appeal the Conwood Proceeding (described below),
with any drawings under the Letter of Credit being converted into the principal
amount of term loans under the Tranche A Facility (the "Term A Loans") and that
the term loans made on the Closing Date under the Tranche B Facility (referred
to as "Term B Loans") will be deposited, at the direction of the United States
District Court for the Western District of Kentucky at Paducah (referred to as
the "District Court"), to satisfy a portion of the Borrower's bonding
requirements arising from the jury verdict in the Conwood Proceeding, in each
case, on terms and conditions more fully set forth in Term Sheet (as defined
below). The financing of the Credit Facilities, the refinancing of indebtedness
and other amounts owing under the Existing Agreement and the issuance of the
Letter of Credit is collectively referred to as the "Transaction".
The Bank of Nova Scotia ("Scotiabank") and Goldman Sachs Credit
Partners L.P. ("GS") are pleased to inform you that each hereby severally (and
not jointly) commits to provide one-half of the Credit Facilities. In
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connection therewith, each of Scotiabank and GS undertakes to use reasonable
commercial efforts to arrange a syndicate of other financial institutions
identified by us in consultation with you (together with Scotiabank and GS, the
"Lenders") that will, collectively, participate in the Credit Facilities.
Furthermore, Scotiabank agrees to act as administrative agent (in such capacity,
the "Administrative Agent") for the Lenders and as a co-lead arranger and GS
agrees to act as a co-lead arranger and as the syndication agent for the Lenders
(in such capacity, the "Syndication Agent", with the Syndication Agent and the
Administrative Agent collectively referred to as the "Agents"). Our commitments,
undertakings and agreements hereunder are subject to (a) the terms and
conditions set forth in this commitment letter and in the term sheet annexed
hereto as Annex I (together with Schedule I thereto, the "Term Sheet") and the
provisions set forth in Annex II hereto, (b) the terms and conditions contained
in the confidential fee letter, dated the date hereof, among you, Scotiabank and
GS (the "Agents' Fee Letter"), (c) the terms and conditions contained in the
confidential fee letter, dated the date hereof, between you and Scotiabank (the
"Administrative Agent's Fee Letter", with the Administrative Agent's Fee Letter
and the Agents' Fee Letter collectively referred to as the "Fee Letters"), (d)
the absence of any disruption of or adverse change in current financial, banking
or capital market conditions generally or in the market for loan syndications,
in particular, that could reasonably be expected to materially and adversely
affect the syndication of the Credit Facilities, (e) there being no facts,
events or circumstances (including, but not limited to, the commencement of any
litigation asserting claims under 15 U.S.C. Section 1 et. seq.), now existing or
hereafter arising, which come to our attention and which could reasonably be
expected to materially and adversely affect your or your subsidiaries business,
assets, debt service capacity, tax position, environmental liability or
financial condition, operations or prospects, (f) neither Agent becoming aware
after the date hereof of any information or other matters (including, without
limitation, any matters relating to the financial models and assumptions
underlying the Projections described below) that in either Agent's judgment is
inconsistent in a material and adverse manner with any information disclosed to
such Agent prior to the date hereof, (g) the Agents having eight weeks following
the court's resolution of the pending bonding motion in connection with the
Conwood Proceeding to syndicate and close the Credit Facilities in an orderly
manner pursuant to customary methods and (h) neither Scotiabank (in the case of
GS' commitment) or GS (in the case of Scotiabank's commitment) terminating its
several commitment to provide one-half of the total Credit Facilities. In the
event any of the foregoing conditions, events or circumstances are not
satisfied, we each reserve the right to either terminate our commitments,
undertakings and agreements hereunder (and thereafter neither Agent shall have
any other or further obligations hereunder or in connection with the Credit
Facilities) or to propose alternative financing amounts or structures that
assure adequate protection for the Agents and the Lenders. We acknowledge that a
judgment in the amount of $1,050,000,000 (after trebling of the original damage
award in the amount of $350,000,000) was entered against, among others, the
Borrower in the proceeding captioned Conwood, L.P., et al. v. United States
Tobacco Company, UST Inc. et al., No. 5:98 CV-108-R (W.D. Ky.) (the "Conwood
Proceeding"), and that such judgment will not (in and of itself) enable us to
terminate our commitments, undertakings and agreements hereunder. Furthermore,
as a condition to our commitments, undertakings and agreements hereunder, you
agree that no other agents, co-agents or arrangers will be appointed, no other
titles will be awarded and no compensation (other than as expressly set forth in
the Term Sheet and each Fee Letter) will be paid in connection with the Credit
Facilities unless you and we shall so agree.
As we discussed, it is the intent of the Agents to solicit commitments
from the Lenders promptly following the execution of this commitment letter in
an amount sufficient to allow each Agent to achieve its desired hold level in
the Credit Facilities. The Agents will manage, in consultation with you, all
aspects of the syndication, including, without limitation, decisions as to the
selection of institutions to be approached (with Scotiabank having the right,
following consultation with GS and the Borrower and based on credit criteria of
the potential Lenders being acceptable to Scotiabank, to decide which
institutions or entities will be accepted to participate in the Letter of Credit
Facility) and when they will be approached, when their commitments will be
accepted, the allocations of the commitments among the Lenders and the amount
and distribution of fees among the Lenders. In that regard, you agree to
actively assist us, in all commercially reasonable respects, in the syndication
of the Credit Facilities, which assistance will require, among other things,
that you provide all information that is reasonably necessary to successfully
complete the syndication, including, without limitation, all the information
prepared by you or on your behalf relating to you and your subsidiaries
respective business, assets, financial condition, litigation, operations and
prospects, as we may deem to be reasonably necessary, and all projections (it
being understood that projections as to future events are not to be viewed as
facts and that actual results may differ materially from projected results),
(the
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"Projections"), as we may reasonably request in connection with the arrangement
and syndication of the Credit Facilities. You hereby represent and covenant that
(a) all factual information (the "Information") that has been or will be made
available to either Agent by you or on your behalf is or will be, when
furnished, complete and correct in all material respects and does not or will
not, when furnished, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which such
statements are made and (b) the Projections that have been or will be made
available to either Agent by you or on your behalf have been or will be prepared
in good faith based upon assumptions believed by you to be reasonable at the
time of the preparation thereof. You agree that you will promptly notify each
Agent of any changes in circumstances that could be expected to call into
question the Information or the continued reasonableness of any assumption
underlying the Projections, and that you will supplement the Information and the
Projections as necessary so that the representation and covenant in the
preceding sentence remain correct without regard to when such Information and
Projections were made available. In arranging and syndicating the Credit
Facilities, we will use and rely on the Information and Projections without
independent verification thereof. In order to ensure an orderly and effective
syndication of the Credit Facilities, you agree that, from the date hereof until
the earlier of (i) the completion of the primary syndication of the Credit
Facilities (as determined by the Agents in their sole discretion and notified to
you in writing (including if such date occurs after the Closing Date), and
referred to as the "Primary Syndication Termination Date"), and (ii) one hundred
and twenty days following the Closing Date, you will not, and will not permit
any of your affiliates to, syndicate or issue, attempt to syndicate or issue,
announce or authorize the announcement of the syndication or issuance of, or
engage in discussions (other than with the Agents and their respective
affiliates) concerning the syndication or issuance of, any debt facility or debt
security (including, without limitation, any renewals or refinancings of any
existing debt facility, by way of bank and/or institutional loans, private
placement, public offering or otherwise) of the Borrower or any of your
subsidiaries (other than (x) the indebtedness contemplated hereby, (y) unsecured
commercial paper issued in the ordinary course of business, and (z) an exchange
offer for the notes issued and outstanding under the Indenture, dated as of May
27, 1999, and the Indenture, dated as of March 1, 2000, in each case by the
Borrower (as issuer) and State Street Bank and Trust Company (as trustee)
(collectively referred to as the "Existing Notes")) without the prior written
consent of each Agent.
In addition, you agree to make certain members of your management, as
well as, to the best of your ability, your consultants and advisors, available
during regular business hours to answer questions regarding the Transaction and
the Credit Facilities, to review and assist in the preparation of the
syndication memorandum relating to the Credit Facilities, to meet with
prospective Lenders and to use your best efforts to ensure that our syndication
efforts benefit materially from your existing lending relationships. By your
signature below you hereby indemnify and hold harmless each Agent, each Lender
committing to participate in the Credit Facilities and each of our and their
respective affiliates, directors, officers, agents and employees, and agree to
promptly pay all of the fees and expenses, in each case following demand, as set
forth in Annex II hereto (with the terms and provisions of such Annex II hereby
being incorporated by reference), whether or not definitive credit, security and
other documentation (collectively, the "Credit Documentation") is ultimately
executed and delivered or the Transaction is ultimately consummated.
You acknowledge that each Agent and their respective affiliates may be
providing debt financing, equity capital or other services (including, without
limitation, financial advisory services) to other companies that may have
conflicting interests from yours. Neither Agent nor their respective affiliates
shall use confidential information obtained from you (or on your behalf) in
connection with the performance by such Agent or their respective affiliates of
services for other companies, and neither Agent nor their respective affiliates
will furnish any such confidential information to other companies. You
acknowledge that neither Agent nor their respective affiliates have any
obligation to use, in connection with the Transaction or otherwise, or to
furnish to you, confidential information obtained from other companies.
The Agents (and their affiliates) may also from time to time effect
transactions, for their own account or the account of customers, and hold
positions in loans or options on loans of the Borrower and other companies that
may be the subject of this arrangement. In addition, certain affiliates of the
Agents are full service securities firms and as such may from time to time
effect transactions, for their own account or the account of customers, and hold
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positions in securities or options on securities of the Borrower and other
companies that may be the subject of this arrangement. The Agents may also
employ the services of their respective affiliates in providing certain services
hereunder and may exchange with such affiliates information concerning the
Borrower and other companies that may be the subject of this arrangement (but
only on an as-needed basis in connection with the Transaction and subject to
customary internal procedures and applicable laws), and such affiliates shall be
entitled to the benefits afforded to the Agents hereunder.
This commitment letter, the Term Sheet, Annex II and Annex III hereto,
and the Fee Letters (collectively referred to as the "Commitment Documents") are
delivered to you with the understanding that no Commitment Document, nor the
substance hereof or thereof, shall be disclosed to any third party (including,
without limitation, other lenders, arrangers, underwriters, placement agents, or
advisors or any similar persons), without our prior written consent (which
consent shall not be unreasonably withheld or delayed), except (a) to your
officers, employees, agents and legal advisors and, in the case of this
commitment letter and the Term Sheet (but not including Schedule I to the Term
Sheet), the rating agencies and the Sureties (as defined in the Term Sheet), in
the case of each of the forgoing persons limited to those who are directly
involved in the consideration of the Transaction (and then only on a
confidential and need-to-know basis) and (b) as required by law or any court or
governmental agency (provided, that you agree to promptly inform us following
any such permitted disclosure). This commitment letter and the Term Sheet are
delivered to you solely for your benefit and may not be relied upon by any other
person or entity, and nothing in the Commitment Documents is intended to confer
any rights upon, nor do the Commitment Documents create third-party beneficiary
status in favor of, any other person or entity as to our commitments hereunder.
You acknowledge that no fiduciary duty exists on our part owing to you or any
other person or entity as a result of our delivery of the Commitment Documents.
The Commitment Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and thereof and
supersede any prior agreements, written or oral, with respect hereto or thereto.
You irrevocably and unconditionally submit to the non-exclusive jurisdiction of
any New York state or federal court (in each case) sitting in the County of New
York over any suit, action or proceeding arising out of or relating to the
Commitment Documents. Service of any process, summons, notice or document in any
suit, action or proceeding arising out of or relating to the Commitment
Documents may be made by registered mail addressed to you or the Agents as
appropriate, and you waive 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.
EACH COMMITMENT DOCUMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK. EACH OF THE UNDERSIGNED PARTIES
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF OR
IN CONNECTION WITH, ANY COMMITMENT DOCUMENT, AND ANY OTHER COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THE
UNDERSIGNED PARTIES IN CONNECTION WITH ANY COMMITMENT DOCUMENT. IN NO EVENT
SHALL ANY PARTY TO THIS COMMITMENT LETTER BE LIABLE FOR CONSEQUENTIAL, SPECIAL,
INDIRECT OR PUNITIVE DAMAGES IN CONNECTION WITH THE TRANSACTION OR THE CREDIT
FACILITIES, OR WITH OUR DELIVERY OF THE COMMITMENT DOCUMENTS.
If you agree with the foregoing, please sign and return to the
Administrative Agent the enclosed copies of this commitment letter and the Fee
Letters no later than 5:00 p.m., New York time, on June 19, 2000. Our
commitments, undertakings and agreements under the Commitment Documents will
terminate at such time unless (a) (i) a copy of this commitment letter and the
Agents' Fee Letter, each signed by you, has been delivered to the Agents and
(ii) a copy of the Administrative Agent's Fee Letter signed by you has been
delivered to the Administrative Agent, and (b) you have made all payments
required to be paid hereunder and thereunder; provided, however, that, any term
or provision in the Commitment Documents to the contrary notwithstanding, (i)
all of your obligations under the Commitment Documents in respect of
indemnification, confidentiality and fee and expense reimbursement shall survive
any termination or the expiration (including, without limitation, by the terms
of this paragraph) of our commitments, undertakings and agreements under the
Commitment Documents, and (ii) following
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your execution and delivery of this commitment letter and each Fee Letter and
the payment of fees as required by clauses (a) and (b) above, our commitments,
undertakings and agreements under the Commitment Documents will terminate in any
event at 5:00 p.m., New York time, on September 19, 2000 (the "Extension Date"),
unless (x) you have delivered to us by 5:00 p.m., New York time, on the date
which is at least three business days prior to the Extension Date, a notice in
the form attached hereto as Annex III extending the commitments, undertakings
and agreements subject to the Commitment Documents until no later than December
19, 2000 (together with the payments required to be paid under the Agents' Fee
Letter), or (y) on or prior to the Extension Date (or such later date if the
right to extend hereunder has been exercised by you), fully executed copies of
definitive Credit Documentation satisfactory to us and our counsel has been
executed and delivered by you, us and the other required parties (with the date
of such execution and delivery being referred to as the "Closing Date").
We look forward to working with you.
Very truly yours,
THE BANK OF NOVA SCOTIA GOLDMAN SACHS CREDIT PARTNERS L.P.
By: s/ John Hopmans By: s/ R. T. Wagner
------------------------- ----------------------
Title: Managing Director Title: Vice President
Agreed to and Accepted
this 19th day of June, 2000
UST INC.
By: s/ Robert T. D'Alessandro
---------------------------------
Title: Senior Vice President and
Chief Financial Officer
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ANNEX I
TERM SHEET
(Unless otherwise defined, terms used
in this Term Sheet have the meanings
ascribed thereto in the commitment letter,
dated June 19, 2000 (the "Commitment Letter"),
to which this Term Sheet is annexed).
I. PARTIES
Borrower: UST Inc. (the "Borrower").
Guarantors: All direct and indirect domestic subsidiaries of
the Borrower (collectively, the "Guarantors").
Administrative Agent and
Co-Lead Arranger: The Bank of Nova Scotia ("Scotiabank").
Syndication Agent and
Co-Lead Arranger: Goldman Sachs Credit Partners L.P. ("GS", and
together with Scotiabank, collectively referred to
as the "Agents").
Joint Book Runners: Scotiabank and GS.
Letter of Credit Issuer: Scotiabank (in such capacity, the "Issuer").
Lenders: Scotiabank, GS and a group of financial
institutions (collectively, the "Lenders")
arranged by the Agents.
II. THE CREDIT FACILITIES
Closing Date: The date on which the definitive credit agreement,
security and related documentation required
thereunder (collectively, the "Credit
Documentation") is executed and delivered by the
Borrower, the Lenders and other requisite parties,
which shall occur no later than September 19,
2000, as such date may be extended upon the terms
of the Commitment Letter.
General Description
of Credit Facilities: A maximum amount of $1,250,000,000 in senior,
first-priority secured financing to be provided to
the Borrower pursuant to (i) a $250,000,000
revolving credit facility (the "Revolving
Facility"), (ii) a $700,000,000 letter of credit
facility (the "Letter of Credit Facility"), (iii)
upon a drawing under the Letter of Credit, a term
loan facility (the "Tranche A Facility") in the
principal amount of such drawing (not to exceed
$700,000,000), and (iv) a $300,000,000 term loan
facility (the "Tranche B Facility"), which will
only be made on the Closing Date. The Tranche A
Facility and the Tranche B Facility are
collectively referred to as the "Term Facilities",
and the Term Facilities, the Letter of Credit
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Facility and the Revolving Facility are
collectively referred to herein as the "Credit
Facilities". Loans made under the Credit
Facilities are collectively referred to as
"Loans", with Loans under the Tranche A Facility
(the "Term A Loans") being made to the Borrower
only following any drawings under the letter of
credit (the "Letter of Credit") issued by the
Issuer (in a principal amount equal to the amount
of such drawings), Loans made on the Closing Date
under the Tranche B Facility being collectively
referred to as "Term B Loans" and Loans under the
Revolving Facility being collectively referred to
as "Revolving Loans".
The Letter of Credit will be issued in favor of
(i) one or more bonding companies (the "Sureties")
whose bonds (the "Surety Bonds") will be issued,
or (ii) the District Court, if permitted by
applicable law, in each case for the purpose of
enabling the Borrower to stay the judgment pending
an appeal in the Conwood Proceeding. The financing
of the Credit Facilities, the refinancing of
indebtedness and other amounts owing under the
Existing Agreement and the issuance of the Letter
of Credit is collectively referred to as the
"Transaction".
Revolving Facility: Pursuant to the Revolving Facility, Revolving
Loans may be borrowed, prepaid and reborrowed by
the Borrower from time to time prior to the
Revolving Facility Commitment Termination Date (as
set forth below).
Revolving Facility
Commitment Amount: $250,000,000.
Purpose: Proceeds of Revolving Loans shall be used to
refinance all amounts outstanding under the
Existing Agreement, and to pay fees and expenses
associated with the Credit Facilities
documentation and the Transaction, and for the
general corporate and working capital purposes
(including, without limitation, to "back-stop"
(unsecured) commercial paper) of the Borrower and
its domestic subsidiaries.
Revolving Facility
Commitment Termination Date: The 364th day following the Closing Date, as such
date may be extended for successive 364-day
periods by the Lenders upon terms and conditions
to be agreed upon. In the event that the full
amount (or such lesser amount as may be acceptable
to the Borrower) of the Revolving Facility is not
so extended by the Lenders, the Borrower shall be
permitted to incur additional indebtedness with
other lenders pursuant to a separate loan
agreement consisting of (i) revolving loans (and
commitments to make such revolving loans to the
Borrower) or (ii) unsecured extendable credit
notes, in each case in an aggregate amount not in
excess of the Revolving Facility Commitment Amount
(the "Replacement Revolving Facility"), provided,
however, that (i) any amounts due and owing under
the Revolving Facility on the Revolving Facility
Commitment Termination Date shall have been repaid
in full and (ii) the Credit Facilities will be
entitled to the benefit of any covenants
(including, without limitation, financial
covenants) in the Replacement
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Revolving Facility which are more restrictive than
those under the Credit Facilities.
Letter of Credit
Availability: The Letter of Credit and related reimbursement
obligations (evidenced by the Term A Loans) in
connection with the Conwood Proceeding may not
exceed (i) $700,000,000 or (ii) such lesser amount
as required by the Sureties to issue the Surety
Bonds (the "Bond Amount"), provided, that, the
Bond Amount shall not exceed 70% of the initial
stated amount of the Surety Bonds (such amount
under clauses (i) or (ii) being referred to as the
"Letter of Credit Amount", and the difference
between the stated amount of the Surety Bonds and
the Letter of Credit Amount, the "Surety Bond
Amount"). The Letter of Credit (i) must be issued
on the Closing Date (or as otherwise agreed to by
the Agents), and (ii) must expire no later than
the third anniversary of the Closing Date. At any
time subsequent to the issuance of the Letter of
Credit and prior to its expiration or a drawing
thereunder, the Borrower may replace the Letter of
Credit with a letter of credit issued by another
letter of credit issuer (i) in the full Letter of
Credit Amount and (ii) containing terms and
conditions substantially similar to the Letter of
Credit and otherwise acceptable to the applicable
Surety or the District Court, as the case may be,
in which case the commitment to make Term A Loans
shall automatically expire. The Issuer shall only
have an obligation to fund any amounts under the
Letter of Credit in connection with a draw
thereunder after the expiration of three business
days following the receipt of a draw request from
the applicable bonding company or, if permitted by
applicable law, the District Court. The Issuer's
exposure for draws under the Letter of Credit will
be "risk participated" to the Lenders.
Stated Amount Reduction
of Letter of Credit: From and after the date (the "Surety Release
Date") upon which the full Surety Bond Amount has
been set aside, accreted in interest or deposited
in the escrow account (the "Escrow Account") as
required by the District Court (such amount not to
include the proceeds of the Term B Loans and
"mandatory prepayments" other than the Surety Bond
Reduction Amount (as defined below)), the Letter
of Credit Amount will reduce dollar-for-dollar
automatically (unless not permitted to be so
reduced by the District Court, in which case such
Letter of Credit Amount shall be reduced in a
manner permitted by the District Court and
satisfactory to the Agents) and (i) without
further action on the part of the Issuer, and (ii)
if applicable, a release from the applicable
Surety) by the amount of cash deposited
(including, without limitation, interest accrued)
from time to time by the Borrower with (and on
terms satisfactory to) the District Court.
Notwithstanding the foregoing and subject to
deposit from time to time by the Borrower with
(and on terms satisfactory to) the District Court,
the Letter of Credit Amount (i) will be reduced
with proceeds of "mandatory prepayments" (other
than the Surety Bond Reduction Amounts) described
below (even if such prepayment occurs prior to the
Surety Release Date) and (ii) on or after the
Surety Release Date, will reduce automatically by
the Amortization Amounts (as defined
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below) and any other amount set aside, accreted in
interest or deposited in the Escrow Account as
required by the District Court (in each case,
unless not permitted to be so reduced by the
District Court, in which case such Letter of
Credit Amount shall be reduced in a manner
permitted by the District Court and satisfactory
to the Agents).
Tranche A Facility: The Term A Loans will be made to the Borrower only
on the date that there is a draw under the Letter
of Credit (the "Letter of Credit Draw Date"), with
the principal amount of the Term A Loans being
equal to the amount of the draw under the Letter
of Credit. Once repaid, Term A Loans cannot be
reborrowed.
Tranche A Facility
Commitment Amount: $700,000,000 (or, if less, the Bond Amount).
Purpose: Proceeds of Term A Loans shall be used to
reimburse the Issuer for the draw made under the
Letter of Credit. The Borrower will be obligated
to repay the amount of the draw under the Letter
of Credit on the business day on which such draw
occurs, provided, that so long as no default or
event of default shall have occurred and be
continuing on the date of the draw under the
Letter of Credit, the Borrower may satisfy its
reimbursement obligations by having the Term A
Loans made to it by the Lenders. In any event,
however, each Lender will (without duplication, if
Term A Loans are made) be obligated to reimburse
the Issuer for the draw under the Letter of Credit
(on the date the Issuer makes any payment under
the Letter of Credit) based on such Lender's
percentage of the Tranche A Facility Commitment
Amount.
Amortization of
the Tranche A Facility: To the extent Term A Loans have been made and the
Surety Release Date has occurred, the outstanding
principal amount will be repaid on the dates and
in the amounts described in the "Amortization
Amounts" (inclusive of the reduction of the Letter
of Credit Amount as a result of the payment of the
Amortization Amounts that occurred prior to the
Term A Loans being made).
Final Maturity Date
for All Term A Loans: The third anniversary of the Closing Date.
Tranche B Facility: The Tranche B Facility will be made available in a
single borrowing on the Closing Date to the
Borrower pursuant to which Term B Loans will be
made. Once repaid, Term B Loans cannot be
reborrowed.
Tranche B Facility
Commitment Amount: $300,000,000.
Purpose: Proceeds of Term B Loans shall be deposited with
(and on terms acceptable to) the District Court in
the Escrow Account to satisfy the Borrower's
obligations to the Sureties or the District Court,
as the case may be, pending appeal of the Conwood
Proceeding.
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Amortization of the
Tranche B Facility: Term B Loans will amortize in equal quarterly
installments of $750,000 (representing 0.25% of
the total amount of the Tranche B Facility
Commitment Amount) for the first 17 quarters
following the Closing Date, with the remainder of
the Term B Loans due and payable on the "Final
Maturity for All Term B Loans" set forth below.
Call Premium for
Tranche B Facility: 102% if any Term B Loans are prepaid (whether by
way of optional or mandatory prepayments (other
than as a result of mandatory prepayments
resulting from the settlement, refund or set-off
of certain tax claims)) at any time during the
first six months following the Closing Date, with
the call premium reducing thereafter ratably every
six months to 100% at 24 months following the
Closing Date.
Final Maturity for
All Term B Loans: Four and one-half years following the Closing Date
(but not to be later than February 16, 2005).
III. COMMON TERMS APPLICABLE TO CREDIT FACILITIES
Interest Rate: At the Borrower's option, Loans will bear interest
at either Scotiabank's (i) alternate base rate
("Base Rate Loans") or (ii) reserve-adjusted LIBO
rate ("LIBO Rate Loans") plus, in each case, the
"Applicable Margin" (as defined below).
Applicable Margin: The Applicable Margin on Loans shall be based on
the Borrower's senior unsecured debt rating
(issued by S&P and Moody's, and referred to as the
"Debt Rating") as set forth on Schedule I hereto.
Interest Payment Dates: Interest periods for LIBO Rate Loans shall be, at
the Borrower's option, one, two, three or six
months. Interest on LIBO Rate Loans shall be
payable on the last business day of the applicable
interest period for such Loans and, if earlier, at
three month intervals following the commencement
of such interest period. Interest on Base Rate
Loans shall be payable quarterly in arrears.
Revolving Facility
Commitment Fees: A commitment fee shall be payable on the unused
principal amount of the Revolving Facility, based
on the Debt Rating, as set forth on Schedule I
hereto.
Letter of Credit
Fees and Payment Dates: A Letter of Credit fee on the Letter of Credit
Amount will accrue in an amount (based on the Debt
Rating) as set forth on Schedule I hereto, with
such Letter of Credit fee being payable quarterly
in arrears (following the date of the issuance of
the Letter of Credit), and on the Letter of Credit
Draw Date. In addition, a fronting fee will be
payable to the Issuer for its own account in an
amount and on the dates set forth in the
Administrative Agent's Fee Letter.
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<PAGE> 11
Optional Prepayments: Outstanding Loans are voluntarily payable without
penalty (subject to the obligation to pay a call
premium payable in connection with the prepayment
of Term B Loans as set forth under the caption
"Call Premium for Tranche B Facility"); provided,
however, that LIBO rate breakage costs, if any,
shall be for the account of the Borrower, and
optional prepayments of Term Loans made following
the Letter of Credit Draw Date shall be divided
pro rata between Term A Loans and Term B Loans.
Mandatory Prepayments: (i) 100% of amounts (in excess of an agreed upon
minimum amount) which are received from the
settlement, refund or set-off of certain tax
claims arising from the Conwood Proceeding (to be
defined in a manner acceptable to the Agents, and
referred to as the "Tax Settlement"); (ii) 100% of
net cash proceeds of asset sales by the Borrower
and its domestic subsidiaries (including, without
limitation, permitted sales of stock of any
domestic subsidiaries of the Borrower); (iii) 100%
of the net cash proceeds from the issuance of
certain, to be agreed upon permitted debt by the
Borrower or any of its domestic subsidiaries; and
(iv) 50% of the net cash proceeds from the
issuance of equity by the Borrower or any of its
domestic subsidiaries, with mandatory prepayments
in each case applied pro rata to (x) the Term B
Loans and (y) to the deposit of the applicable
amount with the District Court (and a resulting
reduction in the Letter of Credit Amount (subject
to the consent of the District Court as
applicable)), or (alternatively) to the Term A
Loans (if made), until all Term Loans are paid in
full (and, as the case may be, the Letter of
Credit Amount is reduced to zero) and then to the
repayment of the outstanding principal amount of
Revolving Loans (but not a reduction in the
Revolving Facility Commitment Amount); provided,
however, that, an amount equal to 50% of all
mandatory prepayments (such amount, the "Surety
Bond Reduction Amount") will be set aside or
deposited in the Escrow Account as required by the
District Court to reduce the Surety Bond Amount
until the Surety Release Date (such 50% not to be
applied as set forth in clauses (x) and (y)
above); and, provided, further, that, any
mandatory prepayments made hereunder will not
reduce the obligations of the Borrower to pay the
Amortization Amounts and the scheduled
amortization of the Tranche B Facility.
Notwithstanding the foregoing, any Lender having
Term B Loans will have the right to decline to
have such Loans prepaid with the mandatory
prepayment amounts set forth above, in which case
the amounts that would have been applied to a
prepayment of such Lender's Term B Loans, shall
instead be applied to a prepayment of the Term A
Loans until paid in full (or, as the case may be,
the Letter of Credit Amount is reduced to zero)
and then to the repayment of the outstanding
principal amount under (but not a reduction in),
the Revolving Facility Commitment Amount.
Security: The Credit Facilities will be secured by a
first-priority perfected lien on any tax claims
payable to the Borrower or it subsidiaries
resulting from a final adverse judgment against
the Borrower and its subsidiaries in the Conwood
Proceeding, and all cash, cash
6
<PAGE> 12
equivalents (other than amounts deposited or
accrued in the Escrow Account), inventory,
accounts receivables and the Lenders' pro rata
portion of any amounts payable to the Borrower
from the taxing authorities and cash payments
actually received in connection therewith (arising
in each case in connection with the establishment
of a "qualified settlement fund"), in each case of
the Borrower and each of its direct and indirect
domestic U.S. subsidiaries, whenever acquired and
wherever located.
Guarantees: To be delivered by each Guarantor.
Conditions Precedent
to Initial Extensions
of Credit: Customary for the type of transaction proposed and
others to be reasonably specified by the Agents,
including, without limitation, the following:
1. Execution and delivery of satisfactory
credit, security, guarantee and other related
documentation embodying the structure, terms
and conditions contained herein.
2. Review and satisfaction with the terms of the
bonding requirements arising in the Conwood
Proceeding and the terms, form and conditions
of the Letter of Credit.
3. No material adverse change in the business,
assets, debt service capacity, tax position
(other than any adverse change in the status
of the Tax Settlement), environmental
liability, financial condition, operations or
prospects of the Borrower since December 31,
1999 (exclusive of up to the $1,050,000,000
judgment entered in the Conwood Proceeding).
4. Receipt of closing certificates, resolutions,
certificates, opinions of counsel, etc.
customary for the type of transaction
proposed and in each case satisfactory in
form and substance to the Agents. Legal
opinions will be from counsel satisfactory to
the Agents and will include opinions on,
among other things, (i) creation and
perfection of the Lenders' liens, (ii) status
of judgment (and lien) creditors compared to
the Lenders' liens, (iii) no conflict of the
Credit Documentation with material agreements
binding on the Borrower and its subsidiaries,
(iv) that the Lenders' liens will not be
required to be shared with the holders of the
Existing Notes or notes exchanged for the
Existing Notes.
5. The Lenders and the Administrative Agent
shall have received all fees and expenses
required to be paid on or before the Closing
Date.
6. All governmental and third party approvals
necessary or advisable in connection with the
Transaction, the financing contemplated
hereby and the continuing operations of the
7
<PAGE> 13
Borrower and its subsidiaries shall have been
obtained and be in full force and effect.
7. There shall exist no pending or threatened
litigation, proceedings or investigations
which (x) contests the consummation of the
Transaction or (y) (other than the Conwood
Proceeding) could reasonably be expected to
have a material adverse effect on the
financial condition, operations, assets,
business, properties or prospects of the
Borrower or any of its subsidiaries.
8. The Lenders shall have received
first-priority perfected liens as
contemplated above under the caption
"Security", in each case to the satisfaction
of the Administrative Agent.
9. Repayment of all indebtedness and other
amounts owing under the Existing Agreement,
and termination of all commitments
thereunder.
10. Evidence satisfactory to the Agents as to the
deductibility of amounts actually paid in
connection with the judgment entered in the
Conwood Proceeding.
Additional Conditions
Precedent: The making of each Loan and the issuance of the
Letter of Credit will be conditioned upon (i) all
representations in the Credit Documentation being
true and correct in all material respects and (ii)
there being no event of default or condition
which, with the giving of notice or passage of
time (or both), would constitute an event of
default.
Representations
and Warranties: Customary for the type of transaction proposed and
others to be reasonably specified by the
Administrative Agent.
Affirmative Covenants: Customary for the type of transaction proposed and
others to be reasonably specified by the
Administrative Agent (including, but not limited
to, the requirement that (x) the Borrower will use
all commercially reasonable efforts to realize as
soon as practicable the settlement, refund or
off-set (in excess of an agreed upon minimum
amount) of tax benefits arising from the Conwood
Proceeding and (y) the Borrower deposit with (or
at the direction of) the District Court not less
than (i) (A) $75,000,000 on or prior to December
31, 2000, and (B) thereafter, $37,500,000 on or
prior to the last business day of each fiscal
quarter ending September and December following
December 31, 2000, and (ii) $25,000,000 on or
prior to the last business day of each fiscal
quarter ending March and June following the
Closing Date (such amounts to be deposited under
clauses (i) and (ii) hereof up to a maximum amount
of $375,000,000); provided, that, the amounts to
be deposited hereunder shall not include any
interest accrued in the Escrow Account or any
mandatory prepayments (the amounts referred to in
clauses (i) and (ii) hereof referred to as the
"Amortization Amounts").
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<PAGE> 14
Negative Covenants: Customary for the type of transaction proposed and
others to be reasonably specified by the
Administrative Agent, including, without
limitation, as follows (subject to agreed upon
baskets and exceptions):
1. Restricting the incurrence of additional
debt, sale leasebacks and contingent
liabilities (but permitting the incurrence of
indebtedness under the Replacement Revolving
Facility).
2. Restricting the making of cash dividends or
similar distributions (including, without
limitation, direct or indirect redemptions of
capital stock). Notwithstanding the
foregoing, the amount of dividends paid at
the current per share level shall be
permitted.
3. Restricting the incurrence or sufferance of
liens or other encumbrances (but permitting
the granting of liens on a pari passu basis
to the lenders under the Replacement
Revolving Facility).
4. Restricting the sale of assets or similar
transfers.
5. Restricting the making of investments or
acquisitions (in a single transaction or in a
series of related transactions).
6. Restricting mergers, consolidations and
similar combinations.
7. Restrictions on transactions with affiliates.
8. Other than in connection with an exchange
offer for the Existing Notes, restricting the
refinancing, defeasance, repurchase or
prepayment of amounts owing under the
Existing Notes.
Financial Covenants: The financial covenants set forth below, with the
definitions and applicable levels and ratios to be
negotiated (all accounting terms to be
interpreted, and all accounting determinations and
computations to be made, in accordance with U.S.
generally accepted accounting principles):
1. Maintenance of maximum debt (which shall
include the then effective amount of the
Surety Bonds, without duplication of the
Letter of Credit Amount) to earnings before
interest, taxes, depreciation and
amortization ("EBITDA").
2. Maintenance of minimum fixed charge coverage
ratio, based on EBITDA less capital
expenditures to the sum of net cash interest,
dividends (both before and after declaration)
and the applicable Amortization Amounts and
the scheduled amortization of the Tranche B
Facility. The minimum fixed charge coverage
ratio will include pro
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<PAGE> 15
forma calculations based on acquisitions and
dispositions as if such acquisitions or
dispositions occurred on the first day of the
relevant four quarter period.
Events of Default: Customary for the type of transaction proposed and
others to be reasonably specified by the Agents,
including, without limitation, a cross-default to
other indebtedness of the Borrower (including, but
not limited to, the Existing Notes) and its
subsidiaries in an amount to be agreed upon, and a
change of control (to be defined).
Miscellaneous: Customary provisions to be included, together with
others to be reasonably specified by the Agents,
including, without limitation, the following:
1. Customary indemnity and capital adequacy
provisions, including but not limited to
compensation in respect of taxes (including,
without limitation, gross-up provisions for
withholding taxes) and decreased
profitability resulting from U.S. or foreign
capital adequacy requirements, guidelines or
policies or their interpretation or
application, and any other customary yield
and increased costs protection deemed
necessary by the Lenders to provide customary
protection.
2. The Lenders will be permitted to assign (by
novation) Loans, notes and commitments. Any
assignments of Revolving Loans and Revolving
Loan Commitments shall be made pro rata, and
shall require the consent of the
Administrative Agent. Assignments of Tranche
A Facility commitments shall be made pro rata
between the obligation to risk participate in
the Letter of Credit and the making of Term A
Loans, and such assignments (including,
without limitation, assignments to affiliates
of a Lender, or to another Lender, or a
"Related Fund" (to be defined in the Credit
Documentation) of a Lender) shall require the
consent of the Administrative Agent (in
consultation with GS) and (prior to the
Letter of Credit Draw Date) the Issuer in
their respective sole discretion. Assignments
of Term B Loans need not be made pro rata
with any other Loans or commitments, but
shall require the consent of the
Administrative Agent. Assignments of
Revolving Loans, Revolving Loan Commitments
and Term Loans (i) shall also (so long as no
default or event of default shall have
occurred and be continuing) require the
Borrower's consent (not to be unreasonably
withheld or delayed), unless the assignment
is made to another Lender or an affiliate
(including, without limitation, a "Related
Fund"), and (ii) unless made by a Lender to
another Lender or an affiliate, shall be made
in minimum amounts of not less than
$1,000,000 (or in lesser amounts if all such
Lender's remaining Revolving Loans, Revolving
Loan Commitments and Term Loans are
assigned). Participation of Loans, notes and
commitments shall be without restrictions and
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<PAGE> 16
participants will have the same benefits as
the Lenders with regard to increased costs,
capital adequacy, etc., and provision of
information on the Borrower; provided, that
the right of participants to vote on
amendments, waivers, etc. will be limited to
certain customary issues such as, without
limitation, extension of the final scheduled
maturity date of the Loans participated in by
such participant. The Credit Documentation
will contain provisions relating to the right
of the Issuer and the Borrower to require a
Lender to assign its Letter of Credit
Commitment and obligation to make Term A
Loans in the event such Lender's unsecured
debt rating (or comparable rating, as
determined by the Issuer or the Borrower) is
below a level satisfactory to the Issuer and
the Borrower.
3. Indemnification of each Agent, each of the
Lenders and each of their respective
affiliates, directors, officers, agents and
employees (collectively, the "Indemnified
Parties") from and against any losses,
claims, damages, liabilities or other
expenses, substantially as set forth in Annex
II hereto.
4. Payment of each Agent's fees and
out-of-pocket expenses, substantially as set
forth in Annex II hereto.
5. Amendments and waivers of the Credit
Documentation will require the approval of
Lenders holding 51% or more of the Loans and
commitments, except that the consent of all
the Lenders shall be required with respect to
certain customary issues.
6. Waiver of jury trial.
7. New York governing law; consent to New York
jurisdiction.
Counsel to the
Administrative Agent: Mayer, Brown & Platt.
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This Term Sheet is intended as an outline only and does not purport to summarize
all the conditions, covenants, representations, warranties and other provisions
which would be contained in the definitive Credit Documentation. Scotiabank's
and GS' commitments, undertakings and obligations described in this Annex and
the Commitment Letter will be subject to negotiation and execution of definitive
Credit Documentation in form and substance satisfactory to Scotiabank, GS, their
legal counsel and the Lenders.
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ANNEX II
INDEMNIFICATION PROVISIONS
Unless otherwise defined, terms used herein shall have the meanings
assigned thereto in the commitment letter (the "Commitment Letter") and term
sheet (the "Term Sheet") to which this Annex II is attached.
UST Inc. (the "Indemnitor") shall pay all of each Agent's fees, costs
and expenses (including, without limitation, all out-of-pocket costs and
expenses arising in connection with the syndication of the Credit Facilities and
any due diligence investigation performed by each Agent, and the fees and
expenses of Mayer, Brown & Platt, special counsel to the Agents and also of,
without limitation, any local or foreign legal counsel) arising in connection
with the negotiation, preparation, execution, delivery or administration of the
Commitment Letter, the Term Sheet, the Fee Letters and the definitive Credit
Documentation, and the Indemnitor shall be obligated to pay such fees, costs and
expenses whether or not definitive Credit Documentation is executed or delivered
or the Transaction is consummated; provided, that the Indemnitor shall only be
required to pay the fees and expenses of Mayer, Brown & Platt, in connection
with such negotiation, preparation, execution, administration and related
matters.
In addition, the Indemnitor hereby indemnifies and holds harmless all
Indemnified Parties (as defined below) from and against all Liabilities (as
defined below) other than the Liabilities of a particular Indemnified Party
arising out of the gross negligence, bad faith or willful misconduct of such
Indemnified Party. "Indemnified Party" shall mean each Agent, each of the
Lenders, each affiliate of any of the foregoing and the respective directors,
officers, partners, agents and employees of each of the foregoing, and each
other person controlling any of the foregoing within the meaning of either
Section 15 of the Securities Act of 1933, as amended, or Section 20 of the
Securities Exchange Act of 1934, as amended. "Liabilities" shall mean any and
all losses, claims, damages, liabilities or other costs or expenses to which an
Indemnified Party may become subject which arise out of or relate to or result
from any transaction, action or proceeding to or connected with the transaction
described in the Commitment Letter, Fee Letters or Term Sheet. In addition to
the foregoing, the Indemnitor agrees to reimburse each Indemnified Party for all
legal or other expenses incurred in connection with investigating, defending or
participating in any action or other proceeding relating to any Liabilities
(whether or not such Indemnified Party is a party to any such action or
proceeding).
In furtherance of the foregoing, in the event that any Indemnified
Party becomes involved in any capacity in any action, proceeding or
investigation brought by or against any person, including, but not limited to,
stockholders of the Indemnitor, in connection with or as a result of either this
arrangement or any matter referred to in the Commitment Documents, the
Indemnitor periodically will reimburse each Indemnified Party for its legal and
other expenses (including, but not limited to, the cost of any investigation and
preparation) incurred in connection therewith.
If for any reason the indemnification described herein is unavailable
to any Indemnified Party or insufficient to hold it harmless, then the
Indemnitor shall contribute to the amount paid or payable by each Indemnified
Party as a result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect the relative economic interests of the Indemnitor and
its stockholders on the one hand and each Indemnified Party on the other hand in
the matters contemplated by the Commitment Documents as well as the relative
fault of the Indemnitor and any Indemnified Party with respect to such loss,
claim, damage or liability and any other relevant equitable considerations. The
Indemnitor also agrees that no Indemnified Party shall have any liability to the
Indemnitor or any person asserting claims on behalf of or in right of the
Indemnitor or any other person in connection with or as a result of either this
arrangement or any matter referred to in the Commitment Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Indemnitor result solely from the gross negligence, bad faith or willful
misconduct of such Indemnified Party in performing the services that are subject
to the Commitment Documents; provided, however, that in no event shall such
Indemnified Party have any liability for any consequential, incidental or
punitive damages in connection with or as a result of such Indemnified Party's
activities arising under or related to the commitments, undertakings or
agreements under the Commitment Documents. The
<PAGE> 19
reimbursement, indemnity and contribution obligations of the Indemnitor
hereunder shall be in addition to the Liabilities, shall extend upon the same
terms and conditions to any Indemnified Party and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representative of any Indemnified Party.
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ANNEX III
UST INC.
The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Attn.: Mr. John Hopmans
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York 10004
Attn.: Mr. Fil Rensky
___________ , 2000
Dear Sirs:
This is to advise you that UST Inc. is hereby exercising its option to
extend the commitments, undertakings and agreements under the commitment letter
(the "Commitment Letter"), dated as of June 19, 2000, by and among UST Inc., The
Bank of Nova Scotia and Goldman Sachs Credit Partners L.P. until December 19,
2000, subject to the terms and conditions of the Commitment Letter. In
connection with the foregoing extension, we agree (in consideration of your
extension of your commitments under the Commitment Letter) to pay the fees
required to be paid under paragraph (a)(ii) of the Agents' Fee Letter on the
dates set forth in the Agents' Fee Letter. Unless otherwise defined, capitalized
terms used herein shall have the meanings provided for in the Commitment Letter.
Sincerely,
UST INC.
By_________________________________
Title:
