<PAGE>
Exhibit (b)(1)
to Schedule TO
The Bank of Nova Scotia
San Francisco Agency
580 California Street, Suite 2100
San Francisco, CA, U.S.A. 94104
Mailing Address: P.O. Box 3716
San Francisco, CA U.S.A. 94119
Tel: (415) 986-1100
Fax: (415) 397-0791
Telex: 00340602
[Scotia Capital logo]
CONFIDENTIAL
August 28, 2000
Vincor International Inc.
441 Courtneypark Drive East
Mississauga, Ontario L5T 2V3
Attention: Mr. Richard G. Jones,
Executive Vice-President and Chief Financial Officer
ACQUISITION FACILITY
COMMITMENT LETTER
Dear Sirs:
You have advised that Vincor International Inc. ("Vincor") proposes to form (x)
a Nevada general partnership (the "U.S. Borrower"), 99% of the partnership units
of which will be owned by Vincor and the remaining 1% of the partnership units
of which will be owned by a direct-wholly-owned Canadian subsidiary of Vincor
("Cdn Subco"), (y) the U.S. Borrower proposes to form a wholly-owned U.S.
subsidiary ("Holdco") and (z) Holdco proposes to form a wholly-owned U.S.
subsidiary ("Acquisitionco"). You have provided us with certain information
regarding the proposed cash tender offer (the "Tender Offer") for all of the
outstanding shares in the capital stock of R.H. Phillips, Inc. ("Phillips") by
Acquisitionco (the acquisition of such capital stock (the "Shares") pursuant to
such cash tender offer being referred to herein as the "Stage I Transaction")
and the subsequent proposed transaction (the "Stage II Transaction") which will
occur no later than the business day immediately following the initial extension
of credit under the Acquisition Facility whereby Acquisitionco would merge with
and into Phillips (the "Merger") with Phillips as the surviving corporation
("Newco") and, concurrently with the consummation of the Merger, Newco will
effect a refinancing of all of the existing indebtedness of Phillips (except as
may otherwise be agreed to by the Administrative Agent). The Stage I Transaction
and the Stage II Transaction are collectively referred to herein as the
"Transactions".
Based on our review of the information provided by you and our discussions with
you, we understand that in order to provide the financing for the Transactions,
as well as to provide for the funding of transaction expenses, you are
interested in obtaining a commitment for a senior secured loan facility to be
provided to the U.S. Borrower.
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August 28, 2000
Upon the terms and conditions set forth herein, Scotiabank is pleased to commit
to provide to the U.S. Borrower the full amount of the Acquisition Facility and
to act as the sole administrative agent for a separate syndicate of other
financial institutions (together with Scotiabank, the "Lenders") which may
commit to a portion of the Acquisition Facility. Scotiabank may solicit
commitments to the Acquisition Facility from such other financial institutions
which shall be reasonably acceptable to you in respective amounts sufficient to
allow Scotiabank to achieve its desired hold level in the Acquisition Facility.
Nonetheless, our commitments are not subject to syndication of any portion of
the Acquisition Facility.
All references to dollar amounts herein and all attachments hereto shall be to
United States dollars.
Our commitments hereunder are subject to:
(a) fulfilment of the terms and conditions set forth herein and in the term
sheet annexed hereto as Annex I (the "Term Sheet");
(b) the fulfilment of the terms and conditions of the confidential fee letter
dated the date hereof (the "Fee Letter");
(c) in Scotiabank's good faith determination (in substitution for any
discretion of Acquisitionco), the fulfilment of all of the conditions to
Acquisitionco's obligation to take up and pay for shares under the Tender
Offer which are set out in the offering circular or in any support or lock
up agreement relating to the Tender Offer; and
(d) Scotiabank's satisfaction that there shall be no competing offering,
placement or arrangement of any debt securities of Vincor, the U.S.
Borrower, Holdco, Acquisitionco or any subsidiary thereof prior to or
during the syndication of the Acquisition Facility;
in which event we reserve the right to either terminate our commitments
hereunder (and thereafter have no other or further obligations hereunder or in
connection with the Acquisition Facility) or to propose alternative financing
amounts or structures that assure adequate protection for Scotiabank and the
Lenders.
You agree, by your signature below, to, and to cause each of the U.S. Borrower,
Holdco and Acquisitionco to, actively assist us, in all commercially reasonable
respects in the syndication of the Acquisition Facility, which assistance will
require, among other things:
(a) provision of all information reasonably deemed necessary by Scotiabank to
successfully complete our syndication efforts including, but not limited
to, information and financial
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August 28, 2000
analyses (the "Financial Analyses") prepared by you, the U.S. Borrower,
Holdco, Acquisitionco or on your or their behalf, related to the
Transactions; and
(b) assistance upon our request in the preparation of syndication memoranda and
all other marketing materials to be used in connection with our syndication
efforts. Such assistance shall also include your using, and causing each of
the U.S. Borrower, Holdco, Acquisitionco and your and their subsidiaries to
use, reasonable efforts to ensure that our syndication efforts benefit from
your and their lending relationships. In addition, you agree to, and to
cause the U.S. Borrower, Holdco, Acquisitionco and your and their
subsidiaries to use reasonable efforts to, make certain of your and their
members of management, as well as, to the best of your and their ability,
your and their consultants and advisors, available during regular business
hours to answer questions regarding the Transactions and the financing
thereof (including, without limitation, pursuant to the Acquisition
Facility).
By the execution of the Loan Documentation you, the U.S. Borrower, Holdco and
Acquisitionco will each represent and covenant that, to the best of your and
their knowledge:
(a) all factual information (the "Information") that has been made or will be
made available to Scotiabank by you or them or on your or their 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 statement contained therein not materially misleading in light of the
circumstances under which such statements are made; and
(b) the Financial Analyses that have been or will be made available to
Scotiabank by you or them or on your or their behalf have been or will be
prepared in good faith based upon reasonable assumptions; provided,
however, that Scotiabank acknowledges that there is no assurance that
actual results will correspond to any financial projections or forecasts
contained in the Financial Analyses. In arranging the syndication of the
Acquisition Facility we will use and rely on the Information and Financial
Analyses without independent verification thereof and will not assume
responsibility for the accuracy or completeness of such Information or
Financial Analyses.
By your signature below you hereby agree, on terms and conditions provided in
Annex II hereto, to indemnify and hold harmless Scotiabank, each other Lender
committing to participate in the Acquisition Facility and each of our and their
respective affiliates, directors, officers, agents and employees, whether or not
definitive loan, guarantee and security documentation (collectively the "Loan
Documentation") is ultimately executed and delivered or the transactions
(including the Transactions) contemplated hereby are completed.
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August 28, 2000
This Commitment Letter and the Term Sheet are delivered to you with the
understanding that neither this Commitment Letter, the Term Sheet, the Fee
Letter nor the substance hereof or thereof shall be disclosed to any third
party including other commercial or investment banks or advisers without our
prior written consent except those in confidential relationships to you, such
as your legal counsel or accountants or accountants, or as required by law or
any court or governmental agency (and in each such event of permitted
disclosure you agree promptly to inform us); provided, however, that after
you have accepted this Commitment Letter in the manner provided below this
Commitment Letter and Term Sheet may be (x) shown to Phillips and (y) filed
with the Securities Exchange Commission in connection with the Tender Offer.
This Commitment Letter, the Fee Letter and the Term Sheet (including, without
limitation, any Annexes, Appendices or Schedules attached thereto) constitute
the entire understanding among the parties hereto with respect to the subject
matter hereof and supersede any prior agreements, written or oral, with respect
thereto. For certainty, this Commitment Letter, the Fee Letter and the Term
Sheet supercede and replace the Commitment Letter dated August 18, 2000 issued
by The Bank of Nova Scotia in connection with the Acquisition Facility (and the
fee letter and term sheet in connection therewith).
This Commitment Letter, the Fee Letter and the Term Sheet shall be governed by
and construed in accordance with the laws of the Province of Ontario and the
laws of Canada applicable therein. In no event shall any party to this
Commitment Letter be liable for consequential damages.
If you agree with the following, please sign and return to us the enclosed copy
of this Commitment Letter and the Fee Letter, by 5:00 p.m., Toronto time, on
August 30, 2000 at which time our commitment on the terms set forth herein will
expire. Notwithstanding any such timely acceptance, our commitments will
terminate at noon, Toronto time, on (a) September 10, 2000 unless on or prior to
such time Acquisitionco has formally commenced the Tender Offer or (b) November
30, 2000, unless, on or prior to such time, Loan Documentation satisfactory to
us and our counsel has been executed and delivered by Vincor, the U.S. Borrower,
Acquisitionco and us (with the date of such execution and delivery being herein
referred to herein as the "Closing Date") provided however that, any term or
provision hereof to the contrary notwithstanding, the four immediately preceding
paragraphs shall survive any termination of our commitments pursuant to this
paragraph.
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August 28, 2000
We look forward to working with you.
Yours very truly,
THE BANK OF NOVA SCOTIA
By: /s/ M. Van Otterloo
----------------------
Name: M. Van Otterloo
Title: Managing Director
Agreed to and accepted as of the 30th day of August, 2000
VINCOR INTERNATIONAL INC.
By: /s/ Richard G. Jones
------------------------
Name: Richard G. Jones
Title: Executive Vice-President
By: /s/ Bruce D. Walker
-----------------------
Name: Bruce D. Walker
Title: Executive Vice President
<PAGE>
ANNEX I to Acquisition
Facility Commitment Letter
TERMS AND CONDITIONS OF THE ACQUISITION FACILITY
(Unless otherwise defined, terms used in this Term Sheet have the meanings
ascribed thereto in the Commitment Letter)
BORROWER: U.S. Borrower
GUARANTORS: "Guarantor" means Vincor and each subsidiary of Vincor
that has previously provided a guarantee to The Bank of
Nova Scotia, all subsidiaries of Vincor in connection
with the Sumac Ridge and Hawthorne acquisitions, Holdco,
Acquisitionco (prior to the Stage II Transaction) and
Newco (at all times after the Stage II Transaction). The
U.S. Borrower and the Guarantors are hereinafter
referred to as the "Companies".
ADMINISTRATIVE The Bank of Nova Scotia ("Administrative Agent")
AGENT:
LENDERS: The Bank of Nova Scotia and a group of financial
institutions (collectively, the "Lenders") as may be
acceptable to the Administrative Agent and the Borrower.
ACQUISITION A senior, first priority secured U.S. $95,000,000
FACILITY non-revolving term credit facility (the "Acquisition
DESCRIPTION: Facility").
USE OF PROCEEDS: As set out in the Commitment Letter.
ACQUISITION U.S. $95,000,000
FACILITY
COMMITMENT
AMOUNT:
BOOKING POINT: The Administrative Agent's San Francisco Agency
STATED MATURITY 180 days after the Closing Date at which time all
DATE FOR outstanding amounts under the Acquisition Facility will
ACQUISITION be due and payable.
FACILITY:
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AVAILMENT OPTION The U.S. Borrower may, at its option, obtain credit
AND INTEREST under the Acquisition Facility as follows:
RATES:
(a) U.S. dollar advances as LIBOR Loans for interest
periods of 1, 2, 3 or 6 months, bearing interest at
LIBOR for applicable interest period plus 3.25% per
annum, payable at end of interest period (but no
less frequently than every 3 months) and calculated
on basis of a 360-day year.
(b) U.S. dollar advances as Alternate Base Rate Loans,
bearing interest at Alternate Base Rate plus 2.25%
per annum, payable monthly in arrears.
VOLUNTARY Outstanding credit is voluntarily prepayable under the
PREPAYMENTS: Acquisition Facility without penalty; provided, however,
that breakage costs, if any, shall be for the account of
the U.S. Borrower.
MANDATORY In events customary for the type of transaction proposed
PREPAYMENTS: including, without limitation, the following events,
amounts equal to:
2. 100% of the net proceeds of asset sales excluding
sales of equipment to be replaced, obsolete
equipment, sale leaseback transactions and proceeds
of insurance provided they are reinvested in the
business within a reasonable time period;
3. 100% of the net proceeds of debt issuances with the
exception of purchase money obligations and capital
leases subject to a maximum aggregate amount to be
mutually agreed upon;
4. 100% of the net proceeds of equity issuances; and
5. 75% of annual excess cash flow;
shall be applied to repayment of the Acquisition
Facility provided, however, that breakage costs, if any,
shall be for the account of the U.S. Borrower.
SECURITY: All debts, liabilities and obligations of the U.S.
Borrower under the Acquisition Facility shall be
collaterally secured by a first-ranking
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security interest (subject to standard permitted liens)
in all of the present and future property, assets and
undertaking of the U.S. Borrower and an unlimited,
unconditional guarantee of each Guarantor, which shall
in turn be secured by a first-ranking security interest
(subject to standard permitted liens) in all of the
present and future property, assets and undertaking of
such Guarantor. The security documentation will include,
without limitation, the following:
(a) pledge agreements of each of Vincor and Cdn. Subco
which will include a pledge of their respective
partnership interests in the U.S. Borrower;
(b) a pledge agreement of the U.S. Borrower which will
include a pledge of all of the shares of Holdco;
(c) a pledge agreement of Holdco which will include all
of the shares of Acquisitionco and, after the Stage
II Transaction, Newco; and
(d) a pledge agreement of Acquisitionco which will
include a pledge of all of the shares of Phillips
acquired in the Tender Offer.
The aforementioned security from the Borrower and the
Guarantors (other than Newco) will be granted on or
prior to the date of the initial extension of credit
under the Acquisition Facility. The aforementioned
security from Newco will be granted immediately upon the
Stage II Transaction becoming effective.
CONDITIONS Customary for the type of transaction proposed
PRECEDENT TO including, without limitation:
INITIAL FUNDING
UNDER ACQUISITION 1. KPMG has provided to the Administrative Agent its
FACILITY: opinion, in form and substance satisfactory to the
Administrative Agent, as to the tax consequences of
the organizational structure, the Transactions and
the financing thereof.
2. The Administrative Agent is satisfied that the
structure of the Transactions is as disclosed to it
as of the date of the Commitment Letter. Any
changes to such structure shall require the consent
of the Administrative Agent.
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3. Completion of formal credit, guarantee, security
and other related documentation prepared by the
Administrative Agent's legal counsel consistent
herewith and with the Commitment Letter and the Fee
Letter and otherwise satisfactory to the
Administrative Agent and receipt of satisfactory
legal opinions and certificates with respect
thereto (including, without limitation, officer's
solvency certificates) and with respect to any
other matters relating to the Transactions. The
aforementioned documentation will include, without
limitation, (x) an inter-creditor agreement
establishing the pari passu nature of the
obligations and security thereof of Vincor and its
subsidiaries in connection with (i) the Acquisition
Facility and (ii) with the credit agreement made as
of November 22, 1996 between Vincor and The Bank of
Nova Scotia, as amended (the "Existing Vincor
Credit Agreement") and the security therefor and
(y) such deeds of trust, security agreements,
trademark security agreements and agreements with
landlords, warehousemen and other creditors as the
Administrative Agent shall require to enable the
Administrative Agent to effectively enforce the
security interests contemplated herein.
4. The Administrative Agent shall be satisfied that:
(i) Vincor, the U.S. Borrower, Holdco and
Acquisitionco have complied with and are
continuing to comply with all applicable
securities laws, regulations and policies and
all requirements of all applicable securities
regulators in relation to the Transactions;
(ii) all necessary registrations and all steps
shall have been taken to ensure that the
Administrative Agent will have a first
priority security interest in all of the
assets, property and undertaking of the
Companies (other than the assets, property
and undertaking of Phillips) and all
necessary lien searches have been completed
in all appropriate jurisdictions, and
(iii) all necessary governmental and third party
approvals, acknowledgments, directions and
consents have been given, and all relevant
laws have been complied with, in respect of
all agreements and transactions referred
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to herein and the continuing operations of
the Companies and are in full force and
effect, and all applicable waiting periods
shall have expired without any action being
taken or threatened by any competent
authority which would restrain, prevent or
otherwise impose adverse conditions on the
Transactions or the financing thereof.
5. No material adverse change in the financial
condition, operations, assets, business, or
properties of Phillips or any Company since
December 31, 1999.
6. The Administrative Agent shall have received all
fees and expenses required to be paid on or before
such initial extension of credit.
7. There shall exist no pending or threatened
litigation, proceedings or investigations which (x)
contest the consummation of the Transactions or (y)
could reasonably be expected to have a material
adverse effect on the financial condition,
operations, assets business or properties of
Phillips or any Company.
8. The Administrative Agent shall have received
pro-forma opening balance sheets of Vincor, the
U.S. Borrower, Holdco and Newco, on both a
consolidated and unconsolidated basis, giving
effect to the contemplated Transactions and
reflecting the existing and proposed legal and
capital structure (both debt and equity), which
legal and capital structure shall be as previously
disclosed to the Administrative Agent or otherwise
satisfactory in all respects to the Administrative
Agent.
9. The Administrative Agent shall have received
consolidated financial statements for Phillips for
each of the fiscal years ending December 31,
1996-1999.
10. Vincor, the U.S. Borrower, Holdco and Acquisitionco
shall have entered into commitment letters
(including term sheets attached thereto) and fee
letters and other documentation, in form and
substance satisfactory to the Administrative Agent
in its sole discretion, documenting the credit
facilities referred to in the attached Schedule A.
The said credit facilities
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would, inter alia, refinance the Acquisition
Facility as well as the credit facilities
established by The Bank of Nova Scotia in favour of
Vincor pursuant to the Existing Vincor Credit
Agreement, which refinancings shall occur as soon
as reasonably practicable after completion of the
Transactions.
11. The Tender Offer shall have been completed in
accordance with all applicable law for a price not
exceeding U.S. $7.00 per share on or before
November 30, 2000. Under the Tender Offer,
Acquisitionco shall have acquired such number of
shares of Phillips on a fully-diluted basis which,
when combined with the shares of Phillips owned
directly or indirectly by Acquisitionco or any
affiliate or associate of Acquisitionco, constitute
more than 90% of the issued and outstanding shares
of Phillips and otherwise permit Acquisitionco and
Phillips to file with the appropriate regulatory
bodies on the date of such initial extension of
credit all necessary and appropriate documentation
required to effect the Stage II Transaction.
12. The Administrative Agent shall not have become
aware of any information or other matter affecting
the Companies, Phillips or the Transactions which
is inconsistent in any materially adverse way with
any information disclosed to the Administrative
Agent prior to the date hereof (including, without
limitation, in the draft merger agreement and the
schedules thereto).
13. The Acquisition Facility and all other financing
provided to the U.S. Borrower shall be in full
compliance with all requirements of Regulations T,
U and X of the Board of Governors of the U.S.
Federal Reserve System.
14. In Scotiabank's good faith determination (in
substitution for any discretion of any Company),
the fulfilment of all of the conditions to
Acquisitionco's obligation to take up and pay for
shares under the Tender Offer which are set out in
the most recent draft merger agreement provided to
the Administrative Agent prior to the date hereof,
which conditions shall not have been amended,
waived or modified without the approval of the
Administrative Agent.
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15. The Administrative Agent shall be satisfied that,
based on the assumption that the Merger has been
consummated, each Company (including, without
limitation, Newco) is solvent, the fair saleable
value of the assets of each Company exceeds such
Company's liabilities, that no Company should be
unable to pay its debts as they mature and that no
Company has unreasonably small capital.
For certainty, the U.S. Borrower shall not be entitled
to avail itself of credit under the Acquisition
Facility for the purposes of retiring the existing
indebtedness of Phillip until the Stage II
Transaction has been completed and the Administrative
Agent shall have a first priority security interest
in all of the assets, property and undertaking of
Newco.
REPRESENTATION Customary for the type of transaction proposed.
AND WARRANTIES:
FINANCIAL 1. Annual audited consolidated, unconsolidated and
REPORTING: consolidating financial statements of the U.S.
Borrower, Vincor and Newco within 120 days of the
end of each Fiscal Year.
2. Quarterly unaudited consolidated, unconsolidated
and consolidating financial statements of the U.S.
Borrower, Vincor and Newco within 60 days of the
end of each of the first three Fiscal Quarters of
each Fiscal Year.
3. Quarterly compliance certificates within 60 days of
the end of each Fiscal Quarter and 120 days of the
end of each Fiscal Year.
4. Annual budget of the U.S. Borrower, Vincor and
Newco at least 60 days prior to each Fiscal Year.
5. Such other information, reports and information
consistent with that which is currently provided to
The Bank of Nova Scotia by Vincor under the
Existing Vincor Credit Agreement and otherwise as
the Administrative Agent may reasonably request.
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AFFIRMATIVE Customary for the type of transaction proposed
COVENANTS: (applicable to the Companies), including, without
limitation, the following:
Immediately after taking up and paying for shares of
Phillips pursuant to the Tender Offer, Vincor shall
cause Acquisitionco and Phillips to file with the
Secretary of State of California all necessary and
appropriate documentation required to effect the Stage
II Transaction, which Stage II Transaction will be
completed in substantially the manner described in a
merger agreement in form and substance satisfactory to
the Administrative Agent and will become effective as
soon as possible and in any event no later than the
business day immediately following the initial extension
of credit under the Acquisition Facility. For certainty,
such filing shall occur on the same day as the initial
extension of credit under the Acquisition Facility.
Immediately upon the Stage II Transaction becoming
effective:
(i) all existing indebtedness of Phillips will be
repaid and cancelled and releases and discharges
of any security granted in connection with such
existing indebtedness will be delivered (other
than as may be consented to by the Administrative
Agent); and
(ii) the U.S. Borrower shall pledge to the Lenders all
of its shares of Newco; and
(iii) Newco will grant to the Lenders the guarantee and
security contemplated in the "Security" section.
NEGATIVE Customary for the type of transaction proposed
COVENANTS: including, without limitation, the following (applicable
to the Companies):
1. Restricting the incurrence of additional debt
(except as may be agreed to by the Administrative
Agent), sale leasebacks and contingent liabilities.
2. Restricting the declaration or payment of
dividends, the return of capital and similar
distributions and the payment of management or
consulting fees.
3. Restricting the incurrence or sufferance of liens
or other encumbrances.
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4. Restricting the sale of assets or similar
transfers.
5. Limiting the making of loans, investments or
acquisitions (in a single transaction or in a
series of related transactions).
6. Restricting mergers (other than the Stage II
Transaction), consolidations and similar
combinations or changes in business conduct.
7. Restricting the repurchase of capital stock.
8. Restrictions on transactions with affiliates.
9. Limitation on capital expenditures.
10. Restricting amendments to material contracts.
11. Limiting the aggregate fees and expenses (excluding
fees payable to the Administrative Agent) relating
to the Transactions to a maximum of U.S.
$7,500,000.
FINANCIAL The financial covenants set forth below (all accounting
COVENANTS: terms to be interpreted, and all accounting
determinations and computations to be made, in
accordance with Canadian generally accepted accounting
principles):
(a) Maintenance of a maximum ratio of Total Debt to
EBITDA (calculated on a rolling four quarters
basis) to be less than equal to 5.0 to 1 for each
Fiscal Quarter.
(b) Maintenance of a maximum ratio of EBITDA to Fixed
Charges (calculated on a rolling four quarter
basis) to be greater than or equal to 1.1 to 1 for
each Fiscal Quarter.
All financial covenants shall be calculated with respect
to Vincor on a consolidated basis.
EVENTS OF Customary for the type of transaction proposed
DEFAULT: including, without limitation, a change of control (to
be defined) of Vincor and cross-default to defaults
under other indebtedness of any Company and its
subsidiaries in the aggregate amount of Cdn $500,000.
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MISCELLANEOUS: Customary provisions to be included, together with
others to be reasonably specified by the Administrative
Agent, including, without limitation, the following:
1. Customary indemnity and capital adequacy
provisions, including but not limited to,
compensation in respect of taxes and decreased
profitability resulting from 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 and
participate their rights under the Loan
Documentation. Participation shall be without
restrictions. Each Lender's entitlement to benefits
with regard to increased costs, capital adequacy,
etc. will be calculated without regard to its
participants.
3. Indemnification of the Administrative Agent, each
Lender 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 fees or expenses as set forth in Annex II to
the Commitment Letter.
4. The Borrower will pay the reasonable fees and
out-of-pocket expenses of the Administrative
Agent's legal counsel.
5. Loan Documentation to be governed by the laws of
the State of California or such other state law as
the Administrative Agent may reasonably stipulate
and the laws of the United States applicable
therein.
6. Majority Lenders will constitute those Lenders
representing at least 66 2/3% of the total
outstanding loans or commitments, as the case may
be.
This Term Sheet is intended as an outline only and does not purport to summarize
all of the terms, conditions, covenants, representations, warranties and other
provisions which would be contained in the definitive Loan Documentation. The
Bank of Nova Scotia's commitment will be subject to negotiation and execution of
definitive Loan Documentation in form and substance satisfactory to The Bank of
Nova Scotia, the Lenders and their counsel.
<PAGE>
ANNEX II to Acquisition
Facility Commitment Letter
INDEMNIFICATION PROVISIONS
(Unless otherwise defined, terms used herein shall have the meanings assigned
thereto in the commitment letter (the "Commitment Letter") and the term sheet
(the "Term Sheet") to which this Annex II is attached.)
Vincor shall be responsible for all reasonable fees and expenses of legal
counsel to the Administrative Agent arising in connection with the negotiation,
preparation, execution and delivery of the Commitment Letter, the Fee Letter and
the definitive Loan Documentation and the syndication of the Acquisition
Facility, and shall be obligated to pay such fees and expenses whether or not
definitive Loan Documentation is executed or delivered. The provisions of such
indemnification will survive any termination of our commitments hereunder.
In addition, Vincor hereby indemnifies and holds harmless all Indemnified
Parties (as defined below) from and against all Liabilities (as defined below).
"INDEMNIFIED PARTY" shall mean the Administrative Agent, each Lender, each
affiliate of any of the foregoing and the respective directors, officers, agents
and employees of each of the foregoing. "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 the Transactions or otherwise from any extension of credit by the Lenders
to the U.S. Borrower under the Acquisition Facility or any action or proceeding
related to any of the foregoing other than those relating to such Indemnified
Party's wilful misconduct or gross negligence, but shall not include loss of
profit, loss of income or revenue or loss of business opportunity. In addition
to the foregoing, Vincor agrees to reimburse each Indemnified Party for all
reasonable 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).
<PAGE>
SCHEDULE A
TRANSACTION OVERVIEW
This Transaction Overview represents an outline of the basis on which The Bank
of Nova Scotia is prepared to establish Credit Facilities in favour of the
Borrowers. It is not necessarily exhaustive as to the terms and conditions which
will govern this financing and negotiation is required to finalize the
transactions being contemplated. For certainty, the Borrowers will be required
to enter into commitment letters (including term sheets) and fee letters and
other documentation, in form and substance satisfactory to the Administrative
Agent in its sole discretion, documenting the credit facilities referred to
herein on or before August 26, 2000.
<TABLE>
<S> <C>
LENDER: The Bank of Nova Scotia ("Scotia Capital")
BORROWERS: Vincor International Inc. ("Vincor") and R.H.
Phillips Inc. or Holdco to be designated ("Phillips")
FACILITIES: 1. REVOLVING TERM FACILITY
Borrower: Vincor
Amount: C/USeq. $35,000,000
Term: 364 days
Purpose: General corporate requirements.
Repayment: Bullet payment at maturity.
2. NON-REVOLVING TERM FACILITY
Borrower: Vincor
Amount: C/USeq. $63,000,000
Term: 6 years
Purpose: Refinance existing debt.
Repayment: Year 1: 0%
Year 2: 5.0% (1.25% per Quarter)
<PAGE>
Year 3: 5.0% (1.25% per Quarter)
Year 4: 12.5% (3.125% per Quarter)
Year 5: 17.5% (4.375% per Quarter)
Year 6: 20.0% (5.00% per Quarter) + 40% Bullet
Subject to a mandatory cash flow sweep of 75% of Excess
Cash Flow. "Excess Cash Flow" shall mean with respect
to any fiscal year of the Borrower on a consolidated
basis, EBITDA less the aggregate of (i) capital
expenditures (ii) cash tax expenses, (iii) interest
charges and (iv) scheduled principal repayments.
3. NON-REVOLVING TERM BRIDGE FACILITY ("BRIDGE LOAN")
Borrower: Vincor
Amount: C/USeq. $35,000,000
Term: 30 months
Purpose: Bridge facility to subordinated debt and/or equity
issuance.
Repayment: Bullet payment at maturity, which if unpaid, converts
to 4.5 year Exchange Notes.
SEE APPENDIX B FOR FURTHER DETAILS
4. INTENTIONALLY LEFT BLANK
5. NON-REVOLVING TERM FACILITY ("TENDER FACILITY")
Borrower: Phillips
<PAGE>
Amount: US $95,000,000
Term: 6 years
Purpose: For acquisition of R.H. Phillips Inc.
Repayment: Year 1: 0%
Year 2: 5.0% (1.25% per Quarter)
Year 3: 5.0% (1.25% per Quarter)
Year 4: 12.5% (3.125% per Quarter)
Year 5: 17.5% (4.375% per Quarter)
Year 6: 20.0% (5.00% per Quarter) + 40% Bullet
Subject to a mandatory cash flow sweep of 75% of Excess
Cash Flow.
</TABLE>
FEES: As previously discussed.
PRICING:
<TABLE>
<CAPTION>
--------------------------------------------------------
FAC 1 FAC 2, 5
----- --------
Total Senior Standby Prime+ B/A+ L/C Prime+ B/A+
Funded Debt to Fee ABR+ LIBOR+ Fee ABR+ LIBOR+
Level EBITDA (bps) (bps) (bps) (bps) (bps)
<S> <C> <C> <C> <C> <C> <C> <C>
1 3.75 LESS THAN X LESS THAN OR EQUAL 4.00 50.0 200.0 300.0 200.0 225.0 325.0
2 3.50 LESS THAN X LESS THAN OR EQUAL 3.75 50.0 162.5 262.5 162.5 187.5 287.5
3 3.00 LESS THAN X LESS THAN OR EQUAL 3.50 37.5 137.5 237.5 137.5 162.5 262.5
4 2.50 LESS THAN X LESS THAN OR EQUAL 3.00 25.0 75.0 175.0 75.0 100.0 200.0
5 LESS THAN OR EQUAL 2.50 25.0 50.0 150.0 50.0 75.0 175.0
--------------------------------------------------------
</TABLE>
SEE APPENDIX B FOR FACILITY 3.
SECURITY: First ranking priority security on all consolidated assets of
Vincor, Phillips and subsidiaries.
GUARANTEES: Unconditional upstream and downstream guarantees between Vincor,
Phillips and all material subsidiaries.
FINANCIAL COVENANTS:
<PAGE>
<TABLE>
<S> <C>
Senior Debt: EBITDA LESS THAN OR EQUAL 4.00 from closing to 2001
LESS THAN OR EQUAL 3.75 in 2002
LESS THAN OR EQUAL 3.50 in 2003
LESS THAN OR EQUAL 2.50 thereafter
Fixed Charge Coverage GREATER THAN OR EQUAL 1.10 from closing to 2002
GREATER THAN OR EQUAL 1.25 thereafter
Total Debt: EBITDA LESS THAN OR EQUAL 5.00 from closing - 2002
LESS THAN OR EQUAL 4.00 thereafter
</TABLE>
OTHER COVENANTS: Standard for facilities of this nature, including, but not
limited to negative pledge, cross default, limitation on
additional indebtedness, asset sales, dividends, restricted
payments, acquisitions, and financial assistance.
CASH FLOW SWEEP: Subject to a mandatory cash flow sweep of 75% of Excess
Cash Flow.
MANDATORY PREPAYMENT:
100% of equity proceeds;
100% of debt proceeds;
100% of asset sale proceeds;
It is understood that further negotiations will be required to finalize the
transaction being described in this Transaction Overview and the final terms and
conditions of the Credit Facility will be contained in the Credit Agreement.
Scotia Capital, as part of its underwriting mandate, reserves the right to
restructure by amending the price, terms and tenor of the Credit Facilities
until Scotia Capital reaches its target hold level.
APPENDIX A
FACILITIES AND SOURCE / USE OVERVIEW
C$mm's
<TABLE>
<CAPTION>
SOURCES / PROPOSED FAC'S USES/RETIRED FAC'S
------------------------ ------------------
<S> <C> <C> <C> <C>
R/T ($35mm Available)(Fac 1)(a) Undrawn R/T (C$75mm Available) 67.0 Drawn
<PAGE>
N/R (Fac. 2)(b) 63.0 N/R 21.1
N/R Bridge (Fac. 3)(c) 35.0 N/R 9.9
----- -----
Sub-total 98.0 Sub-total 98.0
PHILLIPS C$(@1.49) US$eq
N/R (Fac. 5)(d) 142.0 Share Purchase 79.0 53.0
Debt Assumed 52.7 35.4
Transaction & other costs 10.3 7.0
Sub-total 142.0 Sub-total 142.0
----- -----
Total Sources (incl. Sub-debt) 240.0 Total Uses (Consolidated) 240.0
</TABLE>
Note: Funded Sr. Bank Debt = (b) + (d) = C/USeq. $205.0mm
Committed Sr. Bank Debt = (a) + (b) + (d) = C/USeq. $240.0mm
Total Committed Debt = (a) + (b) + (c) + (d) = C/USeq. $275.0mm
<PAGE>
APPENDIX B
PRICING DETAIL FOR FACILITY 3)
BRIDGE LOAN:
B/A + 450 bps at closing, 50bps increase for each quarter (90 days), with a
50bps increase in Q2 to be deferred until the following period. Proposed pricing
schedule as follows:
<TABLE>
<CAPTION>
No. of Months after Closing Margin, BA+ (bps)
--------------------------- -----------------
<S> <C>
First 3 months 450
Second 3 months 450
Third 3 months 550
Fourth 3 months 600
Fifth 3 months 650
Sixth 3 months and thereafter 700
</TABLE>
Exchange fees payable when converts to Exchange Notes: As previously
discussed.
EXCHANGE NOTES:
HIGHER OF a) BRIDGE LOAN RATE AT EXCHANGE + 50 BPS, OR b) GOC + 750.
CASH CAP: 13.5%
TOTAL CAP:15.5%
WARRANTS:
As previously discussed.
