<PAGE>
Exhibit (b)(2) 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
September 5, 2000
Vincor International Inc.
441 Courtneypark Drive East
Mississauga, Ontario L5T 2V3
Attention: Mr. Richard G. Jones,
Executive Vice-President, and Chief Executive Officer
SENIOR SECURED FACILITIES
COMMITMENT LETTER
Dear Sirs:
Based on our review of the information provided by you and our discussions with
you, The Bank of Nova Scotia ("Scotiabank") understands that:
(a) in order to refinance the Acquisition Facility, Vincor International Inc.
("Vincor") is interested in obtaining a commitment for a senior secured
loan facility (referred to as the "U.S. NRT Facility") to be provided to
the U.S. Borrower by way of a six year U.S.$95,000,000 non-revolving term
facility;
(b) in order to provide a portion of the funds required to refinance the
Existing Vincor Facilities, you are interested in obtaining a commitment
for a senior secured loan facility (referred to as the "Cdn. NRT
Facility") to be provided to Vincor by way of a six year Cdn.$63,000,000
non-revolving term facility; and
(c) in order to provide for general corporate purposes of Vincor on a
consolidated basis, you are interested in obtaining a commitment for a
senior secured loan facility (referred to as the "RT Facility") to be
provided to Vincor by way of a 364-day Cdn.$35,000,000 revolving term
facility.
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"Acquisition Facility" means the U.S. $95,000,000 non-revolving term credit
facility established by Scotiabank in favour of the U.S. Borrower. "Existing
Vincor Facilities" means the credit facilities established by Scotiabank in
favour of Vincor pursuant to the credit agreement made as of November 22, 1996
between Vincor and Scotiabank, as amended (the "Existing Vincor Credit
Agreement"). "Existing Facilities" means the Acquisition Facility and the
Existing Vincor Facilities. All capitalized terms used herein which are not
otherwise defined herein shall have the meanings ascribed thereto in the Term
Sheet (as hereinafter defined).
We further understand that the balance of the funds needed to refinance the
Existing Vincor Facilities will be provided by Scotiabank by way of a Cdn
$35,000,000 senior subordinated loan facility (the "Senior Subordinated
Facility") as described in the Senior Subordinated Facility Commitment Letter of
even date herewith.
Upon the terms and conditions set forth herein, Scotiabank is pleased to commit
to provide to the Borrowers the full amount of the Senior Secured Facilities and
to act as the sole administrative agent for a syndicate of other financial
institutions (together with Scotiabank, the "Lenders") which may commit to a
portion of the Senior Secured Facilities. It is Scotiabank's intent to solicit
commitments to the Senior Secured Facilities from such other financial
institutions in amounts sufficient to allow Scotiabank to achieve its desired
hold levels in the Senior Secured Facilities. Nonetheless, our commitments are
not subject to syndication of any portion of the Senior Secured Facilities.
By your signature below you acknowledge and agree that no other arrangers,
managers, agents or co-agents will be appointed, no other titles will be awarded
and no compensation (other than that expressly contemplated by the Fee Letter as
defined below or otherwise agreed to by you and us) will be paid in connection
with the Senior Secured Facilities; provided, however, that you may select
additional agents or co-agents that are reasonably acceptable to Scotiabank for
any syndication of the Senior Secured Facilities to the extent Scotiabank's role
and allocation of the fees and other payments in connection with such
syndication is satisfactory to Scotiabank.
All references to dollar amounts herein and all attachments hereto shall be to
Canadian or United States dollars, or as the case may be.
Our commitments hereunder are subject to:
(a) the terms and conditions set forth herein and in the term sheet annexed
hereto as Annex I (the "Term Sheet");
(b) the terms and conditions of the confidential fee letter dated the date
hereof (the "Fee Letter");
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(c) there being no facts, events or circumstances, now existing or hereafter
arising, which come to our attention and which, in our good faith
determination, could materially adversely affect the condition (financial
or otherwise), assets, liabilities, operations or earnings of either
Borrower or any of their respective subsidiaries;
(d) the absence of any material adverse disruption of, or material adverse
change in, the financial, banking or capital markets after the date hereof
that, in Scotiabank's reasonable judgment, could adversely affect the
satisfactory syndication of the Senior Secured Facilities; and
(e) Scotiabank's satisfaction that there shall be no competing offering,
placement or arrangement of any debt securities of either Borrower or any
subsidiary thereof (other than as contemplated hereunder) prior to or
during the syndication of the Senior Secured Facilities;
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 Senior Secured Facilities) 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 the U.S. Borrower to,
actively assist us, in all commercially reasonable respects in the syndication
of the Senior Secured Facilities, 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 analyses (the "Financial Analyses") prepared
by you or the U.S. Borrower or on your or its behalf; 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 reasonable efforts
to ensure that our syndication efforts benefit from your and its lending
relationships. In addition, you agree to, and to cause the U.S. Borrower
to, use reasonable efforts to make certain of your and its members of
management, as well as, to the best of your and its ability, your and its
consultants and advisors, available during regular business hours to answer
questions.
By the execution of the Loan Documentation you and the U.S. Borrower will each
represent and covenant that:
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(a) all factual information (the "Information") that has been made or will be
made available to Scotiabank by you or it or on your and its 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 it or on your or its 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
Senior Secured Facilities 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 Senior Secured Facilities 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
contemplated hereby are completed.
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 legal
counsel 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).
This Commitment Letter, the Fee Letter and the Term Sheet, together with the
Senior Subordinated Facility Commitment Letter and the term sheet attached
thereto and the fee letter delivered in connection therewith, 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.
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.
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If you agree with the following, please sign and return to us the enclosed copy
of this Commitment Letter and the Fee Letter, together with the Senior
Subordinated Facility Commitment Letter and the fee letter delivered in
connection therewith, by 5:00 p.m., Toronto time, on September 7, 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 December 15, 2000, unless, on or prior to such time, Loan Documentation
satisfactory to us and our counsel has been executed and delivered by the
Companies 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.
We look forward to working with you.
Yours very truly,
THE BANK OF NOVA SCOTIA
By: /s/ Sean Buchan
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Title: Director
By: /s/ Gabriel Wong
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Title: Associate
Agreed to and accepted as of the 6th day of September, 2000.
VINCOR INTERNATIONAL INC.
By: /s/ Richard G. Jones
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Title: Executive Vice-President
By: /s/ Bruce D. Walker
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Title: Executive Vice-President
<PAGE>
ANNEX I to Senior Secured Facilities Commitment Letter
TERMS AND CONDITIONS OF THE SENIOR SECURED FACILITIES
(Unless otherwise defined, terms used in this Term Sheet have the meanings
ascribed thereto in the Commitment Letter)
I. PARTIES
BORROWERS: (1) CDN. NRT FACILITY AND RT FACILITY: Vincor
International Inc. ("Vincor").
(2) U.S. NRT FACILITY: 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 subsidiary of Vincor.
The obligations of the Borrowers under the Senior
Secured Facilities shall be on a joint and several
basis.
GUARANTORS: "Guarantor" means each Material Subsidiary. For the
purposes hereof, "Material Subsidiary" means (x) each
direct or indirect wholly-owned subsidiary of Vincor
that either constitutes more than 5% of the EBITDA of
Vincor or 5% of the tangible net worth of Vincor, in
each case on a consolidated basis, and (y) any other
direct or indirect subsidiary of Vincor designated by
the Administrative Agent as a Material Subsidiary. For
certainty, the U.S. Borrower, Vincor Holdings, Inc.
("Holdco") and the corporation ("Newco") resulting from
the merger between Toast Acquisition Company, Inc. and
R.H. Phillips Inc. shall constitute Material
Subsidiaries. Vincor and the Guarantors are hereinafter
referred to as the "Companies".
ADMINISTRATIVE The Bank of Nova Scotia (the "Administrative Agent").
AGENT:
LENDERS: The Bank of Nova Scotia and a group of financial
institutions acceptable to the Administrative Agent
(collectively, the "Lenders").
II. THE SENIOR SECURED FACILITIES
DESCRIPTION: A senior, first priority secured financing, divided
among: (i) a non- revolving term credit facility in the
amount of Cdn $63,000,000 (the
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"Cdn. NRT Facility") which will be provided to Vincor,
(ii) a revolving term credit facility in the amount of
Cdn $35,000,000 (the "RT Facility") which will be
provided to Vincor and (iii) a non- revolving term
credit facility in the amount of U.S. $95,000,000 (the
"U.S. NRT Facility") which will be provided to the U.S.
Borrower, collectively referred to as the "Senior
Secured Facilities".
CREDIT FACILITIES: U.S. NRT FACILITY: Non-revolving term credit facility in
the amount of U.S. $95,000,000 under which U.S. dollar
advances may be obtained by the U.S. Borrower to
refinance the Acquisition Facility. Repayable in
quarterly instalments commencing one year after the
initial extension of credit under the Senior Secured
Facilities as follows:
<TABLE>
<CAPTION>
YEAR QUARTERLY INSTALMENTS AS % OF
TOTAL AMOUNT OF ACQUISITION FACILITY
<S> <C>
2 1.25% per fiscal quarter
3 1.25% per fiscal quarter
4 3.125% per fiscal quarter
5 4.375% per fiscal quarter
6 5% per fiscal quarter
</TABLE>
with the balance thereafter of 40% of the total amount
of the U.S. NRT Facility due and payable on the sixth
anniversary of the initial extension of credit under the
Credit Facilities.
RT FACILITY: Revolving term credit facility in the
amount equal to, from time to time, the lesser of (a)
the RT Credit Limit (initially Cdn. $35,000,000 or the
U.S. dollar equivalent but subject to reductions as
provided herein) and (b) the Borrowing Base (defined
below) and under which Canadian and U.S. dollar advances
and Canadian dollar bankers' acceptances of 30 to 180
days may be obtained by Vincor for general corporate
purposes of Vincor on a consolidated basis. "Borrowing
Base" means the sum of 90% of the face amount of all
eligible accounts receivable of Vincor (other than those
of Spagnol's Wine and Beer Making Supplies Ltd. and
Newco), 75% of all eligible accounts receivable of
Spagnol's Wine and Beer Making Supplies Ltd. and Newco,
60% of the book value of eligible inventory of Vincor
(finished goods), 50% of the book value of inventory of
Vincor (bulk wine), and 30% of the book value of
inventory of Vincor (raw materials and work in
progress), the eligibility criteria to be
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established by the Administrative Agent, acting
reasonably. Repayable in full on the date which is 364
days after the initial extension of credit thereunder.
CDN NRT FACILITY: Non-revolving term credit facility in
the amount of Cdn. $63,000,000 or the U.S. dollar
equivalent and under which Canadian and U.S. dollar
advances and Canadian dollar bankers' acceptances of 30
to 180 days may be obtained by Vincor for the purpose of
partially refinancing the Existing Vincor Facilities.
Repayable in quarterly instalments commencing one year
after the initial extension of credit under the Senior
Secured Facilities as follows:
<TABLE>
<CAPTION>
YEAR QUARTERLY INSTALMENTS AS % OF
TOTAL AMOUNT OF CDN NRT FACILITY
<S> <C>
2 1.25% per fiscal quarter
3 1.25% per fiscal quarter
4 3.125% per fiscal quarter
5 4.375% per fiscal quarter
6 5% per fiscal quarter
</TABLE>
with the balance thereafter of 40% of the total amount
of the Cdn. NRT Facility due and payable on the sixth
anniversary of the initial extension of credit under the
Credit Facilities.
EXPIRY: The Credit Facilities will expire if the initial
extension of credit under the Credit Facilities has not
occurred before December 15, 2000.
VOLUNTARY Voluntary prepayments under the Senior Secured
PREPAYMENTS: Facilities are permitted on five Banking Days' notice
without penalty but subject to any breakage costs being
for the account of the applicable Borrower. Such
prepayments by Vincor shall be applied to the
outstanding credit under the Cdn. NRT Facility. Such
prepayments by the U.S. Borrower shall be applied to the
outstanding credit under the U.S. NRT Facility.
Prepayments under either the Cdn. NRT Facility or the
U.S. NRT Facility (collectively, the "NRT Facilities")
shall be applied in inverse order of maturity to the
remaining payments thereof and may not be reborrowed.
MANDATORY In events customary for the type of transaction proposed
PREPAYMENTS: including, without limitation, the following events,
amounts equal to:
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1. 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 180-day period;
2. 100% of the net proceeds of debt issuances with the
exception of (i) the Senior Subordinated Facility
(as defined in the Senior Subordinated Facility
Commitment Letter of even date herewith), (ii) any
replacement subordinated indebtedness of Vincor
that refinances in its entirety the Senior
Subordinated Facility, which replacement
indebtedness is on terms and conditions no more
onerous to Vincor than the Senior Subordinated
Facility and otherwise satisfactory to the
Administrative Agent, (iii) purchase money
obligations and (iv) capital leases subject to a
maximum aggregate amount to be mutually agreed
upon;
3. To the extent not applied to the repayment of the
Senior Subordinated Facility, 100% of the net
proceeds of equity issuances; and
4. 75% of annual excess cash flow;
shall be applied to repayment of, firstly, pro rata as
between the NRT Facilities (in each case to be applied
to the remaining repayments thereof in inverse order of
maturity), and, secondly, if no credit remains
outstanding under either NRT Facility, a reduction of
the RT Credit Limit provided, however, that breakage
costs, if any, shall be for the account of the
applicable Borrower. Excess cash flow shall mean with
respect to any fiscal year of Vincor on a consolidated
basis, EBITDA less the aggregate of (i) capital
expenditures (ii) cash tax expenses, (iii) interest
charges, (iv) scheduled principal repayments and (v) the
aggregate of increased inventory up to a maximum of Cdn.
$3,000,000.
AVAILMENT CDN. NRT FACILITY:
OPTIONS,
INTEREST RATES (a) Canadian dollar advances as Prime Rate Loans:
AND interest at Prime Rate plus the Cdn. Prime Rate
FEES: Margin indicated in the table in Exhibit I, payable
monthly in arrears.
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(b) Issuance of bankers' acceptances for terms of 30 to
180 days at the average discount rates of the
applicable reference Lenders as taken from their
Reuters Screen CDOR Page plus a stamping fee
calculated at the B/A Fee Rate indicated in the
table in Exhibit I on the face amount of the
bankers' acceptances being payable upon their
issuance.
(c) U.S. dollar advances as BRCAN Loans, bearing
interest at BRCAN plus the BRCAN Margin indicated
in Exhibit I, payable monthly in arrears.
(d) 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 the LIBOR
Margin indicated in Exhibit I, payable at end of
interest period (but no less frequently than every
3 months) and calculated on basis of a 360-day
year.
RT FACILITY:
(a) Canadian dollar advances as Prime Rate Loans:
interest at Prime Rate plus Cdn. Prime Rate Margin
indicated in Exhibit I, payable monthly in arrears.
(b) U.S. dollar advances as BRCAN Loans: interest at
BRCAN plus BRCAN Margin indicated in Exhibit I,
payable monthly in arrears.
(c) U.S. dollar advances as LIBOR Loans for interest
periods of 1, 2, 3 or 6 months: interest at LIBOR
for applicable interest period plus LIBOR Margin
indicated in Exhibit I, payable at end of interest
period (but no less frequently than every 3 months)
and calculated on basis of a 360-day year.
(d) Canadian dollar bankers' acceptance for terms of 30
to 180 days: Stamping fee at rate equal to B/A Fee
Rate indicated in Exhibit I on face amount of
bankers' acceptance for its term, payable upon
issuance.
(e) Canadian and U.S. dollar standby letters of credit:
Standby L/C fee at rate equal to Standby L/C Fee
Rate indicated in Exhibit I on the amount of such
Letter of Credit for its term, payable upon
issuance of such letter of credit.
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(f) Standby fees at a rate equal to the Standby Fee
Rate indicated in Exhibit I on unutilized portion
of RT Credit Limit, accruing daily from the date of
the initial drawdown under the RT Facility and
payable quarterly in arrears.
U.S. NRT FACILITY:
(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 the LIBOR
Margin indicated in Exhibit I, 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 the
Alternate Base Rate Margin indicated in Exhibit I,
payable monthly in arrears.
Notwithstanding the foregoing, pricing for each Senior
Secured Facility shall be at Level I of Exhibit I until
the completion of one full fiscal quarter after the
Closing Date.
SECURITY: All debts, liabilities and obligations of each Borrower
under the Senior Secured Facilities shall be
collaterally secured by a first-ranking security
interest (subject to standard permitted liens) in all of
the present and future property, assets and undertaking
(including, without limitation, all intellectual
property of such Borrower) of such Borrower and an
unlimited, unconditional guarantee of each Guarantor
which shall in turn be collaterally 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 (including, without
limitation, all intellectual property of each Company).
CONDITIONS PRECEDENT: Customary for the type of transaction proposed
including, without limitation:
2. The aforementioned merger between Toast Acquisition
Company, Inc. and R.H. Phillips, Inc. has been
completed and all existing debt of R.H. Phillips,
Inc. has been refinanced with the Acquisition
Facility.
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3. Vincor shall have received proceeds of Cdn.
$35,000,000 from the Senior Subordinated Facility
(the "Senior Subordinated Financing"), which cash
shall be on hand on the Closing Date to be applied
along with the Senior Secured Facilities to
refinance the Existing Facilities.
4. 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 acting reasonably 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
subject financing. The aforementioned documentation
will include an inter-creditor agreement
establishing the priority ranking of the Senior
Secured Facilities and the security therefor over
the Senior Subordinated Facility and security
thereof.
5. The Administrative Agent shall be satisfied that:
(a) all necessary registrations with respect to
the collateral security and all necessary
lien searches have been completed or arranged
for in all appropriate jurisdictions, and
(b) 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 to
herein.
6. There shall exist no pending or threatened
litigation, proceedings or investigations which (x)
contest the consummation of the subject financing
or (y) could reasonably be expected to have a
material adverse effect on the financial condition,
operations, assets business or properties of any
Company.
7. Scotiabank's satisfaction with the terms,
conditions and pricing of the Senior Subordinated
Financing, such terms, insofar as the Senior
Subordinated Facility is concerned, to be
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substantially in accordance with the Senior
Subordinated Facility Commitment Letter of even
date herewith.
8. The Borrowers and their subsidiaries shall not have
any indebtedness in respect of borrowed money other
than in respect of the Senior Secured Facilities,
the Senior Subordinated Financing and other
existing indebtedness of the Borrowers and its
subsidiaries in amounts acceptable to the
Administrative Agent.
9. No material adverse change in the property, assets,
financial condition, operations, prospects or
business of any Company, in each case on a
consolidated basis since March 31, 2000.
10. The Administrative Agent shall not have become
aware of any information or other matter affecting
any Company which is inconsistent in a material and
adverse manner with any information disclosed to
the Administrative Agent prior to the date hereof.
11. Delivery of pro-forma opening consolidated
financial statements of Vincor as of the Closing
Date and five year financial projections,
satisfactory to the Administrative Agent and giving
effect to the transactions contemplated herein and
reflecting the proposed legal and capital structure
described to the Administrative Agent prior to the
date hereof and described herein, subject to such
changes as may be satisfactory in all respects to
the Administrative Agent and its counsel.
12. The absence of any litigation, inquiry and
investigation enjoining or restricting the Senior
Secured Facilities or any other aspect of the
transactions contemplated herein,
13. The Administrative Agent shall be satisfied that
the assets of the Borrower and its subsidiaries
shall be free and clear of all liens (other than
permitted encumbrances).
14. The reasonable satisfaction of the Administrative
Agent and its counsel with:
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(a) all documentation relating to the
transactions contemplated herein and all
other documentation delivered in connection
therewith;
(b) all material agreements and necessary
governmental, corporate and other third party
approvals and consents with respect to the
transactions contemplated herein, (including
all financings related thereto); and
(c) receipt of all closing certificates,
including solvency certificates from the
Chief Financial Officer of each Company,
resolutions, approvals of counsel, opinions,
security registrations, lien search reports,
etc. relating to the Senior Secured
Facilities customary for the type of
transaction proposed.
14. Payment of all fees and expenses due and payable
related to the Senior Secured Facilities.
REPRESENTATION Customary for the type of transaction proposed
AND WARRANTIES: (applicable to each Company).
FINANCIAL 1. Annual audited consolidated, unconsolidated and
REPORTING: consolidating financial statements of each Borrower
and the corporation continuing upon the
amalgamation of R.H. Phillips, Inc. and Toast
Acquisition Company, Inc. ("Newco") within 120 days
of the end of each Fiscal Year.
2. Quarterly unaudited consolidated, unconsolidated
and consolidating financial statements of each
Borrower 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 each Borrower and Newco at least
30 days prior to each Fiscal Year.
5. Borrowing base calculation worksheet within 15 days
of each calendar month end.
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6. 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.
AFFIRMATIVE Customary for the type of transaction proposed
COVENANTS: (applicable to all Companies) including, without
limitation, the covenant of the Borrowers to fix the
interest rate of at least 50% of the indebtedness
constituted by the NRT Facilities within six months of
the Closing Date. The obligations of the Borrowers to
any Lender in connection with any such interest rate
swap shall be secured on a pari passu basis with the
collateral security securing the Senior Secured
Facilities.
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.
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, 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.
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10. Restricting amendments to material contracts
(including, without limitation, the documentation
evidencing the Senior Subordinated Facility and any
replacement indebtedness therefor).
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 or equal to:
(i) 5.0 to 1 for each fiscal quarter up to and
including the fiscal quarter ending December
31, 2002; and
(ii) 4.0 to 1 for each fiscal quarter thereafter.
(b) Maintenance of a maximum ratio of Senior Debt to
EBITDA (calculated on a rolling four quarters
basis) to be less than or equal to:
(i) 4.00 to 1 for each fiscal quarter up to and
including the fiscal quarter ending December
31, 2001 (other than the fiscal quarters
ending December 31, 2000 and December 31,
2001 for which the covenant level shall be
4.25 to 1);
(ii) 3.75 to 1 for each fiscal quarter in fiscal
year 2002;
(iii) 3.50 to 1 for each fiscal quarter in fiscal
year 2003; and
(iv) 2.5 to 1 for each fiscal quarter thereafter.
(c) Maintenance of a maximum ratio of EBITDA to Fixed
Charges (calculated on a rolling four quarter
basis) to be greater than or equal to:
(i) 1.1 to 1 for each fiscal quarter up to and
including the fiscal quarter ending December
31, 2002; and
(ii) 1.25 to 1 for each fiscal quarter thereafter.
"Senior Debt" shall be defined as indebtedness under or
in connection with the Senior Secured Facilities and the
aggregate amount owing
<PAGE>
-12-
under all capitalized leases. "Total Debt" shall be
defined as all indebtedness of Vincor. "Fixed Charges"
shall be defined as capital expenditures plus principal
plus interest.
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 (which change of control, for
certainty, shall permit the existing voting arrangement
between certain principal shareholders of Vincor and any
termination thereof) and cross-default to defaults under
other indebtedness of any Company and its subsidiaries
in the aggregate amount of Cdn $100,000.
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 (including
gross-up provisions for withholding taxes) and
decreased profitability resulting from Canadian 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 and
participate their right 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 Senior Secured Facilities Commitment Letter.
<PAGE>
- 13 -
4. The Borrowers 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 Province of Ontario and the laws of Canada
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. The consent of all of the Lenders shall be
required with respect to certain customary issues.
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.
Scotiabank's commitment will be subject to negotiation and execution of
definitive Loan Documentation in form and substance satisfactory to Scotiabank,
the Lenders and their respective counsel.
<PAGE>
EXHIBIT I
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
RT FACILITY CDN. AND U.S. NRT
FACILITIES
-----------------------------------------------------------------------------------------------------------------------------------
LEVEL SENIOR DEBT TO STANDBY PRIME B/A+ L/C PRIME B/A+
EBITDA FEE + LIBOR FEE + LIBOR +
(BPS) BRC + + BRC + (BPS)
(BPS) (BPS) ABR +
(BPS)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 3.75 LESS THAN x
OR EQUAL TO 4.25 50 200 300 200 225 325
-----------------------------------------------------------------------------------------------------------------------------------
2 3.50 LESS THAN x
OR EQUAL TO 3.75 50 162.5 262.5 162.5 187.5 287.5
-----------------------------------------------------------------------------------------------------------------------------------
3 3.00 LESS THAN x
OR EQUAL TO 3.50 37.5 137.5 237.5 137.5 162.5 262.5
-----------------------------------------------------------------------------------------------------------------------------------
4 2.50 LESS THAN x
OR EQUAL TO 3.00 25 75 175 75 100 200
-----------------------------------------------------------------------------------------------------------------------------------
5 EQUAL TO 2.50 25 50 150 50 75 175
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX II to Senior Secured Facilities 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 (including the
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 Senior Secured Facilities and other related costs and
expenses, 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 any transaction, action or proceeding to or in connected with the
transactions mentioned in the Commitment Letter, Fee Letter or Term Sheet or any
action or proceeding related thereto 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).
