EXHIBITA Seeattached Term Sheet

 

June 17, 2009

Haights Cross Operating Company

Haights Cross Communications, Inc.

10 New King Street

White Plains, NY 10604

Attn:       Mr. Paul Crecca

President and Chief Executive Officer

Dear Mr. Crecca:

Reference is made (i) to the Credit Agreement dated as of August 15, 2008, as amended (the “Existing Credit Agreement”) among Haights Cross Operating Company (“you” or the “Company”), Haights Cross Communications, Inc. (“Holdings”), the other guarantors party thereto from time to time (collectively with Holdings, the “Guarantors”), the lenders party thereto from time to time, and DDJ Capital Management, LLC, as administrative agent and collateral agent for such lenders (“DDJ” or the “Agent”), and (ii) to the Fourth Forbearance Agreement and Amendment No. 1 to Credit Agreement dated as of May 7, 2009, as amended, including, without limitation, as amended by that certain Letter Agreement dated as of June 5, 2009, each by and among the Company, the Guarantors, the Agent and the lenders party thereto.  Attached as Exhibit A hereto is a term sheet dated the date hereof (the “Term Sheet”) describing the terms of a proposed restructuring of certain obligations of the Company, Holdings and the other Guarantors, including, without limitation, the obligations of the Company, Holdings and the other Guarantors under the Existing Credit Agreement (the “Restructuring”).  This letter is referred to herein as this “Commitment Letter.”  Each capitalized term used but not defined herein has the meaning assigned to such term in the Term Sheet.

Subject to the terms and conditions set forth below and in the Term Sheet, DDJ, on behalf of certain funds and/or accounts managed and/or advised by it (collectively, the “DDJ Lenders”), and Regiment Capital Special Situations Fund IV, L.P. (“Regiment” and together with the DDJ Lenders, each a “Lender” and collectively, the “Lenders”), hereby commit to enter into an Amended and Restated Credit Agreement with the Company, Holdings and the other Guarantors providing for $55,862,000 aggregate principal amount of first-out term A loans (the “Term A Loans”), and $56,818,000 aggregate principal amount of last-out term B loans (the “Term B Loans”).  In connection therewith, in addition to all other conditions precedent set forth herein and in the Term Sheet, the commitment of the Agent and each Lender to enter into the Amended and Restated Credit Agreement on the Effective Date is subject to the following conditions, each of which shall be satisfied on or before the Effective Date:  (i) the Company shall have made the Term Loan Paydown (as set forth in the Term Sheet) to the Paydown Lenders (as set forth in the Term Sheet), (ii) the Company shall have repurchased from the Noteholder Lenders $27,475,000 principal amount of Senior Notes (the “Repurchase”) for the Repurchase Consideration described in the Term Sheet, and (iii) Holdings shall have consummated the offer to exchange shares of common stock of Holdings for Discount Notes (the “Exchange Offer”) in accordance with the terms of Holdings’ Private Offer to Exchange and Consent Solicitation dated June 8, 2009 and the related exchange and amendment documents described therein (the “Exchange Offer Documents”).  In connection with the closing of the Restructuring:  (x) each Paydown Lender agrees to accept the portion of the Term Loan Paydown allocated to such Paydown Lender as described in the Term Sheet;

 

(y) the Noteholder Lenders agree to sell to the Company $27,475,000 principal amount of Senior Notes for the Repurchase Consideration described in the Term Sheet; and (z) each Lender consents to the consummation by Holdings of the Exchange Offer provided that (A) not less than 90% of the Discount Notes (or such lesser percentage as may be approved in writing by the Agent and each Lender, in each case, in its sole discretion) are tendered pursuant to the Exchange Offer and (B) there are no amendments, modifications or waivers with respect to the terms of the Exchange Offer as set forth in the Exchange Offer Documents, other than such amendments, modifications or waivers as may be approved in writing by the Agent and each Lender, in each case, in its reasonable discretion.  Notwithstanding anything to the contrary set forth herein, Holdings, the Company and each Lender hereby acknowledges that each of Crystal Capital Onshore Warehouse LLC and Crystal Capital Fund, L.P. (collectively, the “Crystal Entities”) are not committing to enter into the Amended and Restated Credit Agreement or any of the other Definitive Restructuring Transaction Documents (as defined below), and are each executing this Commitment Letter solely to evidence the agreement of each such Crystal Entity to accept its respective allocation of the Term Loan Paydown as set forth in the Term Sheet.

 

This Commitment Letter and the Term Sheet are not meant to be, and shall not be construed as, an attempt to define all of the terms and conditions of the Restructuring Transactions (as defined below), which terms and conditions shall be set forth in the definitive documents to be agreed upon by the Company, the Agent and each Lender in accordance with the terms and conditions set forth in this Commitment Letter and the Term Sheet (the “Definitive Restructuring Transaction Documents”).  The Restructuring, the establishment of the Term A Loans and the Term B Loans, the Term Loan Paydown, the Repurchase, the Exchange Offer and all related transactions are collectively referred to herein as the “Restructuring Transactions”.  For the avoidance of doubt, the obligations of each Lender and each Crystal Entity hereunder and under the Definitive Restructuring Transaction Documents are several and not joint such that no Lender, nor any Crystal Entity, shall be liable to you or any other Person for the failure of the Agent, any Lender or any Crystal Entity to fulfill any of its obligations under this Commitment Letter.

The obligations of the Agent and each Lender to enter into the Definitive Restructuring Transaction Documents and consummate the Restructuring Transactions shall be subject to each of the conditions set forth in the Term Sheet and in the Definitive Restructuring Transaction Documents (provided that the conditions set forth in the Definitive Restructuring Transaction Documents shall not be inconsistent with or materially more burdensome than the conditions to closing contemplated herein and in the Term Sheet).  Notwithstanding anything to the contrary contained in this Commitment Letter, it shall be a condition to the Company’s, Holdings’, each Guarantor’s and each Lender’s entering into the Definitive Restructuring Transaction Documents that the Company, Holdings, each Guarantor, Agent and each Lender shall have entered into the Definitive Restructuring Transaction Documents.

As consideration for the commitments and agreements of the Lenders and the Crystal Entities hereunder, you agree to cause to be paid the fees described in the Term Sheet when due and payable in accordance with the Term Sheet.  The Commitment Fee due any Lender or either Crystal Entity shall be refundable in the event that such Lender or such Crystal Entity shall breach its obligations under this Commitment Letter in bad faith.

Haights Cross Operating Company

June 17, 2009

Page 3

By acceptance of this Commitment Letter, the Company agrees to reimburse and pay all reasonable and documented out-of-pocket fees and expenses (including reasonable fees, time charges and expenses of attorneys for each Lender, each Crystal Entity and the Agent) incurred by each Lender, each Crystal Entity, the Agent and their outside legal advisors before or after the date hereof in connection with the Restructuring Transactions, whether or not the Restructuring Transactions are consummated and irrespective of whether or not this Commitment Letter expires in accordance with its terms (as set forth below), including without limitation, those reasonable fees and expenses incurred in connection with the preparation, negotiation, execution and enforcement of this Commitment Letter, the Term Sheet, the Definitive Restructuring Transaction Documents and any other documentation contemplated hereby or thereby.  Fees and expenses incurred after the date of execution and delivery of the Definitive Restructuring Transaction Documents shall be reimbursable by the Company as set forth in the Definitive Restructuring Transaction Documents.

The Company agrees, whether or not the Restructuring Transactions are consummated and irrespective of whether or not this letter expires in accordance with its terms (as set forth below), to indemnify and hold harmless the Agent, each Lender, each Crystal Entity and each of their respective affiliates (including affiliated funds), directors, partners, members, officers, employees, advisers, managers and agents (each an “Indemnified Party”) from and against (and will reimburse each Indemnified Party upon demand accompanied by an invoice) any and all losses, claims, damages, liabilities and reasonable and documented out-of-pocket costs and expenses (including without limitation, all reasonable and documented fees and expenses of counsel for such Indemnified Party) that are actually incurred by or awarded against any Indemnified Party (collectively, the “Claims”), in each case arising out of or in connection with this Commitment Letter, the Term Sheet, and the Restructuring Transactions or any related transaction, except (i) for any Claims that are solely among Indemnified Parties; and (ii) to the extent that, as to any Indemnified Party, such Claims are found in a final judgment by a court of competent jurisdiction to have resulted primarily from such Indemnified Party’s own gross negligence or willful misconduct or bad faith.  In the case of any investigation, litigation or proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its shareholders or its creditors or an Indemnified Party and whether or not the Restructuring Transactions are consummated.  One or more of the Indemnified Parties will promptly notify the Company upon receipt of written notice of any Claims or threat to institute a Claim (provided, however, that the failure to so notify the Company shall not relieve the Company from any obligation or liability except to the extent the Company is actually materially prejudiced by such failure).  If and to the extent the foregoing obligations are unenforceable for any reason or are insufficient to hold any Indemnified Party fully indemnified, the Company agrees to make the maximum contribution to the payment and satisfaction of such obligations that is permissible under applicable law.  The Company further agrees that no Indemnified Party shall have any liability to it or any of its subsidiaries on any theory of liability for any special, indirect, consequential or punitive damages arising out of, or in any way related to, or in connection with the Commitment Letter, the Term Sheet and the Restructuring Transactions.

Haights Cross Operating Company

June 17, 2009

Page 4

This Commitment Letter is issued solely to the Company and may not be assigned or otherwise transferred to, or enforced by, any other person without the prior written consent of the Agent and each Lender.  This Commitment Letter (including the Term Sheet) may not be disclosed by Company to any person other than:  (i) to Company’s officers, directors, shareholders, employees, legal and financial advisors or affiliates, in each case, to whom Company deems it reasonably necessary to disclose this Commitment Letter (and/or the Term Sheet) for the purpose of evaluating and consummating the Restructuring Transactions; (ii) to Monarch Alternative Capital, L.P. (“Monarch”) and its legal advisors to the extent reasonably necessary to disclose this Commitment Letter (and/or the Term Sheet) for the purpose of permitting Monarch to evaluate the Restructuring Transactions; and/or (iii) as required for compliance with applicable disclosure obligations pursuant to Company’s Securities and Exchange Commission Filings or applicable law.  Further, any party to whom this Commitment Letter (and/or the Term Sheet) is disclosed (including, without limitation, Monarch) must also agree to be bound by the disclosure limitations described herein and shall be specifically prohibited from using this Commitment Letter (and/or the Term Sheet) for soliciting or engaging in discussions (unsolicited or otherwise) involving any alternative transaction of any kind other than the transaction contemplated herein.

The Agent, the Lenders and the Crystal Entities agree that this Commitment Letter (including the Term Sheet) is for confidential use and may not be disclosed to any other person without the prior written consent of the Company other than to their respective members, officers, directors, shareholders, employees, legal and financial advisors or affiliates, in each case, to whom the Agent, the Lenders or the Crystal Entities deem it reasonably necessary to disclose this Commitment Letter (and/or Term Sheet) or as required for compliance with applicable law.  Further, any party to whom this Commitment Letter (and/or the Term Sheet) is disclosed by the Agent, the Lenders or the Crystal Entities must also agree to be bound by the disclosure limitations described herein.

The terms of this Commitment Letter (including the Term Sheet) may not be modified or otherwise changed except pursuant to a written agreement signed by the Agent, each Lender, each Crystal Entity and the Company.  This Commitment Letter shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts.  This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument.  This Commitment Letter (including the Term Sheet) sets forth the entire agreement and understanding between the Company, the Agent, the Lenders and the Crystal Entities and supersedes all prior agreements and understandings relating to the subject matter hereof.

The preceding six paragraphs, and the compensation, reimbursement, indemnification and confidentiality provisions contained in the Term Sheet and any other provision herein or therein which by its terms expressly survives the termination of this Commitment Letter shall remain in full force and effect regardless of whether the Definitive Restructuring Transaction Documents shall be executed and delivered and notwithstanding the termination of this Commitment Letter or the commitments hereunder, provided that upon closing of the Restructuring Transactions, the indemnification provisions contained herein shall be superseded by any indemnification set forth in the Definitive Restructuring Transaction Documents.

Haights Cross Operating Company

June 17, 2009

Page 5

This Commitment Letter shall expire at 6:00 p.m. eastern daylight time on June 17, 2009, unless on or prior to such time: (i) the Company has executed this Commitment Letter and has returned it to the Agent (which may be by facsimile transmission) and (ii) the Agent (or its designees) shall have received the Retainer (as set forth in the Term Sheet).  Thereafter, each Lender’s commitment to enter into the Definitive Restructuring Transaction Documents, and each Crystal Entity’s commitment to accept its allocation of the Term Loan Paydown, in each case on the terms set forth in the Commitment Letter (including those in the Term Sheet), will automatically expire at 6:00 p.m. eastern daylight time on July 16, 2009, unless the Definitive Restructuring Transaction Documents shall have been executed and delivered prior to such date.  In addition, in accordance with the Term Sheet, it is acknowledged and agreed by the Company that the Company shall pay to the Lenders and the Crystal Entities (or their designees) the Commitment Fee and the Closing Fee (as set forth in the Term Sheet) on the dates and in the amounts set forth in the Term Sheet.

EACH OF THE COMPANY, THE AGENT, EACH LENDER AND EACH CRYSTAL ENTITY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER (AND/OR THE TERM SHEET) EXECUTED BY THE COMPANY IN CONNECTION HEREWITH, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE PERFORMANCE OF SERVICES HEREUNDER.

If this letter accurately reflects your understanding with respect to the matters set forth herein, please execute and return the enclosed copy hereof.

 

 

 

 

 

 

See attached Term Sheet

o     The effectiveness and consummation of the Restructuring Transactions and execution and delivery of the Restructured Loan Documentation will not violate any requirement of law applicable to any Credit Party, any Lender or Agent or any agreement, indenture, instrument or other document to which any Credit Party is party or to which its assets are bound (including without limitation, the Senior Notes Indenture and the Discount Notes Indenture), and the Restructuring Transactions will not be enjoined, temporarily, preliminarily or permanently and all consents and approvals necessary for the effectiveness of the Restructured Loan Documentation, and the consummation of the transactions contemplated therein will have been obtained. o     The Agent and Lenders shall have received all fees and expenses owed by the Credit Parties in connection with the transactions contemplated herein that are payable pursuant to the terms of the Commitment Letter, this Term Sheet or the Credit Agreement. o     There shall not exist any action, investigation, litigation or proceeding pending or threatened in writing in any court or before any arbitrator or governmental authority seeking to enjoin or challenge the Restructuring Transactions or that could reasonably be expected to have a material adverse effect on the Credit Parties. o     The Agent and Lenders shall have received (x) a legal opinion from Brown Rudnick LLP, counsel to the Credit Parties, with respect to the Restructuring Transactions and related matters in substantially the form of the draft opinion dated June 5, 2009 distributed by Brown Rudnick LLP to counsel for the Agent and the Lenders, and (y) certificates, organizational documents and other instruments and documents customary for this type of transaction, including an officer’s solvency certificate, board resolutions, charter documents, good standing certificates and other instruments as are necessary in the reasonable discretion of the Agent and the Lenders. o     Holdings shall have received a fairness opinion having customary terms, conditions, assumptions and limitations from Houlihan, Lokey, Howard & Zukin Financial Advisors, Inc., and the Agent and the Lenders shall have received evidence reasonably satisfactory to them that the Restructuring Transactions are fair to Holdings and the Borrower. o     The Exchange Offer shall have been completed and at least 90% of the Discount Notes (or, such lesser percentage of the Discount Notes as shall have been approved by the Agent and the Lenders in their discretion) shall have been tendered for exchange pursuant thereto. o     Such other conditions as are customary for the Restructuring Transactions or deemed by the Agent or Lenders to be appropriate for this specific transaction, not inconsistent with those set forth herein.