-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IWhKrykAfKrQx0e0w6i863GMkgRvegFlu1UytQPmzE1/NC7fbcMrmwOm5hlav+jw gGAckm7ZkYngvcO0X0GtBg== /in/edgar/work/20000802/0000944209-00-001227/0000944209-00-001227.txt : 20000921 0000944209-00-001227.hdr.sgml : 20000921 ACCESSION NUMBER: 0000944209-00-001227 CONFORMED SUBMISSION TYPE: SC 13E3/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20000802 GROUP MEMBERS: ARTHUR J. ANTIN GROUP MEMBERS: GEI CAPITAL III, LLC GROUP MEMBERS: GREEN EQUITY INVESTORS III, L.P. GROUP MEMBERS: NEIL TAUBER GROUP MEMBERS: ROBERT L. ANTIN GROUP MEMBERS: TOMAS W. FULLER GROUP MEMBERS: VETERINARY CENTERS OF AMERICA INC GROUP MEMBERS: VICAR OPERATING, INC. GROUP MEMBERS: VICAR RECAP, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VETERINARY CENTERS OF AMERICA INC CENTRAL INDEX KEY: 0000817366 STANDARD INDUSTRIAL CLASSIFICATION: [0700 ] IRS NUMBER: 954097995 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A SEC ACT: SEC FILE NUMBER: 005-45093 FILM NUMBER: 684359 BUSINESS ADDRESS: STREET 1: 12401 WEST OLYMPIC BOULEVARD CITY: LOS ANGELES STATE: CA ZIP: 90064-1022 BUSINESS PHONE: 310-584-6500 MAIL ADDRESS: STREET 1: 12401 WEST OLYMPIC BOULEVARD CITY: LOS ANGELES STATE: CA ZIP: 90064-1022 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: VETERINARY CENTERS OF AMERICA INC CENTRAL INDEX KEY: 0000817366 STANDARD INDUSTRIAL CLASSIFICATION: [0700 ] IRS NUMBER: 954097995 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A BUSINESS ADDRESS: STREET 1: 12401 WEST OLYMPIC BOULEVARD CITY: LOS ANGELES STATE: CA ZIP: 90064-1022 BUSINESS PHONE: 310-584-6500 MAIL ADDRESS: STREET 1: 12401 WEST OLYMPIC BOULEVARD CITY: LOS ANGELES STATE: CA ZIP: 90064-1022 SC 13E3/A 1 0001.txt SCHEDULE 13E-3A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________ SCHEDULE 13E-3/A (RULE 13e-100) TRANSACTION STATEMENT UNDER SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 13E-3 THEREUNDER RULE 13E-3 TRANSACTION STATEMENT UNDER SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No. 1) Veterinary Centers of America, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Veterinary Centers of America, Inc. Vicar Operating, Inc. Vicar Recap, Inc. Green Equity Investors III, L.P. GEI Capital III, LLC Robert L. Antin Arthur J. Antin Neil Tauber Tomas W. Fuller - -------------------------------------------------------------------------------- (Name of Person(s) Filing Statement) Common Stock, Par Value $0.001 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 925514101 - -------------------------------------------------------------------------------- (CUSIP Number of Class of Securities) Robert L. Antin John Danhakl Chief Executive Officer Vicar Recap, Inc. Veterinary Centers of America, Inc. 11111 Santa Monica Boulevard 12401 West Olympic Boulevard Los Angeles, CA 90025 Los Angeles, CA 90064 (310) 954-0444 (310) 584-6500
- -------------------------------------------------------------------------------- (Name, Address, and Telephone Numbers of Person Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement) With copies to: Julie Kaufer, Esq. Troop Steuber Pasich Reddick & Tobey, LLP 2029 Century Park East, 24th Floor Los Angeles, CA 90067 (310) 728-3000 Anthony T. Iler, Esq. Irell & Manella LLP 333 South Hope Street, Suite 3300 Los Angeles, CA 90071 (213) 620-1555 This statement is filed in connection with (check the appropriate box): a. [X] The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Act of 1933. b. [ ] The filing of a registration statement under the Securities Act of 1933. c. [ ] A tender offer. d. [ ] None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: [X] Check the following box if the filing is a final amendment reporting the results of the transaction: [ ] Calculation of Filing Fee - -------------------------------------------------------------------------------- Transaction Amount of Filing Fee Valuation* - -------------------------------------------------------------------------------- $306,040,995 $61,208 - -------------------------------------------------------------------------------- * For purposes of calculating the fee only. Assumes purchase of 20,402,733 shares of VCA common stock, par value $0.001 per share, at $15.00 per share. [X] Check the box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: $61,208 Filing Party: Veterinary Centers of America, Inc. ----------------- -------------------------------------- Form or Registration No.: Schedule 14A Date Filed: May 30, 2000 ----------------- --------------------------------------
INTRODUCTION This Amendment No. 1 (the "Schedule 13E-3") to the Rule 13e-3 Transaction Statement on Schedule 13E-3, first filed on May 30, 2000, is being filed with the Securities and Exchange Commission in connection with (i) the transfer of all of the assets, properties, business operations and liabilities of Veterinary Centers of America, Inc., a Delaware corporation ("VCA"), to Vicar Operating, Inc., a Delaware corporation and wholly owned subsidiary of VCA ("Vicar Operating"), and (ii) the merger (the "Merger") of Vicar Recap, Inc., a Delaware corporation ("Vicar Recap"), with and into VCA pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of August , 2000 (the "Merger Agreement"), by and among Vicar Recap, VCA and Vicar Operating. Pursuant to the Merger Agreement, VCA will continue as the surviving corporation, and each issued and outstanding share of common stock of VCA (other than treasury shares, shares retained by the Continuing Stockholders (as defined below), and shares held by dissenting stockholders, Vicar Recap and Green Equity Investors III, L.P., a Delaware limited partnership ("Green Equity")) will be cancelled and converted into the right to receive a cash payment per share, without interest, of $15.00. Prior to the consummation of the Merger, VCA will deliver to Vicar Recap a schedule that will list shares of VCA common stock held by certain VCA employees and management (the "Continuing Stockholders") that will not be cancelled and converted in the Merger but will remain outstanding as shares of common stock of the surviving corporation. The schedule also will list any other forms of consideration that may be provided by certain Continuing Stockholders for shares of common stock of the surviving corporation. The Continuing Stockholders include members of VCA's board of directors and executive officers (the "Management Continuing Stockholders"). The Management Continuing Stockholders are: Robert L. Antin, the Chief Executive Officer, President and Chairman of the Board of VCA; Arthur J. Antin, the Chief Operating Officer, Senior Vice President, Secretary and a Director of VCA; Neil Tauber, the Senior Vice President, Treasurer and a Director of VCA; and Tomas W. Fuller, the Chief Financial Officer, Vice President and Assistant Secretary of VCA. As a result of the Merger (after giving effect to the issuance of employee incentive options and warrants to be issued to GS Mezzanine Partners II, L.P. and certain other mezzanine lenders), Green Equity (along with certain other investors) and the Continuing Stockholders will own approximately 71.75% and 22.5%, respectively, on a fully diluted basis, of the common stock of VCA. This Schedule 13E-3 is being filed by VCA, Vicar Operating, Vicar Recap, Green Equity, GEI Capital III, LLC ("GEI Capital"), Robert L. Antin, Arthur J. Antin, Neil Tauber and Tomas W. Fuller. Concurrently with the filing of this Schedule 13E-3, VCA is filing Amendment No. 1 to its preliminary proxy statement (the "Proxy Statement"), pursuant to which the stockholders of VCA will be given notice of the Merger. The information in the Proxy Statement, including all annexes thereto, is expressly incorporated by reference herein in its entirety and responses to each item herein are qualified in their entirety by the provisions of the Proxy Statement. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Proxy Statement. The filing of this Schedule 13E-3 shall not be construed as an admission by VCA, Vicar Recap, Green Equity, GEI Capital or the Management Continuing Stockholders or any of their affiliates that VCA is "controlled" by Vicar Recap, Green Equity, GEI Capital or the Management Continuing Stockholders or any of their affiliates or that any of Vicar Recap, Green Equity, GEI Capital or the Management Continuing Stockholders or any of their affiliates is an "affiliate" of VCA within the meaning of Rule 13e-3 under Section 13(e) of the Securities Exchange Act of 1934, as amended. ITEM 1. SUMMARY TERM SHEET. The information contained in the sections entitled "QUESTIONS AND ANSWERS ABOUT THE MERGER" and "SUMMARY" of the Proxy Statement is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) Name and Address. The information contained in the section entitled "SUMMARY - The Participants" of the Proxy Statement is incorporated herein by reference. (b) Securities. The information contained in the section entitled "THE SPECIAL MEETING - Record Date and Voting" of the Proxy Statement is incorporated herein by reference. (c) Trading Market and Price. The information contained in the section entitled "PRICE RANGE OF COMMON STOCK" of the Proxy Statement is incorporated herein by reference. (d) Dividends. The information contained in the section entitled "DIVIDENDS" of the Proxy Statement is incorporated herein by reference. (e) Prior Public Offerings. None. (f) Prior Stock Purchases. The information contained in the section entitled "COMMON STOCK PURCHASE INFORMATION" of the Proxy Statement is incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (a) - (c) Name and Address; Business and Background of Entities; Business and Background of Natural Persons. The information contained in the sections entitled "SUMMARY - The Participants," "INFORMATION ABOUT VICAR RECAP, INC., GREEN EQUITY INVESTORS III, L.P. AND GEI CAPITAL III, LLC," "INFORMATION ABOUT VICAR OPERATING, INC.," "PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT AND OTHERS" and "DIRECTORS AND EXECUTIVE OFFICERS OF VCA" of the Proxy Statement is incorporated herein by reference. ITEM 4. TERMS OF THE TRANSACTIONS. (a) Material Terms. (1) Not applicable. (2) (i) The information contained in the sections entitled "QUESTIONS AND ANSWERS ABOUT THE MERGER," "SUMMARY" and "THE MERGER AGREEMENT" of the Proxy Statement is incorporated herein by reference. (ii) The information contained in the sections entitled "QUESTIONS AND ANSWERS ABOUT THE MERGER," "SUMMARY" and "THE MERGER AGREEMENT - Consideration to be Received in the Merger" of the Proxy Statement is incorporated herein by reference. (iii) The information contained in the sections entitled "SPECIAL FACTORS - Background of the Merger," "- Recommendations of the Special Committee and the Board of Directors; Fairness of the Merger" and "- The Green Entities', the Management Continuing Stockholders' and Vicar Operating's Reasons for the Merger" of the Proxy Statement is incorporated herein by reference. (iv) The information contained in the section entitled "THE SPECIAL MEETING - Record Date and Voting" of the Proxy Statement is incorporated herein by reference. (v) The information contained in the sections entitled "SPECIAL FACTORS - Effects of the Merger," "- Interests of VCA Directors and Officers in the Merger" and "THE MERGER AGREEMENT - Consideration to be Received in the Merger" of the Proxy Statement is incorporated herein by reference. (vi) The information contained in the section entitled "SPECIAL FACTORS - Accounting Treatment of the Merger" of the Proxy Statement is incorporated herein by reference. (vii) The information contained in the section entitled "SPECIAL FACTORS - Material Federal Income Tax Consequences of the Merger" of the Proxy Statement is incorporated herein by reference. (c) Different Terms. The information contained in the section entitled "SPECIAL FACTORS - Interests of VCA Directors and Officers in the Merger" of the Proxy Statement is incorporated herein by reference. (d) Appraisal Rights. The information contained in the section entitled "SPECIAL FACTORS - Appraisal Rights" of the Proxy Statement is incorporated herein by reference. (e) Provisions for Unaffiliated Security Holders. None. (f) Eligibility for Listing or Trading. Not applicable. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. (a) Transactions. The information contained in the sections entitled "SPECIAL FACTORS - Interests of VCA Directors and Officers in the Merger" and "- Background of the Merger" of the Proxy Statement is incorporated herein by reference. (b)-(c) Significant Corporate Events; Negotiations or Contacts. The information contained in the sections entitled "SPECIAL FACTORS - Background of the Merger," "- Structure of the Merger" and "- Interests of VCA Directors and Officers in the Merger" of the Proxy Statement is incorporated herein by reference. (e) Agreements Involving the Subject Company's Securities. The information contained in the sections entitled "SPECIAL FACTORS - Background of the Merger," "- Effects of the Merger," "- Interests of VCA Directors and Officers in the Merger," and "THE MERGER AGREEMENT" of the Proxy Statement is incorporated herein by reference. ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS. (b) Use of Securities Acquired. The information contained in the sections entitled "SUMMARY," "SPECIAL FACTORS - Effects of the Merger," "- The Green Entities', the Management Continuing Stockholders' and Vicar Operating's Reasons for the Merger" and "THE MERGER AGREEMENT" of the Proxy Statement is incorporated herein by reference. (c) Plans. The information contained in the sections entitled "SUMMARY," "SPECIAL FACTORS - Effects of the Merger," "- Interests of VCA Directors and Officers in the Merger," "- The Green Entities', the Management Continuing Stockholders' and Vicar Operating's Reasons for the Merger" and "DIVIDENDS" of the Proxy Statement is incorporated herein by reference. ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS. (a), (c) Purposes; Reasons. The information contained in the sections entitled "SPECIAL FACTORS - Background of the Merger," "- Structure of the Merger," "- Recommendations of the Special Committee and the Board of Directors; Fairness of the Merger," and "- The Green Entities', the Management Continuing Stockholders' and Vicar Operating's Reasons for the Merger" of the Proxy Statement is incorporated herein by reference. (b) Alternatives. The information contained in the sections entitled "SPECIAL FACTORS - Risk that the Merger will not be Completed" and "-Background of the Merger" of the Proxy Statement is incorporated herein by reference. (d) Effects. The information contained in the sections entitled "QUESTIONS AND ANSWERS ABOUT THE MERGER," "SUMMARY," "SPECIAL FACTORS - Effects of the Merger," "-The Green Entities', the Management Continuing Stockholders' and Vicar Operating's Reasons for the Merger," "- Structure of the Merger," "- Interests of VCA Directors and Officers in the Merger," "- Accounting Treatment of the Merger," "- Material Federal Income Tax Consequences of the Merger," "- Appraisal Rights," "THE MERGER AGREEMENT" and "EXPENSES" of the Proxy Statement is incorporated herein by reference. ITEM 8. FAIRNESS OF THE TRANSACTION. (a), (b) Fairness; Factors Considered in Determining Fairness. The information contained in the sections entitled "QUESTIONS AND ANSWERS ABOUT THE MERGER," "SUMMARY," "THE SPECIAL MEETING - Record Date and Voting," "SPECIAL FACTORS - Background of the Merger," "- Recommendations of the Special Committee and the Board of Directors; Fairness of the Merger," "- Opinion of Houlihan Lokey Howard & Zukin Capital," "- Opinion of Jefferies & Company, Inc." and "- Positions of the Green Entities, the Management Continuing Stockholders and Vicar Operating as to the Fairness of the Merger" of the Proxy Statement and Annex B, "Opinion of Jefferies & Company, Inc.," and Annex C, "Opinion of Houlihan Lokey Howard & Zukin Capital," of the Proxy Statement is incorporated herein by reference. (c) Approval of Security Holders. The information contained in the section entitled "THE SPECIAL MEETING - Record Date and Voting" of the Proxy Statement is incorporated herein by reference. (d) Unaffiliated Representative. The information contained in the sections entitled "SPECIAL FACTORS - Background of the Merger" and "- Recommendations of the Special Committee and the Board of Directors; Fairness of the Merger" of the Proxy Statement is incorporated herein by reference. (e) Approval of Directors. The information contained in the sections entitled "SPECIAL FACTORS - Background of the Merger" and "- Recommendations of the Special Committee and the Board of Directors; Fairness of the Merger" of the Proxy Statement is incorporated herein by reference. (f) Other Offers. Not applicable. ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS. (a)-(c) Report, Opinion or Appraisal; Preparer and Summary of the Report; Availability of Documents. The information contained in the sections entitled "SPECIAL FACTORS - Background of the Merger," "- Opinion of Houlihan Lokey Howard & Zukin Capital," "- Opinion of Jefferies & Company, Inc." and "- Recommendations of the Special Committee and the Board of Directors; Fairness of the Merger" of the Proxy Statement and Annex B, "Opinion of Jefferies & Company, Inc.," and Annex C, "Opinion of Houlihan Lokey Howard & Zukin Capital" of the Proxy Statement is incorporated herein by reference. ITEM 10. SOURCES AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION. (a), (b), (d) Source of Funds; Conditions; Borrowed Funds. The information contained in the section entitled "SPECIAL FACTORS - Financing for the Merger" of the Proxy Statement is incorporated herein by reference. VCA has no alternative financing arrangements or alternative financing plans if the primary financing falls through. (c) Expenses. The information contained in the section entitled "EXPENSES" of the Proxy Statement is incorporated herein by reference. ITEM 11. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) Securities Ownership. The information contained in the section entitled "PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT AND OTHERS" and "COMMON STOCK PURCHASE INFORMATION" of the Proxy Statement is incorporated herein by reference. (b) Securities Transactions. Not applicable. ITEM 12. THE SOLICITATION OR RECOMMENDATION. (d) Intent to Tender or Vote in a Going-Private Transaction. The information contained in the sections entitled "THE SPECIAL MEETING - Record Date and Voting," "SUMMARY" and "SPECIAL FACTORS - Interests of VCA Directors and Officers in the Merger" of the Proxy Statement is incorporated herein by reference. (e) Recommendations to Others. The information contained in the sections entitled "SUMMARY" and "SPECIAL FACTORS - Recommendations of the Special Committee and the Board of Directors; Fairness of the Merger" of the Proxy Statement is incorporated herein by reference. ITEM 13. FINANCIAL STATEMENTS. (a) Financial Information. The information contained in the section entitled "SUMMARY SELECTED HISTORICAL FINANCIAL DATA" of the Proxy Statement is incorporated herein by reference. (b) Pro Forma Information. Not applicable. ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED. (a), (b) Solicitations or Recommendations; Employees and Corporate Assets. The information contained in the sections entitled "SPECIAL FACTORS - Background of the Merger," "EXPENSES" and "THE SPECIAL MEETING - Voting, Revocation and Solicitation of Proxies" of the Proxy Statement is incorporated herein by reference. ITEM 15. ADDITIONAL INFORMATION. (b) Other Material Information. The information contained in the Proxy Statement, including the annexes thereto, is incorporated herein by reference. ITEM 16. EXHIBITS. (a) Amendment No. 1 to the Preliminary Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on August 2, 2000 (incorporated herein by reference to the Proxy Statement). (b)(1) Commitment Letter, dated March 30, 2000, between Goldman Sachs Credit Partners L.P. and Green Equity Investors III, L.P. (b)(2) Commitment Letter, dated March 30, 2000, between GS Mezzanine Partners II, L.P. and Green Equity Investors III, L.P. (c)(1) Opinion of Jefferies & Company, Inc. (incorporated herein by reference to Annex B of the Proxy Statement). (c)(2) Opinion of Houlihan Lokey Howard & Zukin Capital (incorporated herein by reference to Annex C of the Proxy Statement). (d)(1) Amended and Restated Agreement and Plan of Merger, dated August __, 2000, among Veterinary Centers of America, Inc., Vicar Recap, Inc. and Vicar Operating, Inc. (incorporated herein by reference to Annex A of the Proxy Statement). (d)(2) Voting Agreement, dated March 30, 2000, between Vicar Recap, Inc. and Robert L. Antin (incorporated herein by reference to Annex D of the Proxy Statement). (d)(3) Stock Purchase Agreement, dated March 30, 2000, between Green Equity Investors III, L.P. and Robert L. Antin (previously filed as an exhibit to Schedule 13E-3 filed on May 30, 2000). (d)(4) Rights Agreement, dated as of December 30, 1997, between VCA and Continental Stock Transfer & Trust Company (incorporated herein by reference to VCA's Report on Form 8-K, filed on January 5, 1998, File No. 1-10787). (d)(5) Rights Agreement Amendment, dated as of March 30, 2000, between VCA and Continental Stock Transfer & Trust Company (incorporated herein by reference to VCA's Report on Form 8-K, filed on April 14, 2000, File No. 1-10787). (f) Section 262 of the General Corporation Law of the State of Delaware (incorporated herein by reference to Annex E of the Proxy Statement). (g) Not applicable. SIGNATURE After due inquiry and to the best of their knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: August 1, 2000 Veterinary Centers of America, Inc. By: /s/ Tomas W. Fuller --------------------------------------- Name: Tomas W. Fuller Title: Vice President, Chief Financial Officer Dated: August 1, 2000 Vicar Operating, Inc. By: /s/ Thomas W. Fuller --------------------------------------- Name: Thomas W. Fuller Title: Vice President, Chief Financial Officer Dated: August 1, 2000 Vicar Recap, Inc. By: /s/ John Danhakl --------------------------------------- Name: John Danhakl Title: President Dated: August 1, 2000 Green Equity Investors III, L.P. By: GEI Capital III, LLC its general partner By: /s/ John Danhakl ------------------------------------- Name: John Danhakl Title: Manager Dated: August 1, 2000 GEI Capital III, LLC By: /s/ John Danhakl ------------------------------------- Name: John Danhakl Title: Manager Dated: August 1, 2000 /s/ Robert L. Antin -------------------------------------------- Robert L. Antin Dated: August 1, 2000 /s/ Arthur J. Antin -------------------------------------------- Arthur J. Antin Dated: August 1, 2000 /s/ Neil Tauber -------------------------------------------- Neil Tauber Dated: August 1, 2000 /s/ Tomas W. Fuller -------------------------------------------- Tomas W. Fuller Exhibit List ------------
Exhibit Number Description (a) Amendment No. 1 to the Preliminary Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on August 2, 2000 (incorporated herein by reference to the Proxy Statement). (b)(1) Commitment Letter, dated March 30, 2000, between Goldman Sachs Credit Partners L.P. and Green Equity Investors III, L.P. (b)(2) Commitment Letter, dated March 30, 2000, between GS Mezzanine Partners II, L.P. and Green Equity Investors III, L.P. (c)(1) Opinion of Jefferies & Company, Inc. (incorporated herein by reference to Annex B of the Proxy Statement). (c)(2) Opinion of Houlihan Lokey Howard & Zukin Capital (incorporated herein by reference to Annex C of the Proxy Statement). (d)(1) Amended and Restated Agreement and Plan of Merger, dated August __, 2000, among Veterinary Centers of America, Inc., Vicar Recap, Inc. and Vicar Operating, Inc. (incorporated herein by reference to Annex A of the Proxy Statement). (d)(2) Voting Agreement, dated March 30, 2000, between Vicar Recap, Inc. and Robert L. Antin (incorporated herein by reference to Annex D of the Proxy Statement). (d)(3) Stock Purchase Agreement, dated March 30, 2000, between Green Equity Investors III, L.P. and Robert L. Antin (previously filed as an exhibit to Schedule 13E-3 on May 30, 2000). (d)(4) Rights Agreement, dated as of December 30, 1997, between VCA and Continental Stock Transfer & Trust Company (incorporated herein by reference to VCA's Report on Form 8-K, filed on January 5, 1998, File No. 1-10787). (d)(5) Rights Agreement Amendment, dated as of March 30, 2000, between VCA and Continental Stock Transfer & Trust Company (incorporated herein by reference to VCA's Report on Form 8-K, filed on April 14, 2000, File No. 1-10787). (f) Section 262 of the Delaware Corporation Law of the State of Delaware (incorporated herein by reference to Annex E of the Proxy Statement).
EX-99.B1 2 0002.txt COMMITMENT LETTER GOLDMAN SACHS 03/30/2000 Exhibit (b)(1) GOLDMAN SACHS CREDIT PARTNERS L.P. 85 BROAD STREET NEW YORK, NEW YORK 10004 PERSONAL AND CONFIDENTIAL - ------------------------- March 30, 2000 Green Equity Investors III, L.P. c/o Leonard Green & Partners, L.P. 11111 Santa Monica Boulevard Suite 2000 Los Angeles, California 90025 Attention: Mr. John G. Danhakl Mr. John Baumer Re: Veterinary Centers of America, Inc. ----------------------------------- Ladies and Gentlemen: We are pleased to confirm the arrangements under which Goldman Sachs Credit Partners L.P. ("GSCP") is exclusively authorized by Green Equity Investors III, L.P. (the "Sponsor") to act as Sole Lead Arranger and Sole Syndication Agent in connection with, and commits to provide the financing for, certain loans described herein, in each case on the terms and subject to the conditions set forth in this letter, the attached Annex A and the attached Annex B (together, the "Commitment Letter"). You have advised us that the Sponsor intends to consummate a leveraged acquisition (the "Acquisition") of Veterinary Centers of America, Inc. (the "Company"). While the structure and certain terms of the Acquisition have yet to be finally determined, you have also advised us that you propose to finance the Acquisition (which includes the refinancing of the Company's and its subsidiaries existing indebtedness), including transaction costs, and provide financing for the Company's subsidiaries' working capital and general corporate needs after the consummation of the Acquisition with the proceeds of (i) up to $325.0 million of senior secured credit facilities (the "Facilities") to be made available to Vicar Operating, Inc. ("OpCo"), which will be a wholly owned subsidiary of the Company as the surviving corporation after the merger with Vicar Recap, Inc. ("HoldCo"), (ii) a private placement by OpCo of $50.0 million of subordinated unsecured debt securities (the "OpCo Subordinated Debt"), (iii) a private placement by HoldCo of $70.0 million of pay-in-kind (for the first five years) senior unsecured debt securities (the "HoldCo Debt") and (iv) common and pay-in-kind preferred cash equity contributions by Sponsor sad its affiliates of at least $152 million (the "Sponsor Equity") and "rollovers" by existing management of Company (the "Rollover Equity") of their equity interests or options valued at least $3.5 million; provided that, in no event will the -------- aggregate of the Sponsor Equity and the Rollover Equity be less than $156 million. Upon consummation of the Acquisition, Sponsor will own not less than 71.75% of the fully diluted common stock of HoldCo. Green Equity Investors III, L.P. March 30, 2000 Page 2 GSCP is pleased to confirm its commitment to act as Sole Lead Arranger to provide you and the Company with structuring advice in connection with the Facilities and as Sole Syndication Agent to provide you and the Company with syndication advice in connection with the Facilities and to provide the Company the full $325.0 million of the Facilities, in each case on the terms and subject to the conditions contained in this Commitment Letter. Our fees for such services are set forth in a separate fee letter (the "Fee Letter") entered into by the Sponsor and GSCP on the date hereof. GSCP's commitment is subject, in its reasonable discretion, to the following conditions: (i) there shall not have been, since December 31, 1999, any material adverse change in or affecting the business, financial condition, results of operations or prospects of the Company and its subsidiaries, taken as a whole, in each case other than pursuant to or disclosed in the Agreement and Plan of' Merger (the "Agreement and Plan of Merger") with respect to the Company dated as of even date herewith, (ii) there shall not have been any disruption or adverse change in the financial or capital markets generally, or in the market for loan syndications in particular, which in any such case under clause (i) or (ii) GSCP, in its reasonable judgment, deems material and (iii) the Facilities being assigned a credit rating by two nationally recognized rating agencies (which agencies must be acceptable to GSCP). GSCP's commitment is also subject, in its reasonable discretion, to the satisfactory negotiation, execution and delivery of appropriate loan documents relating to the Facilities, including, without limitation, a credit agreement, guaranties, security agreements, pledge agreements, real property security agreements, opinions of counsel and other related definitive documents (collectively, the "Loan Documents") to be based upon and substantially consistent with the terms set forth in this Commitment Letter. In addition, GSCP's commitment is subject, in its reasonable discretion, to its being satisfied with the results of its confirmatory due diligence with respect to the tax, accounting, legal and regulatory issues relevant to the Acquisition and the Company and its subsidiaries, which confirmatory due diligence shall be completed no later than five business days after the date of this letter. The terms of this Commitment Letter are intended as an outline of certain or the material terms of the Facilities, but do not include all of the terms, conditions, covenants, representations, warranties, default clauses and other provisions that will be contained in the Loan Documents. The Loan Documents shall include, in addition, provisions that are customary or typical for financings of this type and other provisions that GSCP may reasonably determine to be appropriate in the context of the proposed transactions. GSCP intends and reserves the right to syndicate the Facilities to the Lenders (as defined in the attached Annex B). In consultation with you, GSCP shall select the Lenders with your consent, not to be unreasonably withheld. GSCP and the Sponsor will identify a Lender reasonably acceptable to the Sponsor to act as collateral agent and administrative agent for the Lenders (the "Administrative Agent"). GSCP will lead the syndication, including determining the timing of all offers to potential Lenders, any title of agent or similar designations awarded to any Lender and the acceptance of commitments, the amounts offered and the compensation provided to each Lender from the amounts to be paid to GSCP pursuant to the terms of this Commitment Letter and the Fee Letter. GSCP will determine the final commitment allocations and will notify the Sponsor of such determinations. To ensure an orderly and effective syndication of the Facilities, you agree that, until the later of the termination of the syndication as determined by GSCP and 90 days following the 2 Green Equity Investors III, L.P. March 30, 2000 Page 3 date of initial funding under the Facilities, you will not, and will not permit any of your affiliates (including HoldCo, the Company and its subsidiaries) to, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt facility or debt security of HoldCo, the Company or any of its subsidiaries (other than the Facilities and other indebtedness contemplated hereby), including any renewals or refinancings of any existing debt facility or debt security, without the prior written consent of GSCP. You also agree that GSCP shall be entitled, but not obligated, after consultation with you, to change the terms, conditions, pricing and/or structure of the Facilities if GSCP determines in its reasonable discretion that such changes are advisable to insure the successful syndication of all of the Facilities; provided that (i) the total aggregate amount of the Term -------- Facilities as defined below) remains unchanged, (ii) the total amount of the Revolving Facility (as defined below) remains unchanged, (iii) the pricing with respect to loans made under the Facilities shall not be increased by more than 0.50% per annum in excess of the rates set forth in Annex B and (iv) the fee's set forth in the accompanying Fee Letter shall not change. You agree to cooperate and to cause the Company to cooperate with GSCP in connection with (i) the preparation of an information package regarding the business, operations and prospects of OpCo and HoldCo including, without limitation, the delivery of all information relating to the transactions contemplated hereunder prepared by or on behalf of the Sponsor, OpCo or HoldCo deemed reasonably necessary by GSCP to complete the syndication of the facilities and (ii) the presentation of such information package in bank meetings and other communications with prospective Lenders in connection with the syndication of the Facilities. The Company shall be solely responsible for the contents of any such information package and presentation and you acknowledge that GSCP will be using and relying upon the information contained in such information package and presentation without independent verification thereof. In addition, you represent and covenant that all information about the Sponsor, HoldCo or OpCo provided by you to GSCP or the Lenders in connection with the transactions contemplated hereunder is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading; and that to the best of your knowledge all information provided by or about the Company to GSCP or the Lenders in connection with the transactions contemplated hereunder is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading. We acknowledge that projections or other forward looking statements do not constitute "information" and that you represent and covenant that such projections and other forward looking statements will have been prepared in good faith based on assumptions believed by you to he reasonable. In connection with arrangements such as this, it is our firm policy to receive indemnification. You agree to the provisions with respect to our indemnity and other matters set forth in Annex A which is incorporated by reference into this Commitment Letter. GSCP agrees that your obligations and liabilities under this Commitment Letter, including Annex A hereto, and the Fee Letter shall terminate to the extent that both the Acquisition has been consummated and the Company has assumed such obligations and liabilities. 3 Green Equity Investors III, L.P. March 30, 2000 Page 4 Please note that this Commitment Letter, the Fee Letter and any written or oral advice provided by GSCP in connection with this arrangement is exclusively for your information and may not be disclosed to any third party or circulated or referred to publicly without our prior written consent, except, after providing written notice to GSCP, pursuant to a subpoena or order issued by a court of competent jurisdiction or by a judicial, administrative or legislative body or committee. In addition, we hereby consent to your disclosure of (i) such advice to your officers, directors, agents and advisors who are directly involved in the consideration of the Facilities to the extent such persons are obligated to hold such advice in confidence, and (ii) upon your acceptance of this Commitment Letter and the Fee Letter, this Commitment Letter (but not the Fee Letter) or the information contained herein (but not in the Fee Letter) to the Company and the Company's financial and legal advisors to the extent you notify such persons of their obligations to keep such material confidential. As you know, GSCP may from time to time effect transactions, for its own account or the account of customers, and hold positions in loans or options on loans of HoldCo., OpCo and other companies that may be the subject of this arrangement. In addition, Goldman, Sachs & Co. is a full service securities firm and as such may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of HoldCo, OpCo and other companies that may be the subject of this arrangement. In addition, GSCP may employ the services of its affiliates in providing certain services hereunder and may exchange with such affiliates information concerning HoldCo and the Company and other companies that may be the subject of this arrangement, and such affiliates shall be entitled to the benefits afforded to GSCP hereunder. GSCP's commitment hereunder shall terminate on September 30, 2000 unless the closing of the Facilities, on the terms and subject to the conditions contained herein, shall have been consummated. [Remainder of page intentionally left blank] 4 Green Equity Investors III, L.P. March 30, 2000 Page 5 Please confirm that the foregoing is in accordance with your understanding by signing and returning to GSCP the enclosed copy of this Commitment Letter, together, if not previously executed and delivered, with the Fee Letter, on or before the close of business on the third business day following the date of this letter, whereupon this Commitment Letter and the Fee Letter shall become binding agreements between us. If not signed and returned as described in the preceding sentence by such date, this offer will terminate on such date. We look forward to working with you on this assignment. Very truly yours, GOLDMAN SACHS CREDIT PARTNERS L.P. By: /s/ Doug Henderson ------------------------------- Authorized Signatory AGREED AND ACCEPTED: GREEN EQUITY INVESTORS III, L.P. By: GEI CAPITAL III, LLC, Its General Partner By: /s/ John Danhakl -------------------------------- Name: John Danhakl -------------------------- Title: Manager -------------------------- 5 Annex A ------- In the event that GSCP becomes involved in any capacity in any action, proceeding or investigation brought by or against any person, including stockholders or other owners of the Sponsor, HoldCo or the Company, in connection with or as a result of either this arrangement or any matter referred to in this Commitment Letter or the Fee Letter (together, the "Letters"), the Sponsor periodically will reimburse GSCP for its reasonable and documented legal and other expenses (including the reasonable and documented cost of any investigation and preparation) incurred in connection therewith. The Sponsor also will indemnify and hold GSCP harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of either this arrangement or any matter referred to in the Letters, except to the extent that any such loss, claim, damage or liability results from the gross negligence or bad faith of GSCP in performing the services that are the subject of the Letters; provided, however, that if it is found in any such action, proceeding or investigation that any loss, claim, damage or liability of GSCP has resulted from the gross negligence or bad faith of GSCP in performing the services which are the subject of this Letter, GSCP shall repay such portion of the reimbursed amounts that is attributable to expenses incurred in relation to the act or omission of GSCP which is the subject of such finding. If for any reason the foregoing indemnification is unavailable to GSCP or insufficient to hold it harmless, then the Sponsor shall contribute to the amount paid or payable by GSCP as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Sponsor and its stockholders or other owners on the one hand and GSCP on the other hand in the matters contemplated by the Letters as well as the relative fault of the Sponsor and GSCP with respect to such loss, claim, damage or liability and any other relevant equitable considerations. The reimbursement, indemnity and contribution obligations of the Sponsor under this paragraph shall be in addition to any liability which the Sponsor may otherwise have, shall extend upon the same terms and conditions to any affiliate of GSCP and the partners, directors, agent, employees and controlling persons (if any), as the case may be, of GSCP and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Sponsor, HoldCo, Company, GSCP, any such affiliate and any such person. The Sponsor also agrees that neither GSCP nor any of such affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Sponsor or any person asserting claims on behalf of or in right of the Sponsor or any other person in connection with or as a result of either this arrangement or any matter referred to in the Letters except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Sponsor result from the gross negligence or bad faith of GSCP in performing the services that are the subject of the Letters; provided, however, that in no event shall such indemnified party or such other parties have any liability for any indirect, consequential or punitive damages in connection with or as a result of such indemnified party's or such other parties' activities related to the Letters. Any right to trial by jury with respect to any action or proceeding arising in connection with or as a result of either this arrangement or any matter referred to in the Letters is hereby waived by the parties hereto. Except as expressly provided in the Commitment Letter to which this Annex A is attached, the provisions of this Annex A shall survive any termination or completion of the arrangement provided by the Letters, and this Commitment Letter shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. A-1 Annex B ------- VETERINARY CENTERS OF AMERICA, INC. Summary of Terms and Conditions of Facilities This Summary of Terms and Conditions outlines certain terms of the Facilities referred to in the Commitment Letter, of which this Annex B is a part. Certain capitalized terms used herein are defined in the Commitment Letter. Borrower: Vicar Operating Inc. a wholly owned direct subsidiary of Veterinary - -------- Centers of America, Inc. as the surviving corporation after its merger with Vicar Recap, Inc. ("HoldCo"), which shall directly and through its wholly owned direct and indirect subsidiaries own all the operating assets and subsidiaries of the Company. Guarantors: HoldCo and each of the Borrower's subsidiaries (other than any foreign - ---------- subsidiaries to the extent such guaranties would result in material adverse tax consequences) shall guaranty all obligations under the Facilities; provided that, notwithstanding the foregoing, any subsidiary of the Borrower providing any guaranty of any of the HoldCo Debt (defined below), the OpCo Subordinated Debt (defined below) or any refinancings of any of the foregoing, shall guaranty the Facilities. Sole Lead Arranger Goldman Sachs Credit Partners L.P. ("GSCP", and in such capacities, the - ------------------ "Arranger"). and Sole Syndication - -------------------- Agent: - ----- Administrative Agent: A Lender to be identified by GSCP and the Sponsor and reasonably - -------------------- acceptable to the Sponsor (such Lender, in such capacity, the "Administrative Agent"). Lenders: GSCP and/or other financial institutions selected by GSCP in - ------- consultation with, and with the consent (not to be unreasonably withheld) of, the Sponsor (each a "Lender" and collectively, the "Lenders"). Amount of Senior Up to $325.0 million of senior secured bank financing (the Facilities: "Facilities'') to include: - ---------------- (i) $100.0 million senior term loan facility (the "Term Facility A"); (ii) $150.0 million senior term loan facility (the "Term Facility B"; and together with Term Facility A, the "Term Facilities"): and (iii) $75.0 million senior revolving credit facility (the "Revolving Facility").
B-1 Availability: Term Facilities: One drawing may be made under the Term Facilities on - ------------- the Closing Date. Revolving Facility: Amounts available under the Revolving Facility may be borrowed, repaid and reborrowed on and after the Closing Date until the maturity date of the Revolving Facility. Purpose/Use of Term Facilities: To be used in full to finance the Acquisition, to - -------------- repay the Company's and its subsidiaries outstanding indebtedness and Proceeds: to pay related fees and expenses. - -------- Revolving Facility: To be used to finance the working capital and general corporate needs (including permitted acquisitions) of the Borrower and its subsidiaries. In addition, a portion of the Revolving Facility to be determined may be utilized to finance a portion of the Acquisition, provided that, after giving effect to the incurrence of any such indebtedness the ratio of total senior debt to pro forma EBITDA for the fiscal quarter period most recently ended shall not exceed 3.9:l.0. Maturities: Term Facility A: 6th anniversary of the Closing Date - ---------- Term Facility B: 8th anniversary of the Closing Date Revolving Facility: 6th anniversary of the Closing Date Closing Date: The date on or before September 30, 2000, on which the initial - ------------ borrowings under the Facilities are made.
B-2 Amortization: Term Facility A: The outstanding principal amount of the Term Facility - ------------ A will be payable in equal quarterly amounts as follows: Year 1: $ 2,000,000 Year 2: $ 7,000,000 Year 3: $13,000,000 Year 4.: $18,000,000 Year 5: $25,000,000 Year 6: $35,000,000 Term Facility B: The outstanding principal amount of the Term Facility B will be payable in equal quarterly amounts to be determined (it being understood that only minimal amortization will be required with respect to Term Facility B prior to the sixth anniversary of the Closing Date). Revolving Facility: The entire outstanding principal of the Revolving Facility will be due on the sixth anniversary of the Closing Date. Revolving Facility: The entire outstanding principal of the Revolving Facility will be due on the sixth anniversary of the Closing Date. Letters of Credit: At the Borrower's option, a portion of the Revolving Facility to be - ----------------- determined will be made available for the issuance of letters of credit ("Letters of Credit"). Swingline Facility: At the Borrower's option, a portion of the Revolving Facility to be - ------------------ determined will be made available to the Borrower pursuant to a swingline facility. Interest Rate: All borrowings under the Facilities shall bear interest, at the - ------------- Borrower's option, as follows with respect to all loans made under the Facilities: (i) for Term Facility A and the Revolving Facility: (A) at the Base Rate plus 2.25% per annum; or (B) at the reserve adjusted Eurodollar Rate plus 3.25% per annum; and (ii) for Term Facility B: (A) at the Base Rate plus 2.75% per annum; or (B) at the reserve adjusted Eurodollar Rate plus 3.75% per annum.
B-3 On and after the six-month anniversary of the Closing Date and the delivery of quarterly reports of the Borrower evidencing the calculation of total debt to EBITDA, the Term Facility A and the Revolving Facility will bear interest at the Base Rate or the reserve adjusted Eurodollar Rate, as the case may be, plus in each case an applicable margin, based upon a performance pricing grid to be determined. As used herein, the terms "Base Rate" and "reserve adjusted Eurodollar Rate" shall have meanings customary and appropriate for financings of this type, and the basis for calculating accrued interest and the interest periods for loans bearing interest at the reserve adjusted Eurodollar Rate shall be customary and appropriate for financings of this type. Interest on outstanding amounts following the occurrence and during the continuance of an Event of Default shall accrue at a rate equal to the rate on loans bearing interest at the rate determined by reference to the Base Rate plus an additional two percentage points (2.00%) per annum and shall be payable on demand. Interest Payments: Quarterly for loans bearing interest with reference to the Base Rate; - ----------------- on the last day of selected interest periods (which shall be one, two, three and six months) for loans bearing interest with reference to the reserve adjusted Eurodollar Rate (and at the end of every three months, in the case of interest periods of longer than three months); and upon prepayment, in each case payable in arrears and computed on the basis of a 360-day year. Interest Rate Within 90 days after the Closing Date, the Borrower will obtain - ------------- interest rate protection through interest rate swaps, caps or other Protection: agreement reasonably satisfactory to the Arranger and the - ---------- Administrative Agent against increases in the interest rates with respect to a notional amount equal to not less than 25% of the Term Facilities for a period of not less than 2 years. Funding Protection: Customary for transactions of this type, including breakage costs, - ------------------ gross-up for withholding, compensation for increased costs and compliance with capital adequacy and other regulatory restrictions. Commitment Fees: Commitment fees on the daily average unused portion of the Revolving - --------------- Facility (reduced by the amount of letters of credit issued and outstanding) shall accrue from the Closing Date at the rate of (y) 0.75% per annum with respect to any period during which less than 50% of the commitments under the Revolving Facility have been utilized and (z) otherwise, .50% per annum, and shall be payable quarterly in arrears.
B-4 Letters of Credit The letter of credit fee shall be a percentage per annum equal to the - ----------------- applicable margin for Eurodollar Rate loans under the Revolving Fees: Facility, which shall be shared by all Lenders under the Revolving - ---- Facility, and an additional fronting fee of a percentage per annum to be mutually agreed upon with the Administrative Agent, which shall be retained by the Lender issuing the letter of credit, in each case based upon the applicable percentage multiplied by the amount available from time to time for drawing under such letter of credit. In addition, certain customary fees assessed by the issuing Lender shall be payable. Voluntary Prepayments: The Facilities may be prepaid in whole or in part without premium - ---------------------- (except to the extent described below under the heading "Call Protection") or penalty (provided that loans bearing interest with reference to the reserve adjusted Eurodollar Rate shall be prepayable only on the last day of the related interest period unless the Borrower pays any related "broker funding" costs). Voluntary prepayments shall be applied among the Facilities as determined by the Borrower; provided that any voluntary prepayments of the Term Facility A or Term Facility B, as the case may be, shall be further applied to the remaining scheduled amortization payments of such Term Facility on a pro rata basis. Mandatory Prepayments: The Borrower shall make the following mandatory prepayments (subject to - --------------------- certain basket amounts to be mutually agreed upon in the definitive Loan Documents): 1. Asset Sales - prepayments in the amount of all of the net after-tax ----------- cash proceeds of the sale or other disposition of any property or assets of HoldCo, the Borrower or any of its subsidiaries, other than net cash proceeds (y) of sales or other dispositions of inventory or other assets in the ordinary course of business, and (z) reinvested in long-term productive assets of the Borrower or its subsidiaries within 270 days of receipt of such net cash proceeds; 2. Insurance/Condemnation Proceeds - prepayments in the amount of all ------------------------------- of the net cash proceeds received under any casualty insurance maintained by HoldCo, the Borrower or any of its subsidiaries or pursuant to the power of eminent domain or condemnation, other than permitted reimbursements to be mutually agreed upon in the definitive Loan Documents; 3. Equity Offerings - prepayments in an amount equal to 75% of the net ---------------- cash proceeds received from the issuance of equity securities of HoldCo, the Borrower or any of its subsidiaries;
B-5 4. Proceeds of Debt Issuances - prepayments in the amount of all of -------------------------- the net cash proceeds received by any of HoldCo, Borrower or its subsidiaries from issuances of debt securities by HoldCo, the Borrower or any of its subsidiaries (other than indebtedness permitted under the Loan Documents); 5. Excess Cash Flow - prepayments in an amount equal to 75% of excess ---------------- cash flow (to be defined), payable within one hundred (100) days of each fiscal year-end commencing with the fiscal year ending December 31, 2001. All such prepayments shall he applied without premium or penalty (except for breakage costs, if any) to repay, first, outstanding loans under the Term Facilities as set forth in the next sentence and, second, outstanding loans (and to the permanent reduction of commitments) under the Revolving Facility. All mandatory prepayments of the Term Facilities shall be applied to scheduled amortization prepayments of the Term Facilities pro rata between the Term Facilities and further applied pro rata to the remaining scheduled amortization payments thereon; provided that any Lender under Tam Facility B may, so long as there is a corresponding principal mount outstanding under the Term Facility A, decline to accept any such prepayment, in which case the amount of such declined payment shall be applied to the further prepayment of Term Facility A. Security: The Facilities and each guarantee thereof will be secured by first - -------- priority security interests in substantially all assets, including without limitation, all personal, real and mixed property of the Borrower and the guarantors (except as otherwise agreed to by the Arranger and the Administration Agent). In addition, the Facilities shall be secured by a first priority security interest in 100% of the stock of the Borrower and each of its subsidiaries (other than certain exceptions for foreign subsidiaries to the extent such pledge would result in material adverse tax consequences) and all intercompany debt. All security arrangements shall be in form and substance reasonably satisfactory to the Arranger and the Administrative Agent (collectively, the "Agents"). Representations and Customary and appropriate including, without limitation, due - ------------------- organization and authorization, execution, delivery and enforceability Warranties: of the Loan Documents, financial condition, no material adverse change, - ---------- title to properties, liens, litigation, payment of taxes, compliance with laws, environmental and ERISA matters, consents and approvals and full disclosure.
B-6 Covenants: Customary and appropriate affirmative and negative covenants, - --------- including, without limitation, financial covenants related to minimum fixed charge coverage, minimum interest coverage, maximum capital expenditures and senior and total leverage tests. Other covenants will include, without limitation, financial and other reporting requirements, and, subject to customary exceptions and baskets, limitations on other indebtedness, liens, negative pledge, investments, guarantees, restricted junior payments (dividends, redemptions and payments on subordinated debt and junior capital), mergers and acquisitions (it being understood that certain acquisitions, within parameters to be mutually agreed upon, will be permitted; provided that, in any event, any `seller paper" issued in connection with an acquisition shall be fully subordinated to the Facilities, shall be issued by HoldCo and shall be subject to cash pay debt service restrictions to be agreed upon), sales or transfers of assets, sales and leasebacks, transactions with affiliates, including exceptions and baskets to mutually agreed upon. Events of Default: Customary and appropriate including, without limitation, failure to - ----------------- make payments when due, defaults under other agreements or instruments of indebtedness, noncompliance with covenants, breaches of representations and warranties, bankruptcy, uninsured judgments in excess of specified amounts, ERISA. impairment of security interests in collateral, invalidity of guarantees, and "changes of control" (to be defined in a mutually agreed upon manner). Conditions Precedent 1. Satisfactory Documentation. The definitive Loan Documents and the - -------------------- -------------------------- to Initial other documentation evidencing the Facilities shall be prepared by - ---------- counsel to the Arranger and shall be in form and substance reasonably Borrowings: satisfactory in the Agents and the Lenders. - ---------- 2. Acquisition Structure and Documentation. The structure utilized to --------------------------------------- consummate the Acquisition, the terms thereof, the pro forma capitalization of HoldCo, and the Borrower after giving effect to the Acquisition, and the definitive documentation relating thereto (the "Definitive Acquisition Documents") shall be in form and substance reasonably satisfactory to the Agents (it being understood and agreed that the form of Agreement and Plan of Merger provided to us on March 29, 2000 is satisfactory), and the Definitive Acquisition Documents shall be in full force and effect on the Closing Date. 3. Consummation of Acquisition. Prior to the initial borrowing under --------------------------- Facilities or simultaneously therewith, the Acquisition shall have been consummated pursuant to the Definitive Acquisition Documents, no provision of which shall have been amended, supplemented, waived or otherwise modified in any material respect without the prior written consent of the Agents.
B-7 4. Equity Contributions. Prior to the initial borrowing under the -------------------- Facilities or simultaneously therewith, (i) the Sponsor shall have consummated the purchase of at least $152 million of common and/or pay-in-kind preferred equity (the "Sponsor Equity") of the Company and at least $3.5 million of additional common and/or pay-in-kind preferred equity (the "Rollover Equity") shall have been provided through "rollovers" by existing management shareholders of the Company; provided that, in no event shall the aggregate of the Sponsor Equity and the Rollover Equity be less than $156 million, and (ii) the terms and provisions of the Sponsor Equity and the Rollover Equity shall be reasonably satisfactory to the Agents. 5. Issuance of Senior Debt, Preferred Stock and Subordinated Debt. -------------------------------------------------------------- Prior to the initial borrowing under the Facilities or simultaneously therewith (i) the Borrower shall have received the proceeds of (y) a private placement by HoldCo of $70.0 million of pay-in-kind (for the first five years) unsecured debt securities (the "HoldCo Debt"), and (z) a private placement by the Borrower of $50.0 million of subordinated unsecured debt securities (the "OpCo Subordinated Debt"); (ii) the terms and provisions of the HoldCo Debt and the OpCo Subordinated Debt shall be reasonably satisfactory to the Agents; and (iii) the proceeds of the HoldCo Debt and the OpCo Subordinated Debt shall have been applied in full to finance the Acquisition, repay existing indebtedness of the Company and its subsidiaries and to pay related fees and expenses. 6. Discharge of Existing Debt. Concurrently with the consummation -------------------------- of the Acquisition, substantially all pre-existing indebtedness (including, without limitation, any earnout obligations and seller paper) of the Company and its subsidiaries shall have been repaid or repurchased in full, all commitments relating thereto shall have been terminated, and all liens or security interests related thereto shall have been terminated or released, in each case on terms reasonably satisfactory to the Agents. 7. Security. The Administrative Agent, for the benefit of the -------- Lenders, shall have been granted perfected first priority security interests in all assets to the extent described above under the heading "Security" in form and substance reasonably satisfactory to the Agents. 8. Payments of Amounts Due. On the Closing Date, all costs, fees, ----------------------- expenses and other compensation contemplated hereby payable to the Agents or the Lenders shall have been paid to the extent due.
B-8 9. Capital Structure; Related Agreements. All agreements (other than ------------------------------------- the Definitive Acquisition Documents, which are provided for at paragraph 2 of the Conditions Precedent to Initial Borrowings) relating to the corporate structure of the Borrower and the guarantors, all organizational documents of such entities and the employment contracts of key employees and executives shall be reasonably satisfactory to the Agents. 10. Solvency. The Lenders shall have received an opinion from an -------- independent valuation consultant or appraiser reasonably satisfactory to the Agents and a certificate of the chief financial officer of the Borrower, in each case in form and substance reasonably satisfactory to the Agents, supporting the conclusions that, after giving effect to the Acquisition and the related transactions contemplated hereby, the Borrower will not be insolvent or be rendered insolvent by the indebtedness incurred in connection therewith, or be left with unreasonably small capital with which to engage in its businesses, or have incurred debts beyond its ability to pay such debts as they mature. 11. Environmental Matters. The Lenders shall have received reports and --------------------- other information in form, scope and substance reasonably satisfactory to the Agents concerning any environmental liabilities. 12. Consents and Approvals. All necessary governmental and third ---------------------- party approvals and consents in connection with the Facilities, the Acquisition and the other transactions contemplated by the Facilities shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any applicable authority. 13. Litigation, etc. There shall not exist any action, suit, --------------- investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental authority that materially impairs the Acquisition, the financing thereof or any of the other transactions contemplated hereby, or that could have a material adverse effect on HoldCo, the Borrower, the Acquisition, the financing thereof or any of the transactions contemplated hereby.
B-9 14. Financial Statements and Performance. The Lenders shall have ------------------------------------ received the unaudited financial statements for the most recently concluded quarterly periods and copies of the monthly reporting package to be provided under the Agreement and Plan of Merger. The Lenders shall have received pro forma consolidated financial statements satisfactory to the Agents with respect to the Company for the fiscal year eared December 31, 1999 and with respect to the most recently concluded fiscal quarter and month, reflecting the Acquisition and all other acquisitions and divestitures occurring during such periods and any other recent or pending acquisitions or divestitures, as of the beginning of such periods. Such financial statements shall confirm that (y) pro forms EBITDA (to be calculated on a mutually satisfactory basis) for the Company and its subsidiaries for the twelve month period ending March 31, 2000 (or, if later, the most recently ended calendar quarter prior m the Closing Date for which financial statements are available, which financial statements shall in any event be prepared within thirty (30) days after fiscal quarter end) shall not be leas than $63.0 million and (z) the ratio of (i) total senior debt as of March 31, 2000 (determined on a pro forma basis for the Company and its subsidiaries giving effect to the Acquisition and the transactions contemplated in connection therewith) to (ii) pro forma EBITDA (to be calculated on a mutually satisfactory basis) for the twelve month period ending March 31, 2000 was not greater than 3.9:1.0. 15. Customary Closing Documents. All documents required to be --------------------------- delivered under the Loan Documents, including customary legal opinions, corporate records and documents from public officials and officers' certificates, shall have been delivered and shall be reasonably satisfactory to Agents. Conditions to All The conditions to all borrowings will include requirements relating to - ----------------- prior written notice of borrowing, the accuracy of representations and Borrowers: warranties, and the absence of any default or potential event of - --------- default, and will otherwise be customary and appropriate for financings of this type.
B-10 Assignments and The Lenders may assign all, or in an amount of not less than (y) $5 - --------------- million with respect to the Revolving Facility and (z) $2.5 million Participations: with respect to the Term Facility A or Term Facility B any part of, - -------------- their respective shares of the Facilities to their affiliates or one or more banks, financial institutions or other entities that are eligible assignees (to be described in the Loan Documents) which, in the case of assignments with respect to the Revolving Facility (other than the case of assignments made by or to GSCP), are acceptable to the Administrative Agent and (except during the existence of an Event of Default) the Borrower, each such consent not to be unreasonably withheld. Upon such assignment, such affiliate, bank, financial institution or entity shall become a Lender for all purposes under the Loan Documents; provided, assignments made to affiliates and other Lenders shall not be subject to the above described consent or minimum assignment amount requirements. The Administrative Agent will receive a processing fee of $2,000 payable by the assignor or assignee, in connection with each assignment; provided, for any assignments made to affiliates, other Lender's or made by or to GSCP, the processing fee shall be $500. The Lenders will also have the right to sell participations, subject to customary limitations on voting rights, in their respective shares of the Facilities. Requisite Lenders: Lenders holding more than 50% of total commitments or exposure under - ----------------- the Facilities, except that (x) any amendment which would disproportionately affect the obligation of the Borrower to make payment of the loans under the Revolving Facility or either of the Term Facilities shall not be effective without the approval of holders of more than 50% of such class of loans and (y) with respect to certain matters relating to the interest rate, maturity, amortization, collateral issues and the definition of Requisite Lenders, Requisite Lenders will be defined as Lenders holding 100% of total commitments or exposure of the Facilities affected thereby. Taxes, Reserve All payments are to be made free and clear of any taxes (other than - -------------- franchise taxes and taxes on overall net income), imposts, assessments, Requirements and withholdings or other deductions whatsoever. Foreign Lenders shall - ---------------- furnish to the Administrative Agent appropriate certificates or other Indemnities: evidence of exemption from U.S. federal tax withholding. - ----------- The Borrower will indemnify the Lenders against all increased costs of capital resulting from reserve requirements or otherwise imposed, in each case subject to customary increased costs, capital adequacy and similar provisions to the extent not taken into account in the calculation of the Base Rate or the Eurodollar Rate. Indemnity: Customary and appropriate provisions relating to indemnity and related - --------- matters in a form reasonably satisfactory to the Arranger, the Administrative Agent and the Lenders.
B-11 Governing Law and The Borrower and the guarantors will submit to the non-exclusive - ----------------- jurisdiction and venue of the federal and state courts of the State of Jurisdiction: New York and shall waive any right to trial by jury. New York law shall - ------------ govern the Loan Documents.
The foregoing is intended to summarize certain basic terms of the Facilities. It is not intended to be a definitive list of all of the requirements of the Lenders in connection with the Facilities. B-12 EX-99.B2 3 0003.txt COMMITMENT LETTER GREEN EQUITY 03/30/2000 Exhibit (b)(2) PRIVILEGED AND CONFIDENTIAL --------------------------- March 30, 2000 Green Equity Investors III, L.P. c/o Leonard Green & Partners, L.P. 11111 Santa Monica Boulevard Suite 2000 Los Angeles, CA 90025 Attention: Mr. John G. Danhakl John Baumer Gentlemen: We understand that Vicar Recap, Inc., a Delaware corporation ("Recap") wholly ----- owned by Green Equity Investors III, L.P. ("Parent"), is proposing to effect a ------ recapitalization (the "Recapitalization") pursuant to an Agreement and Plan of ---------------- Merger (the "Recapitalization Agreement"), among Recap, Veterinary Centers of -------------------------- America, Inc., a Delaware corporation ("VCA"), and Vicar Operating, Inc., a --- Delaware corporation and a wholly-owned subsidiary of VCA ("Opco"). Prior to ---- the Recapitalization, Rollover Holders (as defined in the Recapitalization Agreement) will exchange a portion of their Existing Shares (as defined in the Recapitalization Agreement) of VCA for shares of Recap. Pursuant to the Recapitalization Agreement, (1) VCA will transfer all of its assets and liabilities to Opco, and (2) Recap will be merged (the "Merger") with and into ------ VCA, with VCA as the surviving corporation in the Merger (such surviving corporation "Holdco" or the "Company"). Pursuant to the Merger, each holder of ------ ------- shares of Common Stock of VCA, par value $.001 per share (the "VCA Common ---------- Shares"), other than the shares held in VCA's treasury, shares held by Recap and - ------ Dissenting Shares (as defined in the Recapitalization Agreement), will be converted into the right to receive $15.00 in cash (the "Merger Price"). After giving effect to the Merger, Opco will be a wholly-owned subsidiary of Holdco, and all of the outstanding equity interests of Holdco will be owned by Parent and Rollover Holders. We further understand that, in order to finance the Recapitalization and other transactions (collectively, the "Transactions") contemplated by the Recapitalization Agreement and to pay related transaction costs, the Company will require financing consisting of: (a) the issuance of $70 million in original principal amount of senior notes of Holdco (the "Holdco Notes"), (b) ------------ the issuance of $50 million in original principal amount of senior subordinated notes of Opco (the "h", and collectively with Holdco Notes, the "Notes"; the - ----- Holdco Notes and the Opco Notes are each sometimes referred to as a class of Notes), (c) the incurrence of $250 million aggregate principal amount of term loans and $75 million principal amount of revolving credit facilities (such term loans and revolving credit facilities the "Senior Facilities") pursuant to the ----------------- commitment letter, dated the date hereof (the "Bank Commitment Letter") issued ---------------------- by Goldman Sachs Credit Partners, L.P. "GSCP"), and (d) $156 million of equity ---- financing (the "Equity Financing") through (i) the issuance for at least $152 ---------------- million in cash to Green Equity Investors III, L.P. (the "Sponsor") or ------- affiliates thereof (the "Sponsor Investors") of shares of Common Stock, par ----------------- value $.01 per share (the "Holdco Common Stock") of Holdco, shares of Junior ------------------- Preferred Stock par value $.01 per share (the "Holdco Junior Preferred Stock"), ----------------------------- of Holdco, at $25.00 per share in cash, and shares of Senior Preferred Stock, par value $.01 per share (the "Holdco Senior Preferred Stock", and, together ----------------------------- with the Holdco 1 Green Equity Investors, III, L.P. March 30, 2000 Common Stock and Holdco Junior Preferred Stock, the "Holdco Stock") of Holdco, ------------ at $25.00 per share in cash, and (ii) the rollover of the Rollover Holders of not less than $3.5 million in value (valued at the Merger Price) of VCA Common Shares or options. This letter confirms the terms and conditions pursuant to which (i) GS Mezzanine Partners II, L.P. and its affiliated investment funds (together, the "Purchasers") commit to purchase in connection with the Transactions (x) from Holdco $70 million in original principal amount of the Holdco Notes and (y) from Opco $50 million in original principal amount of the Opco Notes, and (ii) Holdco is willing to issue to the Purchasers warrants representing the right to acquire, at $.01 per share, up to 5.75%, calculated on a fully-diluted basis, of each of the Holdco Common Stock, the Holdco Junior Preferred Stock and the Holdco Senior Preferred Stock (the "Warrants", and collectively with the Notes, -------- the "Securities"). ---------- 1. Purchase and Sale. The purchase and sale of the Securities shall be ----------------- at the price and subject to the terms and conditions specified herein and in the term sheet attached hereto as Annex B (the "Term Sheet"). ---------- 2. Closing Date. The date of the closing (sometimes referred to herein ------------ as "Closing") of the Merger and the financing contemplated hereby (the ------- "Closing Date") will be on the date of the closing of the Merger and ------------ the other transactions contemplated by the Recapitalization Agreement, but in no event later than September 30, 2000 unless the Purchasers otherwise agree. The commitment of the Purchasers-hereunder shall terminate on September 30, 2000 unless the Closing shall have previously occurred. 3. Definitive Agreements. As soon as reasonably practicable after the --------------------- execution of this letter, the Sponsor and the Purchasers shall commence the negotiation of definitive agreements and documents (the "Definitive Agreements") relating to the issuance of the Securities --------------------- and other related matters, including: (a) a Purchase Agreement between Holdco and the Purchasers which shall set forth the terms and conditions upon which the Holdco Notes will be purchased by the Purchasers, and a Purchase Agreement between Opco and the Purchasers which shall set forth the terms and conditions upon which the Opco Notes will be purchased by the Purchasers; (b) an indenture with respect to each class of Notes between the issuer of each such class of Notes and a trustee reasonably satisfactory to the Sponsor and the Purchasers; (c) an Exchange and Registration Rights Agreement with respect to each class of Notes between the issuer of each such class of Notes and the Purchasers; (d) a Warrant Agreement between Holdco and the Purchasers providing for the issuance of the Warrants and the terms and conditions thereof; and (e) a Registration Rights Agreement and a Stockholders Agreement between Holdco and the Purchasers with respect to the Warrants pursuant to which the holders of the Warrants and the shares of Holdco Stock issuable upon 2 Green Equity Investors, III, L.P. March 30, 2000 exercise thereof are granted registration rights and are subject to the restrictions on transfer set forth therein. Each of the Definitive Agreements (other than the Stockholders Agreement) referred to above with respect to the Notes and the Warrants will initially be prepared by counsel to the Purchasers. The Definitive Agreements will include the terms summarized in the Term Sheet and such other representations, warranties, conditions, covenants, indemnities and other terms, in each case typical for financings of this sort, determined by the Purchasers in their sole reasonable judgment and are not inconsistent with the Term Sheet. 4. Certain Conditions. The commitment of the Purchasers hereunder is ------------------ subject, in their sole discretion, to the conditions (in addition to the conditions set forth elsewhere herein and in the Term Sheet) that there shall not have been, since December 31, 1999, any material adverse change in or affecting the business, financial condition, results of operations or prospects of VCA and its subsidiaries, taken as a whole, in each case other than pursuant to or as disclosed in the Recapitalization Agreement and other than as contemplated by this letter. The commitment of the Purchasers hereunder is also subject to the accuracy in all material respects of all information heretofore furnished to the Purchasers and the Purchasers not becoming aware after the date hereof of any information or other matters affecting the Company and its subsidiaries or the transactions contemplated hereby which is inconsistent in a material and adverse manner with any information disclosed to the Purchasers prior to the date hereof. 5. Inspection and Access to Information. From and after the date of ------------------------------------ execution of this letter by the parties hereto, the Sponsor shall, and shall use reasonable efforts to cause VCA to, permit access to, and make available to the Purchasers' representatives and their accounting and legal advisors for inspection and review, the properties, books, records, accounts, and documents of or relating to VCA and the Sponsor Investors, and the Sponsor shall, and shall use reasonable efforts to cause VCA to, make available at reasonable times and to a reasonable extent officers and employees of Sponsor, the Sponsor Investors and the Company to discuss with the Purchasers' representatives and their accounting and legal advisors the business, affairs, properties and prospects of VCA, such inspection and discussion to be undertaken prior to and after the execution of the Definitive Agreements. Notwithstanding the foregoing, Purchasers will complete all remaining due diligence within five business days after the date of the public announcement of the Recapitalization, subject to compliance by Sponsor and VCA with their obligations under this paragraph 5. 6. No-Shop; Ordinary Course. From the date hereof until the earliest ------------------------ of: (a) the mutual agreement of the parties not to pursue the execution of the Definitive Agreements, (b) the termination of such Definitive Agreements in accordance with the terms thereof, (c) the Closing Date and (d) if the Closing Date shall not have theretofor occurred, September 30, 2000 (or such later date as the Company and the Purchasers shall have mutually agreed to extend the Purchasers' commitment hereunder), the Sponsor shall not, and shall cause its affiliates, agents, representatives, and any other person acting on their behalf not to, directly or indirectly solicit, participate in any 3 Green Equity Investors, III, L.P. March 30, 2000 negotiations or discussions with or provide or afford access to information to any third party with respect to, or otherwise facilitate, encourage or accept any offers for the purchase of the Securities or any alternative mezzanine financing arrangements in connection with the Transactions (other than the transactions contemplated by the Bank Commitment Letter and the Holdco Stock) and shall terminate or have terminated prior to the date hereof any agreement or arrangement related to the foregoing to which the Sponsor or its affiliates are parties, as well as any of the foregoing activities and discussions as may be continuing on the date hereof with any party other than the Purchasers and their representatives, and Sponsor shall promptly advise the Purchasers of any inquiry or proposal relating thereto that may be received, including the terms of the proposal and the identity of the inquirer or offeror. 7. Fees and Expenses. In consideration of the Purchasers' agreements ----------------- hereunder, the Sponsor agrees at the Closing Date to pay or cause to be paid (without duplication) in cash in immediately available funds a funding fee equal to 3.0% of the aggregate original principal amount of the Notes of each class issued at the Closing, which amount will be deducted from the purchase price paid by the Purchasers for the Securities at the Closing. In addition, and whether or not the proposed Transactions are consummated, the Sponsor agrees to reimburse (or to cause VCA or Opco to reimburse) the Purchasers at the Closing or upon termination of this letter or the transactions contemplated by the Recapitalization Agreement for (i) their reasonable and documented out-of-pocket expenses, including the reasonable and documented fees and disbursements of their attorneys, plus (ii) any sales, use or similar taxes (including additions to such taxes, if any) arising in connection with any matter referred to in this letter. In addition, if the Sponsor or any of its affiliates enters into any agreement to acquire VCA and such agreement provides for payment at any time to the Sponsor or any of its affiliates in the event the transaction contemplated thereby is terminated or otherwise not consummated, the Sponsor acknowledges that any fee payable by the Sponsor to GSCP in connection with such termination pursuant to the Bank Commitment Letter may be shared with the Purchasers. Sponsor's obligations and liabilities under this Section 7 will terminate to the extent that the Merger and Recapitalization have occurred and VCA or Opco has assumed such obligations and liabilities. 8. Confidentiality. This letter and its terms and the transactions --------------- contemplated hereby shall be kept confidential by the parties hereto until the parties mutually agree upon the language and timing of a press release or until such time as one such party determines, based upon the advice of counsel, that a public announcement is required by law, in which case the parties hereto shall in good faith attempt to agree on any public announcements or publicity statements with respect thereto. Notwithstanding the foregoing, the parties may disclose this letter and its terms (i) to their officers, employees, attorneys and advisors on a confidential and need-to-know basis, (ii) as required by applicable law or compulsory legal process or in the prosecution of any proceeding initiated by one or more of the parties hereto and (iii) to the Company, GSCP, the Management Shareholders and their respective 4 Green Equity Investors, III, L.P. March 30, 2000 attorneys and advisors, on a confidential basis in connection with the transactions contemplated hereby. 9. Conditions to Closing. Purchaser's commitment to purchase the --------------------- Securities at closing hereunder is subject to: (i) the closing of the Merger on the terms set forth in the Recapitalization Agreement or on other terms reasonably satisfactory to Purchaser; (ii) the negotiation, execution and delivery on or before the Closing Date of the Definitive Agreements; (iii) the satisfaction of the conditions set forth in paragraph 4 above; (iv) the Sponsor's performance of its obligations under paragraphs 5 through 8 hereof; (v) the conditions set forth in the Term Sheet; (vi) delivery of customary closing and solvency certificates and legal opinions; and (vii) the issuance of the Securities being in compliance with the law. 10. Indemnification. In connection with arrangements such as this, it is --------------- our policy to receive indemnification. Effective upon execution of this letter, the Sponsor hereby agrees to the provisions with respect to our indemnity and other matters set forth in Annex A which are incorporated by reference into this letter. Sponsor's obligations and liabilities under this Section 10 will terminate to the extent that the Merger and Recapitalization have occurred and VCA or Opco has assumed such obligations and liabilities. 11. Other Activities. As you know, The Goldman Sachs Group, Inc. is a ---------------- full service securities firm and as such may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company and other companies which may be the subject of the arrangements contemplated by this letter. 12. Governing Law. This letter shall be governed by the internal laws of ------------- the State of New York without regard to principles of conflicts of laws. 13. No Beneficiaries; Assignments. This letter has been and is made ----------------------------- solely for the benefit of the Sponsor and the Purchasers, and no other person will acquire or have any right under or by virtue of this letter. The Sponsor may not assign any of its rights or obligations hereunder without the prior written consent of the Purchasers. The Purchasers may not assign any of its rights or obligations hereunder prior to the Closing without prior written consent of Holdco. 14. Entire Agreement. This letter constitutes the entire agreement ---------------- between the parties hereto with respect to the matters covered hereby and supersedes all prior communications, written and oral, between the Sponsor and the Purchasers. 15. Termination. The obligations and representations of the parties ----------- hereto, automatically terminate and be superseded by the provisions of the Definitive Agreements at the Closing and the consummation of the Recapitalization. 5 Green Equity Investors, III, L.P. March 30, 2000 16. Counterparts. This letter may be executed in counterparts, each of ------------ which shall be deemed to constitute an original but all of which shall constitute one and the same instrument. If the foregoing terms and conditions are acceptable to you, please so indicate by signing both of the enclosed copies of this letter where indicated and returning one to the undersigned on or prior the third business day after the date hereof, whereupon this letter shall become binding agreements between us. If this letter is not signed and returned as described in the preceding sentence by such date, this letter will terminate on such date. Very truly yours, GS MEZZANINE PARTNERS II, L.P. BY: GS MEZZANINE ADVISORS II, L.L.C., its general partner By: /s/ John Bowman --------------------------------- Name: John Bowman Title: Vice President Agreed To And Accepted As Of The Date First Above Written GREEN EQUITY INVESTORS III, L.P. By: GEI Capital III, LLC Its: General Partner By: /s/ John Danhakl --------------------------- Name: John Danhakl Title: Manager 6 Annex A ------- In the event that the Purchasers become involved in any capacity in any action, proceeding or investigation brought by or against any person, including stockholders or investors in the Sponsor or VCA, in connection with or as a result of the Purchasers' agreements contained or any matter referred to in this letter, the Sponsor periodically will reimburse the Purchasers for their reasonable and documented legal and other expenses (including the reasonable and documented cost of any investigation and preparation) incurred in connection therewith unless indemnity is not available under the terms of this Annex A. The Sponsor also will indemnify and hold the Purchasers harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of the Purchasers' agreements contained or any matter referred to in this letter, except to the extent that any such loss, claim, damage or liability results from the gross negligence or bad faith of the Purchasers in performing the obligations that are the subject of this letter or failure to fund in breach of the Purchasers' obligations under this letter. If for any reason the foregoing indemnification is unavailable to the Purchasers or insufficient to hold them harmless, then the Sponsor shall contribute to the amount paid or payable by the Purchasers as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Sponsor on the one hand and the Purchasers on the other hand in the matters contemplated by this letter as well as the relative fault of the Sponsor and the Purchasers with respect to such loss, claim, damage or liability and any other relevant equitable considerations unless indemnity is not available under the terms of this Annex A. The reimbursement, indemnity and contribution obligations of the Sponsor under this paragraph shall be in addition to any liability which the Sponsor may otherwise have, shall extend upon the same terms and conditions to (i) any affiliate of the Purchasers (including The Goldman Sachs Group, Inc.), and (ii) the partners, stockholders, members, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Sponsor, the Purchasers, any such affiliate and any such person. The Sponsor also agrees that neither the Purchasers nor any of such affiliates, partners, stockholders, members, directors, agents, employees or controlling persons shall have any liability to the Sponsor or any person asserting claims on behalf of or in the right of the Sponsor in connection with or as a result of the Purchasers' agreements contained or any matter referred to in this letter except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Sponsor result from the gross negligence or bad faith of the Purchasers in performing the obligations that are the subject of this letter or by reason of Purchasers' failure to fund in breach of Purchasers' obligations under this letter. Any right to trial by jury with respect to any action or proceeding arising in connection with or as a result of the letter to which this Annex A is attached and is made part of or any matter referred to in this letter is hereby waived by the parties hereto. Except as set forth in the commitment letter to which this Annex A is attached, the provisions of this Annex A shall survive any termination or completion of this letter to which this Annex A is attached and is made part of. 1 Annex B ------- VETERINARY CENTERS OF AMERICA, INC ---------------------------------- Summary of Terms and Conditions of the Securities ------------------------------------------------- Holdco ------ $70 Million Senior Notes Opco ---- $50 Million Senior Subordinated Notes This Summary of Terms and Conditions outlines certain terms of the Facilities referred to in the letter (the "Commitment Letter"), of which this Annex B is a part. Certain capitalized terms used herein are defined in such Commitment Letter. Securities: $70 million Senior Notes ("Holdco Notes") $50 million Senior Subordinated Notes ("Opco Notes", and collectively with Holdco Notes, the "Notes"). Issuers: Holdco Notes: Veterinary Centers of America, Inc., as the ------------ surviving entity in the Merger ("Holdco" or the "Company") Opco Notes: Vicar Operating, Inc., a wholly-owned ---------- subsidiary of Holdco ("Opco" and together with Holdco, the "Issuers") Guarantors: Holdco Notes: None. ------------ Opco Notes: All present and future direct and indirect ---------- domestic subsidiaries of Opco. Purchaser: GS Mezzanine Partners II, L.P., GS Mezzanine Partners Offshore II, L.P. and/or their affiliates ("Purchaser"). Financing Fee: Holdco Notes: 3% of the initial purchase price for the ------------ Holdco Notes("Holdco Fee") Opco Notes: 3% of the initial purchase price for the Opco ---------- Notes ("Opco Fee") Interest: Holdco Notes: Interest on the Notes shall accrue at a rate ------------ of 14.5% per annum, based on a 360-day year of twelve 30- day months and shall be payable semi-annually, in arrears; provided that on any semiannual interest payment date on or -------- prior to the 5th anniversary of the Closing Date, Holdco will have the option to pay all or any portion of the interest payable on such date by issuing additional Holdco Notes ("PIK Notes") in a principal amount equal to the --------- interest Holdco elects not to pay in cash. After the 5th anniversary of the Closing Date, all of the interest will be payable in cash semiannually, in arrears. 1 Opco Notes: Interest on the Notes shall accrue at ---------- a rate of 13.5% per annum, based on a 360-day year of twelve 30-day months. All of the interest will be payable in cash semiannually, in arrears. Final Maturity/Redemption: The Notes shall mature 10 years from the closing. Use of Proceeds: Fund the recapitalization of VCA by the Sponsor and management and pay transaction costs. Voluntary Prepayment: Holdco Notes: Except as provided below with ------------ respect to an IPO or a change in control (to be defined) of Holdco, prepayment of the Notes will be permitted at any time after three years from the closing, in whole or in part, at the prices listed below (expressed as a percentage of the principal amount of the Notes being prepaid as of the redemption date) plus accrued interest to the date of prepayment: In the 4th year after closing: 107.25% In the 5th year after closing: 107.25% In the 6th year after closing: 107.25% In the 7th year after closing: 105.80% In the 8th year after closing: 104.35% In the 9th year after dosing: 102.90% In the 10th year after closing: 101.45% Opco Notes: Except as provided below with respect ---------- to an IPO or a change in control of Holdco, prepayment of the Notes will be permitted at any time after three years from the closing, in whole or in part, at the prices listed below (expressed as a percentage of the principal amount of the Notes being prepaid as of the redemption date) plus accrued interest to the date of prepayment: In the 4th year after closing: 106.75% In the 5th year after closing: 106.75% In the 6th year after closing: 106.75% In the 7th year after closing: 105.40% 2 In the 8th year after closing: 104.05% In the 9th year after closing: 102.70% In the 10th year after closing: 101.35% At any time during the third year after closing, the entire aggregate principal amount of the Notes then outstanding may be prepaid concurrently with the consummation of an IPO or a change in control of Holdco at a price of 110% of the principal amount plus accrued interest. At any time prior to two years from the closing, up to 35% of the aggregate principal amount of the Notes then outstanding may be prepaid from the proceeds of an IPO of common stock of Holdco at a price of 110% of the principal amount thereof plus accrued interest; provided that any such proceeds shall be applied first to the prepayment of the Holdco Notes, and if no Holdco Notes are then outstanding to the prepayment of the Opco Notes; provided further that, after giving effect to any such prepayment, at least 65% of the original principal amount of the Notes plus the aggregate principal amount of PIK Notes issued since the Closing Date remains outstanding. Each prepayment must relate to an aggregate principal amount of Notes of at least $5 million. Change of Control: Upon the occurrence of a change of control, the Issuers will be required to offer to purchase the Notes at 101% of the outstanding principal amount of the Notes (including any PIK Notes) then outstanding, plus accrued interest to the date of payment. Subordination: Holdco Notes: None. ------------ Opco Notes: Subordinated to the Senior Facilities ---------- on customary terms for public high yield issues. Without limiting the generality of the foregoing, the Opco Notes shall not be subject to any remedies blockage. Conditions Precedent: Customary conditions, and the following: (i) negotiation and execution of Definitive Agreements reasonably satisfactory to the Purchaser; (ii) the terms of the other debt, the Holdco Stock and capital structure of the Issuers and related entities reasonably satisfactory to the Purchaser, Opco being and remaining a wholly- owned subsidiary of Holdco after the Merger, and a minimum aggregate equity contribution for Holdco Stock by the Sponsor and management to Holdco of at least $152 million in cash and, as to the Management 3 Shareholders, not less than $3.5 million in shares of (or options for) VCA Common Stock; (iii) no material adverse change in or affecting the business, operations, assets, management, condition (financial or otherwise), prospects or results of operations of the Issuers and their subsidiaries taken as a whole; (iv) accounting, legal and regulatory due diligence reasonably satisfactory to the Purchaser; (v) receipt of all necessary third party and governmental consents and approvals for the acquisition and related financing; (vi) closing of the Merger on terms set forth in the Recapitalization Agreement or on other reasonably satisfactory terms; (vii) pro forma EBITDA for VCA and its subsidiaries for the twelve month period ending March 31, 2000 not less than $63.0 million; (viii) the ratio of (a) total consolidated debt at the Holdco as of March 31, 2000 (determined on a pro forma basis for the Company and its subsidiaries giving effect to the acquisition and the transactions contemplated in connection therewith) to (b) pro forma EBITDA for the twelve month period ending March 31, 2000 not greater than 5.9:1.0 and (ix) other customary closing conditions including being addressees of any solvency or other consultants' reports delivered pursuant to the Bank Commitment Letter. Representations, Warranties Customary representations, warranties and and Indeminities: indemnities. Covenants: Customary covenants for public high yield issues, including restrictions (subject to customary exceptions and baskets and subject to agreed parameters permitting add-on acquisitions, including acquired debt and seller paper related thereto) on debt incurrence (including earn- outs), dividends and restricted payments, investments, dividend and other payment restrictions affecting subsidiaries, affiliate transactions, incurrence of any subordinated debt by Opco that is senior to the Opco Notes, change of business, liens and negative pledge clauses, sale leasebacks, mergers, consolidations, asset sales and changes in control, prepayment of debt (or reinvestment in the Issuer's business) using the proceeds of asset sales. Holdco will not incur any debt or other liabilities other than the Notes and will not own any assets or engage in any business other than the ownership of 100% of the capital stock of Opco (which ownership Holdco will maintain so long as any Notes remain outstanding). Financial Covenants: Holdco Notes: None Opco Notes: None 4 Events of Default: Customary events of default, including failure to make interest or principal payments, bankruptcy/insolvency, cross-acceleration and cross payment (at maturity) default for Senior Debt, cross default for pari passu, junior and other debt in excess of an agreed upon threshold amount, material uninsured judgments, violation of covenants and material inaccuracy of representations and warranties. In the event of a default in payment on the Notes or an event of default occurs, the interest rate on the Notes shall increase by 200 basis points above the otherwise applicable rate for any period that includes such a default or event of default which remains uncured and such increase shall be payable in cash. Registration Rights: The Purchaser shall receive demand registration rights on the outstanding Notes and Exchange Notes (as defined below) of each class exercisable on or after the second anniversary of closing of the Merger on terms reasonably acceptable to the Purchaser, which shall include the customary agreement of the Issuers with respect to the payment of expenses, provision of indemnities, selection of the underwriters and other matters. Management will use its commercially reasonable efforts to assist in the marketing of the Notes and Exchange Notes of each class. Rule 144A/Private Resales: At any time after two years from the closing, each Issuer will take all reasonable actions to enable the Purchaser to sell the Notes and Exchange Notes issued by it without registration under the Securities Act of 1933 from time to time under Rule 144A and, if requested by the Purchaser, will agree to make an exchange offer that will permit purchasers in such Rule 144A transactions to exchange such Notes and Exchange Notes for identical and freely transferable notes. In addition, the Notes and Exchange Notes can be sold, pledged or otherwise transferred by the Purchaser on any other private market basis at any time in accordance with applicable securities laws. Exchange Rights: The Purchaser will have the right to exchange all or part of the outstanding Notes of each class for one or more series of new Notes ("Exchange Notes") of such class having identical terms provided that the different series of Exchange Notes may differ as to relative ranking and interest rate or yield, provided the aggregate cost to the Issuer is not increased. Equity: In connection with its purchase of the Notes, the Purchaser will receive warrants ("Warrants"), each of which is exercisable at 5 any time at an exercise price of $0.01 per share, representing the right to acquire 5.75%, calculated on a fully diluted basis, of each class of Holdco Stock. The Warrants shall have customary anti-dilution rights for sales and issuances at other than fair market value, redemption, dividends, tender offers and distributions and upon certain business combinations. The Warrants and shares issuable upon exercise of the Warrants will be separately transferable and salable from the Notes. Upon an IPO, the warrants will be automatically exercised. The Warrants and shares issuable upon exercise of the Warrants can be sold, pledged or otherwise transferred by the Purchaser in accordance with applicable securities laws and any applicable shareholders' agreement. The shares issuable upon exercise of the Warrants shall have preemptive rights and customary liquidity rights, such as registration rights following an IPO and piggyback and tag-along rights (and corresponding bring-along rights in favor of the Sponsor). Board Representation: The Purchaser will have the right to appoint one director to the board of directors of Holdco, Opco and each subsidiary of any Issuer (as applicable). Expenses: Without limiting the Sponsor's obligations as set forth in the Commitment Letter, on the Closing Date, all costs, fees, expenses and other compensation contemplated hereby payable to Purchaser shall have been paid to the extent due. Access to Information: The Purchaser shall receive prior to and after closing monthly reporting packages contemplated in the Recapitalization Agreement, and after closing shall receive quarterly unaudited financial statements, audited annual financial statements, and other financial and operational information to be determined, including information and access the Purchaser requires to comply with VCOC regulations. The Purchaser's rights to receive monthly financial information shall not be transferable. 6 -----END PRIVACY-ENHANCED MESSAGE-----