FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: September 5, 1997
(Date of earliest event reported)
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LEVITZ FURNITURE INCORPORATED LEVITZ FURNITURE CORPORATION
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
DELAWARE 33-47377-01 23-2351830 FLORIDA 33-47377 23-1657490
(State or other (Commission File (IRS Employer (State or other (Commission (IRS Employer
jurisdiction of Number) Identification No.) jurisdiction of File Number) Identification No.)
incorporation) incorporation)
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6111 BROKEN SOUND PARKWAY, N.W.
BOCA RATON, FLORIDA 33487-2799
(561) 994-6006
(Address including zip code, and telephone number
including area code of registrants' principal executive offices)
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Item 3. BANKRUPTCY OR RECEIVERSHIP.
On September 5, 1997, Levitz Furniture Incorporated, a Delaware
corporation ("LFI"), and each of its subsidiaries, including, Levitz Furniture
Corporation, a Florida corporation and wholly owned subsidiary of LFI ("LFC"),
filed voluntary petitions for relief under Chapter 11, Title 11 of the United
States Code (the "Bankruptcy Code") with the United States Bankruptcy Court for
the District of Delaware, Wilmington, Delaware 19801 (the "Court"). The Court
agreed to consolidate the petitions and provide for the joint administration of
their respective cases. Pursuant to Sections 1107 and 1108 of the Bankruptcy
Code, LFI, as debtor and debtor-in-possession, will continue to manage and
operate its assets and businesses in the ordinary course of business, pending
the confirmation of the plan of reorganization and subject to the supervision
and orders of the Court. No trustee, examiner or similar officer has been
appointed by the Court. By operating as debtor-in- possession under Chapter 11
of the Bankruptcy Code, the existing directors and officers of LFI will continue
to manage the operations of LFI subject to the supervision and orders of the
Court.
On September 5, 1997, LFI and LFC entered into a credit agreement (the
"Credit Agreement") with a group of lenders (the "Lenders"), led by BT Commer-
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cial Corporation, pursuant to which, among other things, the Lenders have agreed
to provide LFI and LFC with a financing facility in an aggregate principal
amount not to exceed $260 million (the "Facility"). Advances under the Facility
are subject to certain conditions, including the execution of definitive loan
documents in form and substance acceptable to the Lenders. The Court approved
the Facility on an interim basis on September 8, 1997, thus allowing LFI and LFC
to borrow up to $40 million under the Facility over and above LFI and LFC's
existing liabilities under a prepetition credit agreement that provided for
loans to LFI and LFC in an aggregate principal amount of up to $190 million. A
final hearing on the full $260 million Facility is scheduled for October 7,
1997.
On September 5, 1997, LFC and General Electric Capital Corporation
("GECC") entered into an amended and restated agreement (the "Amended GECC
Agreement"), the effectiveness of which is subject to Court approval. On
September 8, 1997, the Court approved the Amended GECC Agreement, subject to a
final hearing on October 7, 1997.
Under LFC's previously existing agreement with GECC, LFC's customer
obligations are transferred to GECC on a nonrecourse basis, except for
insignificant amounts. Under such agreement, LFC may pay GECC a service fee or
may
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receive income, based upon the relationship among the interest earned on the
portfolio transferred thereunder, the amount of the servicing fee, the prime
rate, promotional discount fees and to a limited extent, credit losses. The
Amended GECC Agreement provides for two incremental increases in the service fee
per active account of $.40 each, commencing, respectively, after the date of
entry of the Court order approving the Amended GECC Agreement and after January
31, 1998, with the second incremental increase subject to elimination if LFC
reaches agreement with a third party regarding the terms and conditions of a
credit card program. Under the Amended GECC Agreement, the incremental increases
in the service fee are subject to accrual through March 1, 1998 and thereafter
will be amortized in equal installments over the immediately following six-month
period. All amounts so accrued will become immediately due and payable upon
termination of the Amended GECC Agreement.
The foregoing summary of the Credit Agreement and the Amended GECC
Agreement are qualified in their entirety by reference to the full text of the
Credit Agreement and the Amended GECC Agreement copies of which are filed as
Exhibits to this Current Report on Form 8-K.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS:
99.1 $260,000,000 Postpetition Credit Agree-
ment among Levitz Furniture Incorporat-
ed, Levitz Furniture Corporation,
Levitz Furniture Realty Corporation,
Levitz Shopping Service, Inc., Levitz
Furniture Company of the Midwest, Inc.,
Levitz Furniture Company of the Pacif-
ic, Inc., Levitz Furniture Company of
Washington, Inc., Levitz Furniture Com-
pany of the Midwest Realty, Inc.,
Levitz Furniture Company of the Pacific
Realty, Inc., Levitz Furniture Company
of Washington Realty, Inc., John M.
Smyth Company and John M. Smyth Realty
Company, Debtors and Debtors in Posses-
sion, as Borrowers, The Financial In-
stitutions from time to time parties
thereto, as Lenders, with Levitz Furni-
ture Corporation, as LFC Funds Adminis-
trator and, BT Commercial Corporation,
as Agent, dated as of September 5,
1997.
99.2 Interim Order (I) Authorizing a Secured
Post-Petition Financing on a Super Pri-
ority Basis Pursuant to 11 U.S.C.ss. 363
and 364, (II) Granting of Adequate Pro-
tection Pursuant to 11 U.S.C.ss. 364 and
(III) Scheduling A Final Hearing pursu-
ant to Bankruptcy Rule 4001(C), ap-
proved on September 8, 1997.
99.3 Second Amended and Restated Account
Purchase And Credit Card Program Agree-
ment by and among Levitz Furniture Cor-
poration, Levitz Furniture Company of
the Midwest, Inc., Levitz Furniture
Company of the Pacific, Inc., Levitz
Furniture Company of Washington, Inc.,
Levitz Shopping Service, Inc., John M.
Smyth Company and General Electric Cap-
ital Corporation, dated September 5,
1997.
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99.4 Order Pursuant to Bankruptcy Code Sec-
tions 105, 363 and 365 Authorizing the
Debtors to Sell Accounts and Assume
Second Amended and Restated Account
Purchase and Credit Card Program Agree-
ment, approved on September 8, 1997.
99.5 Press release issued by Levitz Furni-
ture Incorporated on September 5, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
LEVITZ FURNITURE INCORPORATED
By /S/ EDWARD P. ZIMMER
--------------------------------
Edward P. Zimmer
Vice President
Date: September 12, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
LEVITZ FURNITURE CORPORATION
By /S/ EDWARD P. ZIMMER
--------------------------------
Edward P. Zimmer
Vice President
Date: September 12, 1997
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INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
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99.1 $260,000,000 Postpetition Credit Agree-
ment among Levitz Furniture Incorporat-
ed, Levitz Furniture Corporation,
Levitz Furniture Realty Corporation,
Levitz Shopping Service, Inc., Levitz
Furniture Company of the Midwest, Inc.,
Levitz Furniture Company of the Pacif-
ic, Inc., Levitz Furniture Company of
Washington, Inc., Levitz Furniture Com-
pany of the Midwest Realty, Inc.,
Levitz Furniture Company of the Pacific
Realty, Inc., Levitz Furniture Company
of Washington Realty, Inc., John M.
Smyth Company and John M. Smyth Realty
Company, Debtors and Debtors in Posses-
sion, as Borrowers, The Financial In-
stitutions from time to time parties
thereto, as Lenders, with Levitz Furni-
ture Corporation, as LFC Funds Adminis-
trator and, BT Commercial Corporation,
as Agent, dated as of September 5,
1997.
99.2 Interim Order (I) Authorizing a Secured
Post-Petition Financing on a Super Pri-
ority Basis Pursuant to 11 U.S.C.ss. 363
and 364, (II) Granting of Adequate Pro-
tection Pursuant to 11 U.S.C.ss. 364 and
(III) Scheduling A Final Hearing pursu-
ant to Bankruptcy Rule 4001(C), ap-
proved on September 8, 1997.
99.3 Second Amended and Restated Account
Purchase And Credit Card Program Agree-
ment by and among Levitz Furniture Cor-
poration, Levitz Furniture Company of
the Midwest, Inc., Levitz Furniture
Company of the Pacific, Inc., Levitz
Furniture Company of Washington, Inc.,
Levitz Shopping Service, Inc., John M.
Smyth Company and General Electric Cap-
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ital Corporation, dated September 5,
1997.
99.4 Order Pursuant to Bankruptcy Code Sec-
tions 105, 363 and 365 Authorizing the
Debtors to Sell Accounts and Assume
Second Amended and Restated Account
Purchase and Credit Card Program Agree-
ment, approved on September 8, 1997.
99.5 Press release issued by Levitz Furni-
ture Incorporated on September 5, 1997.
EXHIBIT 99.1
===============================================================================
$260,000,000
POSTPETITION
CREDIT AGREEMENT
AMONG
LEVITZ FURNITURE INCORPORATED
LEVITZ FURNITURE CORPORATION
LEVITZ FURNITURE REALTY CORPORATION
LEVITZ SHOPPING SERVICE, INC.
LEVITZ FURNITURE COMPANY OF THE MIDWEST, INC.
LEVITZ FURNITURE COMPANY OF THE PACIFIC, INC.
LEVITZ FURNITURE COMPANY OF WASHINGTON, INC.
LEVITZ FURNITURE COMPANY OF THE MIDWEST REALTY, INC.
LEVITZ FURNITURE COMPANY OF THE PACIFIC REALTY, INC.
LEVITZ FURNITURE COMPANY OF WASHINGTON REALTY, INC.
JOHN M. SMYTH COMPANY
AND
JOHN M. SMYTH REALTY COMPANY,
DEBTORS AND DEBTORS IN POSSESSION,
AS BORROWERS
THE FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTIES HERETO
AS LENDERS
WITH
LEVITZ FURNITURE CORPORATION
AS LFC FUNDS ADMINISTRATOR
AND
BT COMMERCIAL CORPORATION,
AS AGENT
DATED AS OF SEPTEMBER 5, 1997
===============================================================================
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TABLE OF CONTENTS
PAGE
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ARTICLE 1. DEFINITIONS............................................................................. 3
1.1 General Definitions............................................................... 3
1.2 Accounting Terms and Determinations............................................... 24
1.3 Other Terms; Headings............................................................. 25
1.4 Separate Capacity................................................................. 25
ARTICLE 2. REVOLVING LOANS.......................................................................... 25
2.1 Revolving Commitments............................................................. 25
2.2 Borrowing of Revolving Loans...................................................... 26
2.3 Notice of Request for Revolving Lender
Revolving Advances................................................................ 27
2.4 Periodic Settlement of Agent Revolving
Advances; Interest and Revolving Fees;
Statements........................................................................ 27
2.5 Sharing of Payments............................................................... 28
2.6 Defaulting Revolving Lenders...................................................... 29
2.7 Superpriority and Liens........................................................... 30
ARTICLE 2A. TERM LOAN............................................................................... 31
ARTICLE 3. LETTERS OF CREDIT........................................................................ 31
3.1 Issuance of Letters of Credit..................................................... 31
3.2 Terms of Letters of Credit........................................................ 32
3.3 Notice of Issuance................................................................ 32
3.4 Revolving Lenders' Participation.................................................. 32
3.5 Payments of Amounts Drawn Under Letters of
Credit............................................................................ 32
3.6 Payment by Revolving Lenders...................................................... 33
3.7 Obligations Absolute.............................................................. 33
3.8 Agent's Execution of Applications and Other
Issuing Bank Documentation; Reliance on
Credit Agreement by Issuing Bank.................................................. 33
3.9 Existing Letters of Credit........................................................ 34
ARTICLE 4. COMPENSATION, REPAYMENT AND REDUCTION OF
COMMITMENTS.............................................................................. 34
4.1 Interest on Revolving Loans....................................................... 34
4.1A Interest on Term Loan............................................................. 35
4.1B Interest on Prepetition Obligations............................................... 35
4.2 Unused Line Fee................................................................... 36
4.3 Letter of Credit Fees............................................................. 36
4.4 Facility Fee...................................................................... 36
4.5 Interest and Letter of Credit Fees After
Event of Default.................................................................. 36
4.6 Expenses.......................................................................... 37
4.7 Mandatory Payment of Revolving Loans;
Reductions of Revolving Commitments............................................... 37
4.7A No Permitted Prepayment of Term Loan.............................................. 38
4.8 Maintenance of Revolving Loan Account;
Statements of Account............................................................. 38
4.9 Payment Procedures................................................................ 38
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4.10 Collection of Accounts............................................................ 39
4.11 Distribution and Application of Collections
and other Amounts................................................................. 39
4.12 Calculations...................................................................... 40
4.13 Special Provisions Relating to LIBOR Rate
Loans............................................................................. 41
4.14 Indemnification in Certain Events................................................. 44
ARTICLE 5. CONDITIONS PRECEDENT..................................................................... 47
5.1 Conditions Precedent to Initial Loans and
Letter of Credit.................................................................. 47
5.2 Conditions Precedent to All Revolving Loans
and Letters of Credit............................................................. 47
ARTICLE 6. REPRESENTATIONS AND WARRANTIES........................................................... 48
6.1 Organization and Qualification.................................................... 48
6.2 Authority......................................................................... 49
6.3 Enforceability.................................................................... 49
6.4 Reserved.......................................................................... 49
6.5 Consents and Filings.............................................................. 49
6.6 Government Regulation............................................................. 50
6.7 Rights in Collateral; Priority of Liens........................................... 50
6.8 Financial Data.................................................................... 50
6.9 Locations of Offices, Records and Inventory....................................... 50
6.10 Subsidiaries; Ownership of Stock.................................................. 51
6.11 No Judgments or Litigation........................................................ 51
6.12 Labor Matters..................................................................... 51
6.13 Compliance with Law............................................................... 52
6.14 ERISA............................................................................. 52
6.15 Compliance with Environmental Laws................................................ 52
6.16 Intellectual Property............................................................. 53
6.17 Licenses and Permits.............................................................. 53
6.18 Taxes and Tax Returns............................................................. 53
6.19 Material Contracts................................................................ 54
6.20 Accuracy and Completeness of Information.......................................... 54
6.21 No Change......................................................................... 54
ARTICLE 7. AFFIRMATIVE COVENANTS.................................................................... 55
7.1 Financial Reporting............................................................... 55
7.2 Collateral Reporting.............................................................. 57
7.3 Notification Requirements......................................................... 57
7.4 Corporate Existence............................................................... 59
7.5 Books and Records; Inspections.................................................... 59
7.6 Insurance......................................................................... 59
7.7 Postpetition Charges.............................................................. 60
7.8 Compliance with Laws.............................................................. 60
7.9 Use of Proceeds................................................................... 61
7.10 Fiscal Year....................................................................... 61
7.11 Maintenance of Property........................................................... 61
7.12 ERISA Documents................................................................... 61
7.13 Environmental and Other Matters................................................... 62
7.14 Restoration and Repair of Borrowers' Real
Property.......................................................................... 62
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7.15 Store Closings.................................................................... 63
ARTICLE 8. NEGATIVE COVENANTS....................................................................... 63
8.1 Minimum EBITDA.................................................................... 63
8.2 Capital Expenditures.............................................................. 64
8.2A Establishment of Continuing Financial
Covenants......................................................................... 64
8.3 Additional Indebtedness........................................................... 64
8.4 Liens............................................................................. 65
8.5 Contingent Obligations............................................................ 66
8.6 Sale of Assets.................................................................... 66
8.7 Restricted Payments............................................................... 66
8.8 Investments....................................................................... 67
8.9 Affiliate Transactions............................................................ 68
8.10 Additional Bank Accounts.......................................................... 68
8.11 Excess Cash....................................................................... 68
8.12 Additional Negative Pledges....................................................... 69
8.13 Additional Subsidiaries........................................................... 69
8.14 Changes to Certain Documents...................................................... 69
8.15 Returns to Vendors................................................................ 69
8.16 Reclamation Claims................................................................ 69
8.17 Application to the Bankruptcy Court............................................... 70
8.18 Modifications to Interim Financing Order or
Permanent Financing Order......................................................... 70
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES........................................................... 70
9.1 Events of Default................................................................. 70
9.2 Remedies.......................................................................... 73
9.2A Acceleration of Postpetition Obligations in
Respect of Term Loans............................................................. 74
9.3 Right of Setoff................................................................... 74
9.4 Application of Proceeds; Surplus;
Deficiencies...................................................................... 75
ARTICLE 10. THE AGENT............................................................................... 75
10.1 Appointment of Agent.............................................................. 75
10.2 Nature of Duties of Agent......................................................... 75
10.3 Lack of Reliance on Agent......................................................... 76
10.4 Certain Rights of the Agent....................................................... 76
10.5 Reliance by Agent................................................................. 77
10.6 Indemnification of Agent.......................................................... 77
10.7 The Agent in its Individual Capacity.............................................. 77
10.8 Holders of Notes.................................................................. 78
10.9 Successor Agent................................................................... 78
10.10 Collateral Matters................................................................ 78
ARTICLE 11. MISCELLANEOUS........................................................................... 80
11.1 GOVERNING LAW..................................................................... 80
11.2 SUBMISSION TO JURISDICTION........................................................ 80
11.3 SERVICE OF PROCESS................................................................ 81
11.4 JURY TRIAL........................................................................ 81
11.5. LIMITATION OF LIABILITY........................................................... 81
11.6 Delays............................................................................ 81
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11.7 Notices........................................................................... 81
11.8 Assignments and Participations.................................................... 82
11.9 Confidentiality................................................................... 84
11.10 Indemnification................................................................... 84
11.11 Amendments and Waivers............................................................ 85
11.12 Counterparts and Effectiveness.................................................... 86
11.13 Severability...................................................................... 86
11.14 Maximum Rate...................................................................... 87
11.15 Entire Agreement; Successors and Assigns.......................................... 87
11.16 Joint and Several Liability of Borrowers.......................................... 88
11.17 Prepetition Lender Consents....................................................... 88
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ANNEXES
ANNEX I
List of Revolving Lenders; Revolving Commitment Amounts;
Applicable Lending Offices
ANNEX II
List of Term Lenders; Term Commitment Amounts
SCHEDULES
SCHEDULE A Closing Document List
SCHEDULE B Disclosure Schedules
SCHEDULE B, PART 6.1 States in which Qualified
SCHEDULE B, PART 6.8 Contingent Obligations and
Other Liabilities
SCHEDULE B, PART 6.9 Chief Executive Offices;
Locations of Collateral
SCHEDULE B, PART 6.10 Subsidiaries
SCHEDULE B, PART 6.11 Pending Judgments, Litigation
and other Claims
SCHEDULE B, PART 6.12 Labor Contracts
SCHEDULE B, PART 6.14 Plans
SCHEDULE B, PART 6.15 Environmental Matters
SCHEDULE B, PART 6.18 Tax Matters; Tax Sharing
Agreements
SCHEDULE B, PART 6.19 Material Contracts
SCHEDULE B, PART 8.3 Existing Indebtedness
SCHEDULE B, PART 8.4 Existing Liens
SCHEDULE B, PART 8.8 Existing Investments
SCHEDULE B, PART 8.10 Disbursement Accounts
EXHIBITS
EXHIBIT A Form of Borrowing Base
Certificate
EXHIBIT B Form of Notice of Borrowing
EXHIBIT C-1 Form of Revolving Note
EXHIBIT C-2 Form of Term Note
EXHIBIT D Form of Notice of Continuation
EXHIBIT E Form of Notice of Conversion
EXHIBIT F Form of Compliance Certificate
EXHIBIT G-1 Form of Revolving Assignment
and Assumption Agreement
EXHIBIT G-2 Form of Term Assignment and
Assumption Agreement
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THIS POSTPETITION CREDIT AGREEMENT, dated as of September 5, 1997 (this
"CREDIT AGREEMENT"), is among LEVITZ FURNITURE INCORPORATED, a Delaware
corporation and a debtor and debtor in possession ("LFI"), LEVITZ FURNITURE
COMPANY, a Florida corporation and a debtor and debtor in possession ("LFC"),
LEVITZ FURNITURE REALTY CORPORATION, a Florida corporation and a debtor and
debtor in possession ("LFR"), LEVITZ SHOPPING SERVICE, INC., a Florida
corporation and a debtor and debtor in possession ("LSS"), LEVITZ FURNITURE
COMPANY OF THE MIDWEST, INC., a Colorado corporation and a debtor and debtor in
possession ("LFC MIDWEST"), LEVITZ FURNITURE COMPANY OF THE PACIFIC, INC., a
California corporation and a debtor and debtor in possession ("LFC PACIFIC"),
LEVITZ FURNITURE COMPANY OF WASHINGTON, INC., a Washington corporation and a
debtor and debtor in possession ("LFC WASHINGTON") LEVITZ FURNITURE COMPANY OF
THE MIDWEST REALTY, INC., a Colorado corporation and a debtor and debtor in
possession ("LFC MIDWEST REALTY"), LEVITZ FURNITURE COMPANY OF THE PACIFIC
REALTY, INC., a California corporation and a debtor and a debtor in possession
("LFC PACIFIC REALTY"), LEVITZ FURNITURE COMPANY OF WASHINGTON REALTY, INC., a
Washington corporation and debtor and a debtor in possession ("LFC WASHINGTON
REALTY"), JOHN M. SMYTH COMPANY, an Illinois corporation and a debtor and debtor
in possession ("JMS") and JOHN M. SMYTH REALTY COMPANY an Illinois corporation
and a debtor and debtor in possession ("JMS REALTY") (LFI, LFC, LFR, LSS, LFC
Midwest, LFC Pacific, LFC Washington, LFC Midwest Realty, LFC Pacific Realty,
LFC Washington Realty, JMS and JMS Realty sometimes hereinafter individually
called a "BORROWER" and collectively called the "BORROWERS"); each financial
institution identified on ANNEX I (together with its successors and permitted
assigns hereinafter individually called a "REVOLVING LENDER" and collectively
called the "REVOLVING LENDERS"); each financial institution identified on ANNEX
II (together with its successors and permitted assigns, hereinafter individually
called a "TERM LENDER" and collectively called the "TERM LENDERS"; the Term
Lenders, together with the Revolving Lenders, are hereinafter collectively
called the "LENDERS"); and BT COMMERCIAL CORPORATION, a Delaware corporation (in
its individual capacity, hereinafter called "BTCC"), acting in its capacity as
agent for the Lenders (in such capacity, together with its successors in such
capacity, hereinafter called the "AGENT").
PRELIMINARY STATEMENTS:
A. Certain of the Borrowers are parties to (i) the $150,000,000 Credit
Agreement dated as of July 1, 1996 (the "TRANCHE A CREDIT AGREEMENT") with the
Lenders, as revolving lenders and the term lenders thereunder (the Lenders in
such capacities hereinafter individually called the "PREPETITION REVOLVING
LENDERS" and the "PREPETITION TERM LENDERS", respectively, and collectively the
"TRANCHE A LENDERS") and BTCC, as agent, and (ii) the $40,000,000 Credit
Agreement dated as of July 1, 1996 (the "TRANCHE B CREDIT AGREEMENT" and,
collectively with the Tranche A Credit Agreement, the "PREPETITION CREDIT
AGREEMENTS") with the Lenders, as lenders thereunder (the "TRANCHE
<PAGE>
B LENDERS" and, collectively with the Tranche A Lenders, the "PREPETITION
LENDERS") and BTCC, as agent.
B. Under the Tranche A Credit Agreement, the Prepetition Revolving
Lenders provided certain of the Borrowers with a revolving credit facility up to
an aggregate outstanding principal amount of $115,000,000, of which
$77,041,536.30 is presently outstanding and the Prepetition Term Lenders made a
term loan to the Borrowers in the original principal amount of $35,000,000,
under which $36,356,250 is presently outstanding (the "PREPETITION TRANCHE A
TERM LOAN").
C. Under the Tranche B Credit Agreement, the Tranche B Lenders provided
certain of the Borrowers with a nonrevolving line of credit in the original
principal amount of $40,000,000, of which $39,515,134 is presently outstanding.
D. To secure their obligations under the Prepetition Credit Agreements,
certain of the Borrowers granted to BTCC, as collateral agent for the
Prepetition Lenders, security interests in substantially all of their respective
assets.
E. The security interests granted by certain of the Borrowers to secure
the Prepetition Obligations (hereinafter defined) were properly perfected and
are subject to no prior liens or security interests, and the liquidation value
of certain of the Borrowers' assets securing the Prepetition Obligations
presently exceeds the outstanding amount of the Prepetition Obligations.
F. On September 5, 1997 (the "PETITION DATE"), each of the Borrowers
filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code
with the United States Bankruptcy Court for the District of Delaware (the
"BANKRUPTCY COURT").
G. The Borrowers are continuing to operate their businesses and manage
their properties as debtors in possession under sections 1107 and 1108 of the
Bankruptcy Code.
H. An immediate and on-going need exists for Borrowers to obtain
additional funds in order to continue the operation of their businesses as
debtors in possession under chapter 11 of the Bankruptcy Code, and accordingly
the Borrowers have requested that the Lenders extend postpetition financing to
the Borrowers.
I. To secure such postpetition financing, the Borrowers have agreed to
grant to the Collateral Agent on a postpetition basis a security interest in all
of the Borrowers' respective assets, thereby continuing and maintaining the
security interests certain of the Borrowers granted to the Prepetition
Collateral Agent (hereinafter defined) pursuant to the Prepetition Credit
Documents and providing the Collateral Agent a security interest in all property
of the Borrowers that was not subject to the security interests securing the
Prepetition Obligations other than any GECC Account.
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J. The Lenders are willing to provide such postpetition financing on
the terms and conditions set forth in this Credit Agreement and the other Credit
Documents (hereinafter defined).
K. The Borrowers and the Lenders contemplate that on or after the
Petition Date the Bankruptcy Court will enter the Interim Financing Order, which
will approve this Credit Agreement and will authorize the Borrowers to incur
interim secured and superpriority indebtedness under the terms and conditions of
this Credit Agreement pursuant to sections 363 and 364 of the Bankruptcy Code.
L. In accordance with the Interim Financing Order, the Permanent
Financing Order (when entered into by the Bankruptcy Court), and this Credit
Agreement, the Lenders will make postpetition loans and other financial
accommodations to the Borrowers.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained in this Credit Agreement, the Borrowers, the Lenders and
the Agent hereby agree as follows:
ARTICLE 1. DEFINITIONS.
1.1 GENERAL DEFINITIONS.
ACCOUNT has the meaning set forth in the Postpetition Security
Agreement and shall mean and include the GECC Receivable.
ACTIONABLE DEFAULT has the meaning set forth in the Collateral Agency
Agreement.
AFFILIATE of a Person means another Person who directly or indirectly
controls, is controlled by, is under common control with or is a director or
officer of, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to vote five percent (5%) or
more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a business.
AGENT has the meaning set forth in the Preamble.
AGENT REVOLVING ADVANCES has the meaning set forth in SECTION 2.2.
APPLICABLE LENDING OFFICE means, with respect to each Revolving Lender,
such Revolving Lender's LIBOR Lending Office in the case of a LIBOR Rate Loan,
and such Revolving Lender's Domestic Lending Office in the case of a Prime Rate
Loan.
APPRAISED VALUE means (i) with respect to the various parcels of real
property of the Borrowers for which a current appraisal dated August 29, 1997 or
later prepared by Ernst & Young L.L.P. has been delivered to the Agent, the
appraised liquidation value of
3
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each such property as reflected in the applicable appraisal, (ii) with respect
to any leasehold interest of any Borrower in any real property on the date of
its sale, transfer or other disposition by such Borrower the fair market value
of such leasehold interest (assuming the same to be freely assignable to the
extent provided in section 365 of the Bankruptcy Code) on such date as
determined by a nationally recognized real estate appraisal firm retained by the
Agent and reasonably acceptable to the Majority Term Lenders for purposes of
making such determination and in an appraisal reasonably satisfactory to the
Agent and the Majority Term Lenders; it being understood that, if any appraisal
delivered to the Agent pursuant to clause (i) or (ii) sets forth a range of
values for the subject property, the "Appraised Value" of such property shall be
the arithmetic mean of the high and low values specified for such property, as
determined by the Agent in its Permitted Discretion and (iii) with respect to
any other fixed assets of any Borrower, (including without limitation fixtures,
furniture and equipment) the fair market value of such assets as determined by
the Agent in the exercise of its Permitted Discretion.
ASSET DISPOSITION means, with respect to any Borrower, any sale,
transfer, conveyance, assignment, exchange, liquidation or other disposition of
all or any portion of any asset of such Borrower or any interest therein outside
the ordinary course of business of such Borrower (including, without limitation,
any Casualty Loss and any disposition of any real property or interest in real
property); PROVIDED, THAT the term "ASSET DISPOSITION" shall not mean or include
the sale, assignment or other transfer by any Borrower to GECC of any GECC
Account pursuant to the GECC Account Purchase Agreement.
AUDITORS means a nationally recognized firm of independent public
accountants selected by the Borrowers and reasonably satisfactory to the Agent;
PROVIDED, THAT for purposes of this Credit Agreement, the firm of Arthur
Andersen LLP shall be deemed to be satisfactory to the Agent.
BANKRUPTCY CODE means Title 11 of the U.S. Code, 11 U.S.C. ss.ss.
101-1330, as now in effect or hereafter amended.
BANKRUPTCY COURT has the meaning set forth in the Preliminary
Statements and includes any other court having competent jurisdiction over the
Borrowers' chapter 11 cases.
BENEFIT PLAN means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which any Borrower, any Subsidiary of any Borrower or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
BORROWERS has the meaning set forth in the Preamble.
BORROWING means a borrowing of Revolving Loans of the same Type by the
LFC Funds Administrator for the joint and several account of the Borrowers from
(or, in the case of Agent Advances,
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on behalf of) the Revolving Lenders on a pro rata basis on a given date (whether
pursuant to SECTION 2.2 or resulting from continuations or conversions of
Revolving Loans on a given date pursuant to SECTIONS 4.12(A) and (B),
respectively) having, in the case of LIBOR Loans, the same Interest Period.
BORROWING BASE means, at any time, the sum at such time of:
(a) the Fixed Asset Sublimit, PLUS
(b) eighty-five percent (85%) of Eligible Accounts
Receivable, PLUS
(c) seventy-five percent (75%) of Eligible
Inventory; provided that the foregoing percentage may
be adjusted by the Agent in the exercise of its
Permitted Discretion based upon appraisals of the
Borrowers' inventory prepared from time to time at
the Agent's or the Majority Lenders' direction, LESS
(d) the aggregate amount of the Borrowers' allowed
professional fees and disbursements to which the
Postpetition Obligations and the Prepetition
Obligations may be subordinated pursuant to the
Interim Financing Order and the Permanent Financing
Order following a Default or an Event of Default;
PROVIDED, THAT so long as the LFC Funds Administrator has delivered a current
Borrowing Base Certificate to the Agent in accordance with the requirements of
SECTION 7.2, the amounts referred to in CLAUSES (b) and (c) above shall be
determined at any time by reference to such current Borrowing Base Certificate.
In addition, the Agent, in the exercise of its Permitted Discretion,
may (I) establish and increase or decrease reserves against Eligible Accounts
Receivable and Eligible Inventory, (II) reduce the advance rates provided for in
this definition, or restore such advance rates to any level equal to or below
the advance rates in effect as of the date of this Credit Agreement, and (III)
impose additional restrictions (or eliminate the same) to the standards of
eligibility set forth in the definitions of "ELIGIBLE ACCOUNTS RECEIVABLE" and
"ELIGIBLE INVENTORY."
BORROWING BASE CERTIFICATE means a certificate of the LFC Funds
Administrator concerning the Borrowing Base provided under SECTION 7.2 and
substantially in the form of EXHIBIT A.
BTCC has the meaning set forth in the Preamble.
BUSINESS DAY means any day that is neither a Saturday nor a Sunday nor
a day on which commercial banks in Chicago, Illinois are required or permitted
by law to be closed and, when used in connection with LIBOR Rate Loans, this
definition will also exclude any day on which commercial banks are not open for
dealing in
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United States dollar deposits in the London (U.K.) interbank market.
CAPITAL EXPENDITURES means, for any Person for any period, the sum of
all expenditures which have been, or should have been, capitalized by such
Person for financial statement purposes in accordance with GAAP during such
period (to the extent payable in cash or other property); PROVIDED, THAT the
term "CAPITAL EXPENDITURES" shall exclude (I) the capitalized portion of capital
leases and that portion of Investments made by such Person allocable to
property, plant or equipment and (II) proceeds of any Casualty Loss applied to
the repair, replacement or rebuilding of the property affected by such Casualty
Loss.
CASH EQUIVALENTS means either of the following, so long as the same are
maintained in accounts in which the Collateral Agent has a perfected security
interest, subject to no other Liens: (I) securities issued, guarantied or
insured by the full faith and credit of the United States and having maturities
of not more than one year; and (II) certificates of deposit having maturities of
not more than one year issued by a United States national or state chartered
commercial bank of recognized standing whose combined capital and unimpaired
surplus is in excess of $200,000,000 and whose short-term commercial paper
rating, or that of its parent holding company, is at least "A-1" or the
equivalent by S&P and at least "Prime-1" or the equivalent by Moody's.
CASUALTY LOSS means, for any Person, (I) the loss, damage, or
destruction of any asset or property owned or used by such Person, (II) the
condemnation, confiscation, or other taking, in whole or in part, of any such
asset or property, or (III) the diminishment of the use of any such asset or
property so as to render impracticable or unreasonable the use thereof for its
intended purpose.
CHANGE OF CONTROL means the occurrence of any of the following:
(A) the acquisition by a person, entity or group of
beneficial ownership of thirty-five percent (35%) or more of
the combined voting power of the then outstanding voting
securities of LFI or any Borrower;
(B) individuals who constitute the Board of Directors of LFI
or any Borrower (any such Board, an "INCUMBENT BOARD")
cease for any reason, during a period of two (2)
consecutive years, to constitute at least a majority of
such Board, PROVIDED, THAT any new director (X) serving
on the Board of a Borrower that is a wholly owned
Subsidiary of LFI or (Y) who is approved by a vote of at
least two-thirds of the applicable Incumbent Board shall
be considered a member of such Incumbent Board (other
than an individual initially assuming office as a result
of either an actual or threatened election contest or
other actual or threatened solicitation of proxies or
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consents by or on behalf of a person, entity or group
other than such Incumbent Board);
(C) the approval by the stockholders of LFI or any Borrower
of a merger, consolidation or reorganization involving
LFI or such Borrower, unless (I) the stockholders of LFI
or the relevant Borrower immediately before such merger,
consolidation or reorganization own immediately
thereafter at least fifty-one percent (51%) of the
combined voting power of the outstanding voting
securities of the surviving corporation in substantially
the same proportion as their ownership of securities
immediately before any such transaction; (II) the
individuals constituting an Incumbent Board immediately
prior to such merger, consolidation or reorganization
constitute at least a majority of the Board of the
applicable surviving corporation; and (III) no person,
entity or group (other than LFI or a wholly owned
subsidiary of LFI) has beneficial ownership of thirty-
five percent (35%) or more of the combined voting power
of the surviving corporation's then outstanding voting
securities; and
(D) the disposition by LFI of any material equity interest in
any Borrower.
CHARGES means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to the PBGC at the
time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Obligations, (b) the employees,
payroll, income or gross receipts of any Borrower, (c) any Borrower's ownership
or use of any properties or other assets, or (d) any other aspect of any
Borrower's business.
CLAIM has the meaning set forth in section 101(5) of the Bankruptcy
Code.
CLOSING DATE means the date of execution and delivery of this Credit
Agreement by all of the parties hereto, or if later, the date on which the
initial Revolving Loan is made.
CLOSING DOCUMENT LIST has the meaning set forth in SECTION 5.1.
CODE has the meaning set forth in SECTION 1.3.
COLLATERAL has the meaning set forth in the Postpetition Collateral
Agency Agreement.
COLLATERAL AGENT has the meaning set forth in the Postpetition
Collateral Agency Agreement.
COLLATERAL ACCOUNT has the meaning set forth in the Postpetition
Collateral Agency Agreement.
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COLLATERAL DOCUMENTS has the meaning set forth in the Postpetition
Collateral Agency Agreement.
COLLATERAL MONITORING FEE has the meaning set forth in the Postpetition
Collateral Agency Agreement.
COLLECTIONS means all cash, funds, checks, notes, instruments and any
other form of remittance tendered by account debtors in payment of Accounts of a
Borrower.
COMMITMENTS means, collectively, the Term Commitments and the Revolving
Commitments.
CONSOLIDATED ENTITY means LFI and those of its Subsidiaries, including
in any event each of the Borrowers, consolidated with it for purposes of
financial reporting.
CONTINGENT OBLIGATION means, with respect to any Person, any direct,
indirect, contingent or noncontingent guaranty or obligation of such Person for
the Indebtedness of another Person, except for endorsements in the ordinary
course of business.
CREDIT DOCUMENTS means, collectively, this Credit Agreement, the Notes,
the Letters of Credit, the Collateral Documents, the Postpetition Collateral
Agency Agreement and all other documents, agreements and instruments now or
hereafter executed in connection herewith or therewith.
DEFAULT means an event, condition or default that with the giving of
notice, the passage of time or both would be an Event of Default.
DEFAULTING REVOLVING LENDER has the meaning set forth in SECTION 2.6.
DEPOSITARY ACCOUNT has the meaning set forth in SECTION 8.10.
DEPOSITARY BANK has the meaning set forth in SECTION 8.10.
DISBURSEMENT ACCOUNT means the operating account of the LFC Funds
Administrator maintained with the Disbursement Account Bank.
DISBURSEMENT ACCOUNT BANK means Bankers Trust Company or any other
financial institution selected from time to time by the Agent and reasonably
acceptable to the LFC Funds Administrator.
DOMESTIC LENDING OFFICE means, with respect to any Revolving Lender,
the office of such Revolving Lender specified as its "DOMESTIC LENDING OFFICE"
on ANNEX I, as such annex may be amended from time to time, which office shall
in any event be located in the United States.
EBITDA means, for any period, the consolidated net income of the
Consolidated Entity (excluding extraordinary items) for such period, plus (a)
all interest expense, income tax expense, depreci-
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ation and amortization (including amortization of any goodwill or other
intangibles) for such period; minus or plus (without double counting) (b) gains
and losses attributable to any fixed asset sales; plus or minus (c) any other
noncash charges (excluding ordinary course accruals) or gains which have been
subtracted or added in calculating such consolidated net income; provided, that
any such noncash charges (if the aggregate amount thereof in any fiscal year is
in excess of $2,000,000) subtracted in calculating consolidated net income and
added back in computing EBITDA for any period shall be subtracted from EBITDA as
and when such noncash charges are paid in cash, and (d) plus all restructuring
and similar costs, expenses and charges (including without limitation
professional fees and store closing expenses) taken, paid or incurred by the
Borrowers on account of or directly relating to the Borrowers' chapter 11 cases
to the extent such charges are reflected in the business plan dated August 27,
1997 submitted by the Borrowers to the Lenders.
ELIGIBLE ACCOUNTS RECEIVABLE means Accounts of the respective Borrowers
deemed by the Agent in the exercise of its Permitted Discretion to be eligible
for inclusion in the calculation of the Borrowing Base. In determining the
amount to be so included, the face amount of such Accounts shall be reduced by
the amount of all returns, discounts, deductions, claims, credits, charges, or
other allowances. Unless otherwise approved in writing by the Agent, no Account
of any Borrower shall be deemed to be an Eligible Account Receivable if:
(A) it arises out of a sale made by such Borrower to an
Affiliate of such Borrower or any other Borrower; or
(B) it (I) does not arise from a signed purchase agreement,
(II) does not have a deposit from the purchaser in an amount
equal to at least ten percent (10%) of the face amount of such
Account, (III) pertains to goods that are not currently in
stock, and (IV) pertains to goods that are not scheduled for
delivery within 30 days; or
(C) the account debtor is (or the assets of the account
debtor are) the subject of an Insolvency Event; or
(D) the Account is not payable in United States dollars or
the account debtor for the Account is located outside the
continental United States, unless the Account is supported by
an irrevocable letter of credit satisfactory to the Agent (as
to form, substance and issuer) and assigned to and directly
drawable by the Collateral Agent; or
(E) the sale to the account debtor is on a guarantied sale,
sale-and-return, sale on approval or consignment basis or made
pursuant to any other written agreement providing for
repurchase or return; or
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(F) the Agent determines by its own credit analysis that
collection of the Account is uncertain or the Account may
not be paid; or
(G) the account debtor is the United States of America or
any department, agency or instrumentality thereof, unless such
Borrower duly assigns its rights to payment of such Account to
the Agent pursuant to the Assignment of Claims Act of 1940, as
amended (31 U.S.C. ss.ss. 3727 et seq.); or
(H) the Account does not comply with all Requirements of
Law, including, without limitation, the Federal Consumer
Protection Act, the Federal Truth-in-Lending Act and
Regulation Z; or
(I) the Account is not subject to a valid and perfected
first priority Lien in favor of the Collateral Agent or does
not otherwise conform to the representations and warran-ties
contained in the Credit Documents.
ELIGIBLE INVENTORY means the aggregate amount of Inventory of the
respective Borrowers deemed by the Agent in the exercise of its Permitted
Discretion to be eligible for inclusion in the calculation of the Borrowing
Base. In determining the amount to be so included, Inventory shall be valued at
the lower of cost or market on a basis consistent with the Borrowers' current
and historical accounting practice. Unless otherwise approved in writing by the
Agent, no Inventory of any Borrower shall be deemed Eligible Inventory if:
(A) it is not owned solely by such Borrower or such Borrower
does not have good, valid and marketable title thereto;
or
(B) it is not located in the United States; or
(C) it is not subject to a valid and perfected first
priority Lien in favor of the Collateral Agent, except, with
respect to such Inventory stored at locations other than
locations owned by a Borrower, for Liens for unpaid rent or
normal and customary warehousing charges; or
(D) it consists of goods returned or rejected by such
Borrower's customers or goods in transit to third
parties; or
(E) it is not first-quality finished goods, is obsolete or
slow moving, or does not otherwise conform to the
representations and warranties contained in the Credit
Documents.
ENVIRONMENTAL CLAIMS means any and all actual or threatened
administrative or judicial actions, orders, claims, liens, notices, violations
or proceedings, civil or criminal, brought, issued or asserted by (a) any
governmental authority under Environmental Laws
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for compliance, damages, penalties, removal, response, remedial or other action,
or (b) by any third party response, remedial or other action, or (b) by any
third party seeking damages for personal injury, property damage, or loss of
use, arising from a release or threatened release of a Hazardous Substance at,
to or from any property owned, leased or occupied by any Borrower or any
Subsidiary of any Borrower.
ENVIRONMENTAL LAW means any applicable federal, state, local, civil or
criminal, statute, ordinance, guideline, guidance or code relating to pollution,
damage to or protection of the environment, and/or governing the presence,
generation, use, management, storage, transport, treatment, recycling,
reclamation, disposal, discharge, emission or release of any Hazardous
Substance.
ERISA means the Employee Retirement Income Security Act of 1974, 29
U.S.C. ss.ss. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
ERISA AFFILIATE means any entity required to be aggregated with any
Borrower or any Subsidiary of any Borrower under sections 414 (b), (c), (m) or
(o) of the Internal Revenue Code.
EVENT OF DEFAULT has the meaning set forth in ARTICLE 9.
EXISTING LETTERS OF CREDIT has the meaning set forth in SECTION 3.9.
EXPENSES means all reasonable costs and expenses of the Agent and the
Collateral Agent incurred in connection with the Credit Documents and the
respective transactions contemplated therein, including, without limitation, (I)
the costs of conducting record searches, examining collateral, opening bank
accounts and lockboxes, depositing checks, and receiving and transferring funds
(including charges for checks for which there are insufficient funds), (II) the
reasonable fees and expenses of legal counsel and paralegals, accountants,
appraisers and other consultants, experts or advisors retained by the Agent
including, without limitation, consultants, experts or advisors retained in
connection with due diligence investigations, (III) expenses incurred in
connection with the assignments of or sales of participations in the Revolving
Loans or the Term Loan, (IV) the cost of title insurance premiums, real estate
survey costs, and fees and taxes in connection with the filing of financing
statements, and (V) the costs of preparing and recording Collateral Documents,
releases of Collateral, and waivers, amendments, and terminations of any of the
Credit Documents. EXPENSES also means all reasonable costs and expenses
(including the reasonable fees and expenses of legal counsel and other
professionals) paid or incurred by the Agent, the Collateral Agent or any Lender
(I) during the continuance of an Event of Default, (II) in enforcing or
defending its respective rights under or in respect of any of the Credit
Documents, (III) collecting the Revolving Loans or the Term Loan, (IV)
foreclosing or otherwise collecting upon the Collateral or any part thereof and
(V) in
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obtaining any legal, accounting or other advice in connection with any of the
foregoing.
EXPIRATION DATE means the earlier of (I) March 5, 1999 and the date on
which this Credit Agreement is terminated pursuant to SECTION 9.2(B).
FACILITY FEE has the meaning set forth in SECTION 4.4.
FEDERAL FUNDS RATE means, for any period, a fluctuating interest rate
per annum for each day during such period equal to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
FEDERAL RESERVE BOARD means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeeding to its functions.
FEES means, collectively, the Unused Line Fee, the Letter of Credit
Fees, the L/C Facing Fee, the Issuing Bank Fees, the Facility Fee and the
Collateral Monitoring Fee.
FINANCIAL STATEMENTS means the consolidated balance sheets, statements
of operations, statements of cash flows and statements of changes in
shareholder's equity of the Consolidated Entity for the period specified,
prepared in accordance with GAAP and consistently with prior practices.
FIXED ASSET SUBLIMIT means an amount equal to $90,000,000; provided,
that such amount shall be automatically and permanently reduced on the date on
which Net Cash Disposition Proceeds of the sale, transfer or other disposition
of any real property, other fixed assets or any leasehold interest in real
property by any Borrower are received by or for the account of such or any other
Borrower, in an amount equal to (i) in the case of any sale, transfer or other
disposition of any real property or any leasehold interest in real property, the
Appraised Value thereof, and (ii) in the case of any sale, transfer or other
disposition of any other fixed assets (including without limitation fixtures,
furniture and equipment), twenty-five percent (25%) of the Appraised Value
thereof; provided that, no reduction of the Fixed Asset Sublimit pursuant to
this clause (ii) shall occur as a result of the Borrowers' selling, transferring
or otherwise disposing of obsolete or worn out fixed assets with an aggregate
Appraised Value of up to $1,800,000.
GAAP means generally accepted accounting principles in the United
States as in effect from time to time.
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GECC means General Electric Capital Corporation, a New York
corporation.
GECC ACCOUNT has the meaning set forth in the Postpetition Security
Agreement.
GECC ACCOUNT PURCHASE AGREEMENT has the meaning set forth in the
Postpetition Security Agreement.
GECC RECEIVABLE means, at any time, the aggregate net amount payable by
GECC to Borrowers at such time pursuant to section 2.2 of the GECC Account
Purchase Agreement in respect of the purchase price of GECC Accounts.
GOVERNING DOCUMENTS means certificates or articles of incorporation,
by-laws and other similar organizational or governing documents.
GOVERNMENTAL AUTHORITY means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
HAZARDOUS SUBSTANCES means petroleum materials, petroleum wastes,
radioactive materials, polychlorinated biphenyls, urea formaldehyde, asbestos or
any materials containing asbestos, and any materials or substances defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "hazardous constituents," "toxic substances," "toxic
pollutants," "pollutants," or "contaminants" or terms of similar import under
any Environmental Law.
HIGHEST LAWFUL RATE means, at any given time during which any
Obligations shall be outstanding hereunder, the maximum nonusurious interest
rate that at any time or from time to time may be contracted for, taken,
reserved, charged or received on such Obligations, under the laws of the State
of New York (or the law of any other jurisdiction whose laws may be mandatorily
applicable notwithstanding other provisions of this Credit Agreement and any of
the other Credit Documents), or under applicable federal laws that may presently
or hereafter be in effect and that allow a higher maximum nonusurious interest
rate than under the State of New York (or such other jurisdiction's) law, in any
case after taking into account, to the extent permitted by applicable law, any
and all relevant payments or charges under this Credit Agreement and any other
Credit Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions.
INDEBTEDNESS of a Person means, without duplication, (a) indebtedness
for borrowed money or for the deferred purchase price of property or services
(other than trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), whether on open account or
evidenced by a note, bond, debenture or similar instrument, (B) obligations
under capital leases, (C) reimbursement obligations for
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letters of credit, banker's acceptances or other credit accommodations, whether
drawn or undrawn, (D) liabilities, as reasonably determined by the Agent, under
any Interest Rate Agreement, (E) Contingent Obligations and (F) Indebtedness
secured by any Lien on any property of that Person, even if that Person has not
assumed such Indebtedness.
INTEREST PERIOD means, for any LIBOR Rate Loan, the period commencing
on the date of such Borrowing and ending on the last day of the period selected
by the LFC Funds Administrator pursuant to the provisions below. The duration of
each such Interest Period shall be one, two, three or six months, in each case
as the LFC Funds Administrator may, in an appropriate Notice of Borrowing,
Notice of Continuation or Notice of Conversion, select; PROVIDED, THAT the LFC
Funds Administrator may not select any Interest Period that ends after the
Expiration Date. Whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day; PROVIDED, THAT
if such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day.
INTEREST RATE AGREEMENT means any interest rate protection or hedge
agreement, including, without limitation, interest rate future, option, swap,
and cap agreements.
INTERIM FINANCING ORDER means the order entered by the Bankruptcy Court
pursuant to section 364(c) and (d) of the Bankruptcy Code and Bankruptcy Rule
4001(c), authorizing the Borrowers to incur postpetition secured and
superpriority indebtedness in accordance with this Credit Agreement on an
interim basis in form and substance satisfactory to the Agent.
INTERNAL REVENUE CODE means the Internal Revenue Code of 1986,
amendments thereto, successor statutes, and regulations or guidance promulgated
thereunder.
INVENTORY has the meaning set forth in the Postpetition Security
Agreement.
INVESTMENT means all expenditures made and all liabilities incurred
(contingently or otherwise) for or in connection with the acquisition of stock
or Indebtedness of, or for loans, advances, capital contributions or similar
transfers of property to, or acquisition of substantially all the assets of, a
Person. In determining the aggregate amount of Investments outstanding at any
particular time, (I) the amount of any Investment represented by a guaranty
shall be taken at not less than the principal amount of the obligations
guaranteed and outstanding; (II) there shall be deducted in respect of each such
Investment any amount received as a return of capital (but only by repurchase,
redemption, retirement, repayment, liquidating dividend or liquidating
distribution); (III) there shall not be deducted in respect of any
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Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise; and (IV) there shall not be deducted from the
aggregate amount of Investments any decrease in the market value thereof.
ISSUING BANK means Bankers Trust Company or any Revolving Lender or
other financial institution that is acceptable to the Agent and the Borrowers
that may at any time issue or be requested to issue a Letter of Credit for the
account of any Borrower.
ISSUING BANK FEES has the meaning set forth in SECTION 4.3.
L/C FACING FEE has the meaning set forth in SECTION 4.3.
LFC FUNDS ADMINISTRATOR means LFC acting in its capacity as borrowing
agent for the Borrowers under that certain Borrower Agency Agreement of even
date herewith among LFC, as borrowing agent, and the Borrowers.
LFI means Levitz Furniture Incorporated, a Delaware corporation.
LFI DEBENTURES means the 15% Senior Deferred Coupon Debentures due 2002
issued by LFI pursuant to the LFI Debenture Indenture, as amended, restated,
supplemented or otherwise modified from time to time pursuant to the terms
hereof and thereof.
LFI DEBENTURE INDENTURE means the 15% Senior Deferred Coupon Indenture
dated as of December 1, 1992 by and between LFI and First National Association,
as trustee, as amended, restated, supplemented or otherwise modified from time
to time pursuant to the terms hereof and thereof.
LENDER means any of the Revolving Lenders or the Term Lenders.
LETTER OF CREDIT FEE has the meaning set forth in SECTION 4.3.
LETTER OF CREDIT OBLIGATIONS means, without duplication, the sum of the
aggregate undrawn face amount of all Letters of Credit outstanding, PLUS the
aggregate amount of all drawings under Letters of Credit for which the Borrowers
have not reimbursed the Issuing Bank, PLUS the aggregate amount of all payments
made by Revolving Lenders to the Issuing Bank for their participations in
Letters of Credit, for which the Borrowers have not reimbursed the Revolving
Lenders.
LETTER OF CREDIT REQUEST has the meaning set forth in SECTION 3.3.
LETTERS OF CREDIT means all letters of credit issued for the account of
any Borrower under ARTICLE 3 and all amendments, renewals, extensions or
replacements thereof.
LIBOR LENDING OFFICE means, with respect to any Revolving Lender, the
office of such Revolving Lender specified as its "LIBOR
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LENDING OFFICE" opposite its name on ANNEX I, as such annex may be amended from
time to time (or, if no such office is specified, its Domestic Lending Office).
LIBOR RATE means, with respect to any Interest Period for each LIBOR
Rate Loan comprising part of the same Borrowing, an interest rate per annum
equal to the rate (rounded upward to the nearest whole multiple of one-sixteenth
(1/16) of one percent (1.00%) per annum, if such rate is not such a whole
multiple of one-sixteenth (1/16) of one percent (1.00%)) of the offered
quotation, if any, to first class banks in the London (U.K.) interbank market by
Bankers Trust Company for United States dollar deposits of amounts in
immediately available funds comparable to the principal amount of the LIBOR Rate
Loan of BTCC for which the LIBOR Rate is being determined with maturities
comparable to the Interest Period for which such LIBOR Rate will apply as of
approximately 10:00 a.m. Chicago time two (2) Business Days prior to the
commencement of such Interest Period.
LIBOR RATE LOAN means a Revolving Loan that bears interest as provided
in SECTION 4.1(B) hereof.
LIEN means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title, or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
LOAN means the Term Loan or any Revolving Loan.
MAJORITY LENDERS means, at any time, those Lenders holding in the
aggregate more than fifty percent (50%) of the sum at such time of the total
Revolving Commitments and the aggregate outstanding principal amount of the
Prepetition Tranche A Term Loan and the Term Loan; PROVIDED, THAT if at such
time the Revolving Commitments have terminated, those Lenders then owed in the
aggregate more than fifty percent (50%) of the sum of the aggregate then
outstanding Revolving Loans, Letter of Credit Obligations and the aggregate
outstanding principal amount of the Prepetition Tranche A Term Loan and the Term
Loan, in each case including accrued but then unpaid interest thereon.
MAJORITY TERM LENDERS means, at any time, those Term Lenders holding in
the aggregate more than fifty percent (50%) of the aggregate outstanding
principal amount of the Prepetition Tranche A Term Loan and the Term Loan.
MATERIAL ADVERSE EFFECT means a material adverse effect on (I) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of the Borrowers taken as a whole, (II) the
ability of any Borrower to perform its obligations under the Credit Documents to
which it is a party, or on the ability of the Agent, the Collateral Agent or the
Lenders to enforce the Postpetition Obligations or realize upon the Collateral,
or (III) the value of the Collateral consisting of
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non-current assets, or the amount that the Agent, the Collateral Agent or the
Lenders would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of such Collateral.
MATERIAL CONTRACT means any contract or other arrangement to which a
Borrower or any Subsidiary of a Borrower is a party (other than the Credit
Documents) for which breach, nonperformance, cancellation or failure to renew
could reasonably be expected to have a Material Adverse Effect.
MOODY'S means Moody's Investors Service, Inc., or any successor
thereto.
MORTGAGE means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by any Borrower to the Prepetition
Collateral Agent with respect to any Borrower's interest in real property.
MULTIEMPLOYER PLAN means a "multiemployer plan" (as defined in section
4001(a) (3) of ERISA) to which a Borrower, any Subsidiary of Borrower or any
ERISA Affiliate has contributed within the past six years or with respect to
which a Borrower or any Subsidiary of a Borrower could reasonably be expected to
incur any liability.
NET CASH DISPOSITION PROCEEDS means proceeds in cash or Cash
Equivalents of an Asset Disposition by any Borrower to any Person other than
another Borrower, net of (A) direct costs and expenses relating to such Asset
Disposition, (B) taxes paid or payable as a result thereof and (C) amounts
required to be applied to the repayment of Indebtedness secured by a Lien on the
asset which is the subject of such Asset Disposition. Net Cash Disposition
Proceeds shall also include proceeds of insurance paid on account of loss or
damage to any property, condemnation awards (or payments made in lieu thereof)
by reason of, or in anticipation of, a permanent taking of any property pursuant
to condemnation proceedings or by the exercise of the right of eminent domain or
by conveyance in lieu of condemnation, in each case net of (I) funds actually
used to repair or reconstruct the damaged property or property affected by the
condemnation or taking, (II) costs and expenses reasonably incurred in
connection with the collection of such proceeds, awards or other payments and
(III) amounts retained by or paid to third parties having rights in such
proceeds, awards or other payments superior to the rights of the Secured Parties
and the applicable Borrower.
NOTE means any Term Note or Revolving Note.
NOTE DOCUMENTS means, collectively, the Senior Notes, the Senior Note
Indenture, the Senior Notes (12-3/8%), the Senior Note Indenture (12-3/8%), the
Senior Subordinated Notes and the Senior Subordinated Note Indenture and all
other documents, agreements and instruments now or hereafter executed in
connection therewith.
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NOTICE OF BORROWING means an irrevocable and binding notice delivered
by the LFC Funds Administrator to the Agent either by telephone or by facsimile
transmission (and if by telephone, promptly confirmed in writing), of the
Borrowers' request for a Borrowing, which notice shall be substantially in the
form of EXHIBIT B.
NOTICE OF CONTINUATION has the meaning set forth in SECTION 4.13(A).
NOTICE OF CONVERSION has the meaning set forth in SECTION 4.13(B).
PERMANENT FINANCING ORDER means an order entered by the Bankruptcy
Court as to which no stay has been entered and that has not been vacated,
modified or overturned, in form and substance substantially similar to the
Interim Financing Order, authorizing the incurrence by the Borrowers of
permanent postpetition superpriority indebtedness in accordance with this Credit
Agreement and the other Loan Documents.
PERMITTED DISCRETION means the Agent's judgment exercised in good faith
and not in an irrational manner based upon its consideration of any factor which
the Agent believes in good faith could affect the value of any Collateral,
including any Inventory or Accounts of any Borrower or the amount which the
Agent and the Lenders would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of such
Collateral. In exercising such judgment, the Agent may consider such factors
which are already included in or tested by the definition of Eligible Accounts
Receivable or Eligible Inventory, as well as any of the following: (I) the
financial and business climate of any Borrower's industry and general
macroeconomic conditions, (II) changes in collection history and dilution with
respect to the Accounts of any Borrower, (III) changes in levels of backlog of
firm purchase orders and demand for, and pricing of, Inventory of any Borrower,
(IV) changes in any concentration of risk with respect to Accounts and Inventory
of any Borrower, and (V) any other factors that change the credit risk of
lending to the Borrowers on the security of the Accounts and Inventory of the
Borrowers.
PERMITTED EXPENSES means, collectively, (i) fees required to be paid to
the Office of the United States Trustee pursuant to 28 U.S.C. section 1930(a),
(ii) compensation for services rendered or reimbursement of expenses incurred
that are permitted to be paid by the Bankruptcy Court under sections 330 or 331
of the Bankruptcy Code after the date of the occurrence of an Event of Default
to professionals retained pursuant to an order of the Bankruptcy Court by the
Borrowers or any official committee appointed pursuant to section 1102 of the
Bankruptcy Code in an amount not to exceed $2,000,000 and (iii) so long as no
Event of Default has occurred and is continuing, Permitted Prepetition Claim
Payments.
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PERMITTED LIENS means the Liens referred to in CLAUSES (A) through (J)
of SECTION 8.4.
PERMITTED PREPETITION CLAIM PAYMENT means any payment, approved by an
order of the Bankruptcy Court (as adequate protection or otherwise) on account
of any Claim arising or deemed to have arisen prior to the Petition Date in
respect of (i) prepetition employee wages, salaries, sick pay, vacation pay
(including "personal days"), holiday pay, and other accrued compensation; (ii)
obligations to reimburse prepetition employee business expenses (including
travel, lodging, moving, and relocation expenses); (iii) obligations to make
payments for which employee payroll deductions were made; (iv) obligations to
make prepetition contributions and pay benefits under employee benefit plans;
(v) all costs and expenses incident to the payments and contributions described
in (i) through (iv) (including payroll-related taxes and processing costs); (vi)
obligations to customers incurred in the ordinary course of business (including
honoring obligations arising from deposits, prepayments, gift certificates,
warranties, refunds, returns, exchanges and other credit balances); (vii)
obligations under the Borrowers' or any Subsidiary's self-insured workers'
compensation program; (viii) amounts owed to department lessees and licensees in
the ordinary course of Borrowers' or any Subsidiary's business; (ix) amounts
owed to certain individuals or entities who, although not employees of
Borrowers, (I) provide ongoing vital services to Borrowers on a regular and
recurring basis, (II) are paid for the services they perform for Borrowers
directly by Borrowers and not by any agency (such as an employment agency), and
(III) perform services that, with respect to Borrowers, are performed by
employees; (x) amounts owed to certain individuals or entities that (I) provide
services to Borrowers' customers on behalf of Borrowers, (II) have direct
contact with Borrowers' customers or take possession of customers' goods or
property, (III) the customers believe are employees of Borrowers, and (IV) are
compensated by Borrowers, who, in turn, receive customer payments for those
services; (xi) the claims of all contractors that have given or could give rise
to mechanics' or materialmen's liens against property of Borrowers or any
Subsidiary, (xii) employee withholding taxes, sales, use and excise and other
similar trust fund amounts.
PERSON means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, entity, party or government (including any
division, agency or department thereof), and its successors, heirs and assigns.
PETITION DATE has the meaning set forth in the Preliminary Statements.
PETITIONS means the voluntary petitions filed by the Borrowers for
relief under chapter 11 of the Bankruptcy Code with the Bankruptcy Court on the
Petition Date.
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PLAN means any Benefit Plan, Multiemployer Plan, or Retiree Health
Plan, or any employee benefit plan, fund, program or arrangement, whether oral
or written, maintained or contributed to by any Borrower or any Subsidiary of
any Borrower, or with respect to which any of them could reasonably be expected
to incur liability.
PLAN OF REORGANIZATION means a plan or plans of reorganization for the
Borrowers promulgated and filed pursuant to section 1121 ET SEQ. of the
Bankruptcy Code.
POSTPETITION CHARGE means any Charge arising or levied after the
Petition Date.
POSTPETITION COLLATERAL AGENCY AGREEMENT means the Intercreditor and
Collateral Agency Agreement of even date herewith among BTCC, acting in its
capacity as collateral agent thereunder, the Agent and the Lenders.
POSTPETITION OBLIGATIONS means the unpaid principal and interest
hereunder (including interest accruing on or after the occurrence of an Event of
Default) in respect of Revolving Loans, Term Loans, reimbursement obligations
under Letters of Credit, Fees, Expenses and all other joint and several
obligations and liabilities of the Borrowers to the Agent, the Issuing Bank, the
Collateral Agent or any of the Lenders under this Credit Agreement, the Notes or
any of the other Credit Documents.
POSTPETITION PLEDGE AGREEMENT means the Pledge Agreement of even date
herewith executed by LFC in favor of the Collateral Agent for the benefit of the
Secured Parties identified therein.
POSTPETITION SECURITY AGREEMENT means the Security Agreement of even
date herewith executed by the Borrowers in favor of the Collateral Agent for the
benefit of the Secured Parties identified therein.
PREPETITION COLLATERAL AGENCY AGREEMENT means the Intercreditor and
Collateral Agency Agreement dated as of July 1, 1996 among BTCC, acting in its
capacity as collateral agent thereunder, BTCC, as agent for the Prepetition
Lenders, and the Prepetition Lenders.
PREPETITION COLLATERAL AGENT means BTCC, acting in its capacity as
collateral agent under the Prepetition Collateral Agency Agreement.
PREPETITION CREDIT AGREEMENTS has the meaning set forth in the
Preliminary Statements.
PREPETITION CREDIT DOCUMENTS means, collectively, all of the "Credit
Documents" and "Collateral Documents" under each of the Prepetition Credit
Agreements.
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PREPETITION INDEBTEDNESS of any Borrower means Indebtedness of such
Borrower outstanding on the Petition Date.
PREPETITION LENDERS has the meaning set forth in the Preliminary
Statements.
PREPETITION OBLIGATIONS means, collectively, the "Obligations" of the
Borrowers under each of the Prepetition Credit Agreements.
PREPETITION TRANCHE A TERM LOAN has the meaning set forth in the
Preliminary Statements.
PRIME LENDING RATE means the rate which Bankers Trust Company announces
as its prime lending rate, from time to time. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers Trust Company and each of the
Revolving Lenders may make commercial loans or other loans at rates of interest
at, above or below the Prime Lending Rate.
PRIME RATE LOAN means a Revolving Loan that bears interest as provided
in SECTION 4.1(A) hereof.
PROJECTIONS means the Borrowers' forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, if applicable, and otherwise
consistent with the historical Financial Statements of the Borrowers, together
with appropriate supporting details and a statement of underlying assumptions.
PROPORTIONATE SHARE of (i) a Revolving Lender means a fraction,
expressed as a percentage, obtained by dividing its Revolving Commitment by the
Revolving Line of Credit or, if the Revolving Commitments are terminated, by
dividing its then outstanding Revolving Loans and Letter of Credit
participations by the then outstanding aggregate Revolving Loans and Letter of
Credit Obligations and (ii) a Term Lender means a fraction, expressed as a
percentage, obtained by dividing its Term Commitment by the Term Loan Amount or,
if the Term Commitments are terminated, by dividing the sum of its outstanding
Term Loans and Prepetition Tranche A Loans by the outstanding aggregate Term
Loans and Prepetition Tranche A Loans.
PURCHASE MONEY LIENS has the meaning set forth in SECTION 8.3(E).
REGISTER has the meaning set forth in SECTION 11.8(D).
REGULATION D means Regulation D of the Federal Reserve Board, as in
effect from time to time.
REGULATION G means Regulation G of the Federal Reserve Board, as in
effect from time to time.
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REGULATION Z means Regulation Z of the Federal Reserve Board, as in
effect from time to time.
REPORTABLE EVENT means any of the events described in section 4043 of
ERISA and the regulations thereunder.
REQUIREMENT OF LAW means, with respect to any Person, (A) the Governing
Documents of such Person, (B) any law, treaty, rule or regulation or
determination of an arbitrator, court or other Governmental Authority binding on
such Person, or (C) any franchise, license, lease, permit, certificate,
authorization, qualification, easement, right of way, right or approval binding
on a Person or any of its property.
RETIREE HEALTH PLAN means an "employee welfare benefit plan" within the
meaning of section 3(1) of ERISA, and any other plan, program or arrangement,
whether oral or written, that provides benefits to persons after termination of
employment, other than as required by section 601 of ERISA.
REVOLVING ASSIGNMENT AND ASSUMPTION AGREEMENT has the meaning set forth
in SECTION 11.8(B).
REVOLVING COMMITMENT of a Revolving Lender means such Revolving
Lender's commitment, on the terms and subject to the conditions set forth
herein, to make Revolving Loans and to participate in Letters of Credit, up to
the amount set forth below its name on ANNEX I (as amended from time to time
pursuant to SECTION 11.8(B)), as such amount may be reduced from time to time in
accordance with the terms and provisions of this Credit Agreement.
REVOLVING LENDER has the meaning set forth in the Preliminary
Statements.
REVOLVING LENDER ADVANCES has the meaning set forth in SECTION 2.2.
REVOLVING LINE OF CREDIT means the aggregate revolving line of credit
extended pursuant to this Credit Agreement by the Revolving Lenders to the
Borrowers for Revolving Loans and Letters of Credit, in an aggregate principal
amount at any time of up to $260,000,000 less the aggregate outstanding
principal amount of the Prepetition Tranche A Term Loan and the Term Loan, as
such amount may be reduced from time to time pursuant to the terms and
provisions hereof.
REVOLVING LOAN ACCOUNT has the meaning set forth in SECTION 4.8.
REVOLVING LOANS has the meaning set forth in SECTION 2.1.
REVOLVING NOTE means a promissory note of the Borrowers payable to the
order of any Revolving Lender, substantially in the form of EXHIBIT C-1, as
amended, restated, supplemented or
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otherwise modified from time to time, and including all notes issued in
replacement of, or in substitution or exchange for, any Revolving Note.
REVOLVING SETTLEMENT DATE has the meaning set forth in SECTION 2.4.
S&P means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
SECURED PARTIES has the meaning set forth in the Postpetition
Collateral Agency Agreement.
SENIOR NOTE INDENTURE means the 13-3/8% Senior Note Indenture dated as
of March 1, 1996, by and between LFC and American Bank National Association, as
trustee, as amended, restated, supplemented or otherwise modified from time to
time in accordance with the respective terms and provisions hereof and thereof.
SENIOR NOTES means the 13-3/8% Senior Notes Due October 15, 1998,
issued by LFC pursuant to the Senior Note Indenture, as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
respective terms hereof or thereof.
SENIOR SUBORDINATED NOTE INDENTURE means the 9-5/8% Senior Subordinated
Note Indenture dated as of July 15, 1993, between LFC and Norwest Bank
Minnesota, National Association, as Trustee, as amended, restated, supplemented
or otherwise modified from time to time in accordance with the respective terms
and provisions hereof and thereof.
SENIOR SUBORDINATED NOTES means the Senior Subordinated Notes Due July
15, 2003 issued by LFC pursuant to the Senior Subordinated Note Indenture, as
amended, restated, supplemented or otherwise modified from time to time in
accordance with the respective terms and provisions hereof and thereof.
SUBSIDIARY of a Person means a corporation or other entity in which
that Person directly or indirectly owns or controls the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or appoint other managers of such corporation or other
entity.
TERM ASSIGNMENT AND ASSUMPTION AGREEMENT has the meaning set forth in
SECTION 11.8(C).
TERM COMMITMENT of a Term Lender means such Term Lender's Commitment,
on the terms and subject to the conditions set forth herein, to make the Term
Loan up to the amount set forth below its name on Annex II (as amended from time
to time pursuant to SECTION 11.8(C)).
TERM LENDER has the meaning set forth in the Preliminary Statements.
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TERM LENDER ASSIGNMENT has the meaning set forth in SECTION 11.8(C).
TERM LOAN has the meaning set forth in Article 2A.
TERM LOAN AMOUNT means the sum of the Term Commitments.
TERM NOTE means, collectively, each promissory note of the Borrowers
payable to the order of any Term Lender, substantially in the form of EXHIBIT
C-2 as amended, restated, supplemented or otherwise modified from time to time,
and including all notes issued in replacement of, or in substitution or exchange
for, any of the foregoing.
TERMINATION EVENT means (I) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan; (II) the withdrawal of any Borrower, any
Subsidiary of any Borrower or any ERISA Affiliate from a Benefit Plan during a
plan year in which it was a "substantial employer" (as defined in section
4001(a) (2) of ERISA); (III) the providing of notice of intent to terminate a
Benefit Plan in a distress termination (as described in section 4041 (c) of
ERISA); (IV) the institution by the Pension Benefit Guaranty Corporation of
proceedings to terminate a Benefit Plan or Multiemployer Plan; (V) any event or
condition (A) which could reasonably be expected to constitute grounds under
section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (B) that may result in
termination of a Multiemployer Plan pursuant to section 4041A of ERISA; or (VI)
the partial or complete withdrawal, within the meaning of sections 4203 and 4205
of ERISA, of a Borrower, any Subsidiary of a Borrower or any ERISA Affiliate
from a Multiemployer Plan.
TYPE means a LIBOR Rate Loan or a Prime Rate Loan.
UNUSED LINE FEE has the meaning set forth in SECTION 4.2.
1.2 ACCOUNTING TERMS AND DETERMINATIONS.
Unless otherwise defined or specified herein, all accounting terms used
in this Credit Agreement shall be construed in accordance with GAAP, applied on
a basis consistent in all material respects with the Financial Statements
referred to in SECTION 7.1. All accounting determinations for purposes of
determining compliance with the financial covenants contained in ARTICLE 8 shall
be made in accordance with GAAP as in effect on the Closing Date and applied on
a basis consistent in all material respects with the audited Financial
Statements referred to in SECTION 7.1. The Financial Statements required to be
delivered hereunder from and after the Closing Date, and all financial records,
shall be maintained in accordance with GAAP. If GAAP changes from the basis used
in preparing the audited Financial Statements delivered to the Agent on or
before the Closing Date, the certificates required to be delivered pursuant to
SECTION 7.1 demonstrating compliance with the covenants contained herein shall
include, at the election of
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the Borrowers or upon the request of the Majority Lenders, calculations setting
forth the adjustments necessary to demonstrate that the Borrowers are in
compliance with the financial covenants based upon GAAP as in effect on the
Closing Date.
1.3 OTHER TERMS; HEADINGS.
Terms used herein and not otherwise defined in ARTICLE 1 that are
defined in the Uniform Commercial Code in effect in the State of New York (the
"CODE") shall have the meanings given in the Code. Each of the words "hereof,"
"herein," and "hereunder" refer to this Credit Agreement as a whole. An Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in accordance with SECTION 11.11 hereof. References to Articles,
Sections, Annexes, Schedules, and Exhibits are internal references to this
Credit Agreement, and to its attachments, unless otherwise specified. The
headings and the Table of Contents are for convenience only and shall not affect
the meaning or construction of any provision of this Credit Agreement.
1.4 SEPARATE CAPACITY.
Any reference to a "Revolving Lender" or a "Term Lender" shall mean
such Lender sorely in its capacity as the holder of a Revolving Loan or a Term
Loan, as the case may be. If a Lender holds both Revolving Loans and Term Loans,
the rights, privileges, obligations or disabilities that may be enjoyed by or
imposed upon such Lender with respect to one kind of Loan shall not be imposed
upon or enjoyed by such Lender with respect to the other kind of Loan.
ARTICLE 2. REVOLVING LOANS.
2.1 REVOLVING COMMITMENTS.
Subject to the terms and conditions set forth in this Credit Agreement,
and in reliance on the representations and warranties of the Borrowers set forth
herein, on and after the Closing Date and to but excluding the Expiration Date,
each Revolving Lender severally agrees to make loans and advances to the
Borrowers on a joint and several basis (each a "REVOLVING LOAN") in an amount
not to exceed at any time its Proportionate Share of the lesser at such time of
(A) the Revolving Line of Credit and (B) the Borrowing Base MINUS, in each case,
the sum of (X) the aggregate outstanding principal amount of all Prepetition
Obligations other than any Prepetition Obligations relating to the Prepetition
Tranche A Term Loan and (Y) the aggregate outstanding Letter of Credit
Obligations. The Revolving Loans of each Revolving Lender shall be evidenced by
a Revolving Note dated as of the Closing Date and executed by each of the
Borrowers in the maximum amount of such Revolving Lender's Revolving Commitment.
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2.2 BORROWING OF REVOLVING LOANS.
Revolving Loans may be made available to the LFC Funds Administrator
for the account of Borrowers directly by the Revolving Lenders ("REVOLVING
LENDER ADVANCES") or, in the circumstances described in SECTION 2.2(B), from the
Agent acting on behalf of the Revolving Lenders ("AGENT REVOLVING ADVANCES").
(A) REVOLVING LENDER ADVANCES. Subject to the
determination by the Agent and the Revolving Lenders that the
conditions for borrowing contained in SECTION 5.2 are satisfied, upon
receipt of a Notice of Borrowing from the LFC Funds Administrator
received by the Agent before 1:00 P.M. Chicago time on a Business Day,
Revolving Lender Advances of Revolving Loans shall be made to the
extent of each Revolving Lender's Proportionate Share of the requested
Borrowing.
(B) AGENT REVOLVING ADVANCES. The Agent is authorized
by the Revolving Lenders, but is not obligated, to make Agent Revolving
Advances upon a receipt of any Notice of Borrowing received by the
Agent before 3:00 P.M. Chicago time on a Business Day. Agent Revolving
Advances shall be subject to periodic settlement with the Revolving
Lenders under SECTION 2.4. Agent Revolving Advances may be made only in
the following circumstances:
(I) NORMAL COURSE AGENT REVOLVING ADVANCES.
For administrative convenience, the Agent may, but is not
obligated, to make Agent Revolving Advances up to the amount
available for borrowing under SECTION 2.1 in reliance upon the
actual or deemed representations of the Borrowers under
SECTION 5.2 that the conditions for borrowing are satisfied.
(II) OTHER AGENT REVOLVING ADVANCES. When the
conditions for borrowing under SECTION 5.2 cannot be
fulfilled, and notwithstanding the Borrowing Base limitation
of SECTION 2.1, the Agent may, but is not obligated, to
continue to make Agent Revolving Advances for seven (7)
Business Days or until sooner instructed by the Majority
Lenders to cease, in an aggregate amount at any time not to
exceed $3,000,000.
(C) DISBURSEMENT OF REVOLVING LOANS. The proceeds of
Revolving Loans shall be transmitted: (X) in the circum-
stances described in SECTION 3.5, by the Agent directly to the
applicable Issuing Bank, and (Y) in all other circumstances,
by the Agent or Revolving Lenders, as the case may be, to the
Disbursement Account.
(D) NOTICES OF BORROWING. Notices of Borrowing may be
given under this SECTION 2.2 by telephone or facsimile transmission,
and, if by telephone, promptly confirmed in writing. The LFC Funds
Administrator shall specify in each Notice of Borrowing whether the
conditions for the requested
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Borrowing are satisfied. The Borrowers may request one or more
Borrowings of Revolving Loans constituting Prime Rate Loans on the same
Business Day. Each Notice of Borrowing for LIBOR Rate Loans shall be
given not later than noon Chicago time on the third Business Day prior
to the proposed Borrowing. Each Notice of Borrowing shall, unless
otherwise specifically provided herein, consist entirely of Revolving
Loans of the same Type and, if such Borrowing is to consist of LIBOR
Rate Loans, shall be in an aggregate amount of not less than $5,000,000
or an integral multiple of $1,000,000 in excess thereof. The right of
the Borrowers to choose LIBOR Rate Loans is subject to the provisions
of SECTION 4.12. Once given, a Notice of Borrowing is irrevocable and
binding on the Borrowers. The LFC Funds Administrator shall provide to
the Agent a list, with specimen signatures, of officers and other
Persons, if any, authorized to request Revolving Loans. The Agent is
entitled to rely upon such list until it is replaced by the LFC Funds
Administrator.
2.3 NOTICE OF REQUEST FOR REVOLVING LENDER REVOLVING
ADVANCES.
Subject to the last sentence of this SECTION 2.3, the Agent shall give
each Revolving Lender prompt notice by telephone or facsimile transmission of a
Notice of Borrowing that is received pursuant to SECTION 2.2(A) and is to be
satisfied by Revolving Lender Advances. No later than 3:00 P.M. Chicago time on
the date of receipt of such notice, each Revolving Lender shall make available
for the account of its Applicable Lending Office to the Agent at the Agent's
address for deposit into the Loan Disbursement Account, its Proportionate Share
of such Borrowing in immediately available funds. Unless the Agent receives
contrary written notice prior to any such Borrowing, it is entitled to assume
that each Revolving Lender will make available its Proportionate Share of the
Borrowing and in reliance upon that assumption, but without any obligation to do
so, may advance such Proportionate Share on behalf of the Revolving Lender,
without the necessity of giving daily notice to each Revolving Lender of the
receipt of a Notice of Borrowing.
2.4 PERIODIC SETTLEMENT OF AGENT REVOLVING ADVANCES; INTEREST
AND REVOLVING FEES; STATEMENTS.
(a) THE REVOLVING SETTLEMENT DATE; ALLOCATION OF
INTEREST AND REVOLVING FEES. The amount of each Revolving Lender's
Proportionate Share of Revolving Loans shall be computed weekly (or
more frequently in the Agent's discretion) and shall be adjusted upward
or downward based on all Revolving Loans (including Agent Revolving
Advances) and repayments received by the Agent as of 5:00 P.M. Chicago
time on the last Business Day of the period specified by the Agent
(such date, the "REVOLVING SETTLEMENT DATE").
(b) SUMMARY STATEMENTS; SETTLEMENTS. The Agent shall
deliver to each of the Revolving Lenders promptly after the
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Revolving Settlement Date a summary statement of the account of
outstanding Revolving Loans (including Agent Revolving Advances) for
the period, the amount of repayments received for the period, and the
amount allocated to each Revolving Lender of the interest and Unused
Line Fee for the period. After application of payments under SECTION
4.10, as reflected on the summary statement, (I) the Agent shall
transfer to each Revolving Lender its allocated share of interest and
Unused Line Fee, and its Proportionate Share of repayments received by
the Agent in respect of the period covered by such summary statement;
and (II) each Revolving Lender shall transfer to the Agent, or the
Agent shall transfer to each Revolving Lender, such amounts as are
necessary to insure that, after giving effect to all such transfers,
the amount of Loans made by each Revolving Lender shall be equal to
such Revolving Lender's Proportionate Share of the aggregate amount of
Loans outstanding as of such Revolving Settlement Date. If the summary
statement requires transfers to be made to the Agent by the Revolving
Lenders and is received by the Revolving Lenders prior to 12:00 noon
Chicago time on a Business Day, such transfers shall be made in
immediately available funds no later than 3:00 P.M. Chicago time that
day; and, if received after 12:00 noon Chicago time, then no later than
3:00 P.M. Chicago time on the next Business Day. The obligation of each
Revolving Lender to transfer such funds is irrevocable, unconditional
and without recourse to or warranty by the Agent.
(C) DISTRIBUTION OF INTEREST AND UNUSED LINE FEES.
Interest on the Revolving Loans (including Agent Revolving Advances)
and the Unused Line Fee shall be allocated by the Agent to each
Revolving Lender (I) in the case of interest, in accordance with the
Revolving Loans actually advanced by and repaid to such Revolving
Lender and (II) in the case of the Unused Line Fee, in accordance with
the Proportionate Share of such Revolving Lender. Interest shall accrue
from and including the date Revolving Loans are advanced and to but
excluding the date such Revolving Loans are either repaid by the
Borrowers or, if later, actually settled under this SECTION 2.3.
Promptly after the end of each month, the Agent shall distribute to
each Revolving Lender its portion, allocated as provided above, of the
interest and Unused Line Fee which has been received by the Agent
during such month.
2.5 SHARING OF PAYMENTS.
If any Revolving Lender shall obtain any payment (whether made
voluntarily or involuntarily, or through the exercise of any right of set-off,
or otherwise) on account of the Revolving Loans made by it or its participation
in the Letter of Credit Obligations in excess of its Proportionate Share of
payments on account of the Revolving Loans or Letter of Credit Obligations
obtained by all the Revolving Lenders, such Revolving Lender shall forthwith
purchase from the other Revolving Lenders such participations in the Revolving
Loans made by them or in their participation in Letters of
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Credit as shall be necessary to cause such purchasing Revolving Lender to share
the excess payment ratably with each of them; PROVIDED, THAT if all or any
portion of such excess payment is thereafter recovered from such purchasing
Revolving Lender, such purchase from each Revolving Lender shall be rescinded
and each such Revolving Lender shall repay to the purchasing Revolving Lender
the purchase price to the extent of such recovery, together with an amount equal
to such Revolving Lender's ratable share (according to the proportion of (I) the
amount of such Revolving Lender's required repayment to (II) the total amount so
recovered from the purchasing Revolving Lender) of any interest or other amount
paid or payable by the purchasing Revolving Lender in respect to the total
amount so recovered. The Borrowers agree that any Revolving Lender so purchasing
a participation from another Revolving Lender pursuant to this SECTION 2.6, to
the fullest extent permitted by law, may exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Revolving Lender were the direct creditor of the Borrowers in the amount
of such participation.
2.6 DEFAULTING REVOLVING LENDERS.
(a) A Revolving Lender who fails to pay the Agent its
Proportionate Share of any Revolving Loans (including Agent Revolving
Advances) made available by the Agent on such Revolving Lender's
behalf, or who fails to pay any other amounts owing by it to the Agent,
is a "DEFAULTING REVOLVING LENDER." The Agent is entitled to recover
from such Defaulting Revolving Lender all such amounts owing by such
Defaulting Revolving Lender on demand. If the Defaulting Revolving
Lender does not pay such amounts on the Agent's demand, the Agent shall
promptly notify the LFC Funds Administrator and the Borrowers shall pay
such amounts to the Agent (to the extent the Agent has made such
amounts available to or for the account of Borrowers) within five (5)
Business Days of its receipt of such notice. In addition, the
Defaulting Revolving Lender or the Borrowers shall pay to the Agent for
its own account interest on such amount for each day from the date it
was made available by the Agent to the Borrowers to the date it is
recovered by the Agent at a rate per annum equal to (X) the overnight
Federal Funds Rate, if paid by the Defaulting Revolving Lender, or (Y)
the then applicable rate of interest calculated under SECTION 4.1, if
paid by the Borrower; PLUS, in each case, the Expenses and losses, if
any, incurred as a result of the Defaulting Revolving Lender's failure
to perform its obligations. Nothing herein shall be deemed to relieve
any Revolving Lender of its obligation to fulfill its commitments
hereunder or to prejudice any rights which the Borrowers may have
against any Revolving Lender as a result of any default by such
Revolving Lender hereunder, including, without limitation, the right of
the Borrowers to seek reimbursement from any Defaulting Revolving
Lender for any amounts paid by the Borrowers under CLAUSE (Y) above on
account of such Defaulting Revolving Lender's default.
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(B) The failure of any Revolving Lender to fund its
Proportionate Share of a Revolving Loan shall not relieve any other
Revolving Lender of its obligation to fund its Proportionate Share of a
Revolving Loan. Conversely, no Revolving Lender shall be responsible
for the failure of another Revolving Lender to fund its Proportionate
Share of a Revolving Loan.
(C) The Agent shall not be obligated to transfer to a
Defaulting Revolving Lender any payments made by the Borrowers to the
Agent for the Defaulting Revolving Lender's benefit; nor shall a
Defaulting Revolving Lender be entitled to the sharing of any payments
hereunder. Amounts payable to a Defaulting Revolving Lender shall
instead be paid to or retained by the Agent. The Agent may hold and, in
its discretion, re-lend to the Borrowers the amount of all such
payments received by it for the account of such Revolving Lender. For
purposes of voting or consenting to matters with respect to the Credit
Documents and determining Proportionate Shares, such Defaulting
Revolving Lender shall be deemed not to be a "REVOLVING LENDER" and
such Revolving Lender's Commitment shall be deemed to be zero (-0-).
This SECTION 2.6 shall remain effective with respect to such Revolving
Lender until (X) the Postpetition Obligations shall have been declared
or shall have become immediately due and payable or (Y) the Majority
Lenders, the Agent and the Borrowers shall have waived such Revolving
Lender's default in writing. The operation of this SECTION 2.6 shall
not be construed to increase or otherwise affect the Revolving
Commitment of any Revolving Lender, or relieve or excuse the
performance by the Borrowers of their respective duties and obligations
hereunder.
2.7 SUPERPRIORITY AND LIENS.
The Postpetition Obligations shall constitute, in accordance with
Section 364(c)(1) of the Bankruptcy Code, claims against each of the Borrowers
in their Chapter 11 cases which are administrative expense claims having
priority over any and all administrative expenses of the kind and specified in
section 503(b) or 507(b) of the Bankruptcy Code, except for Permitted Expenses,
and such claims shall at all times be secured by a first priority Lien on all
Collateral as follows:
(a) pursuant to Bankruptcy Code section 364(c)(2), a
first priority, perfected Lien upon all of the Borrowers' right, title
and interest in, to and under all Collateral that is not otherwise
encumbered by a validly perfected Lien or security interest, including
without limitation, all personal and real property and the proceeds of
all causes of action arising under the Bankruptcy Code;
(b) pursuant to Bankruptcy Code section 364(d)(1), a
first priority, senior, priming, perfected Lien upon all of
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the Borrowers' right, title and interest in, to and under the
Collateral that secures the Prepetition Obligations; and
(c) pursuant to Bankruptcy Code section 364(c)(3), a
second priority, perfected Lien upon all of the Borrowers' right, title
and interest in, to and under all Collateral that is subject to a
validly perfected security interest or Lien in existence as of the
Petition Date (other than the Collateral that secures the Prepetition
Obligations, which is covered by clause (b) above), junior to such
validity perfected Lien or security interest; provided, however, that
if review of updated title searches on the Borrowers' real property
(which review shall be completed prior to the hearing concerning the
entry of the Permanent Financing Order by the Bankruptcy Court) reveals
the existence of liens, claims or encumbrances by third parties that
the Lenders deem material, the Lenders reserve the right either to
reduce the Commitments or to condition any further extensions of credit
to the Borrowers under this Credit Agreement upon provisions in the
Permanent Financing Order granting the Lenders Liens upon such real
property senior to any other liens pursuant to section 364(d)(1) of the
Bankruptcy Code.
ARTICLE 2A. TERM LOAN.
On each Business Day that Collections are to be applied to repay the
principal of the Prepetition Tranche A Term Loan pursuant to the Postpetition
Collateral Agency Agreement, then, unless an Actionable Default has occurred and
is continuing, each Term Lender shall be deemed to fund a term loan to the
Borrowers in an amount equal to its Proportionate Share of the amount of the
Collections so to be applied (all term loans made in such manner by each Term
Lender herein collectively called the "Term Loan"). The Term Loan of each Lender
shall be evidenced by a Term Note and shall be governed in all respects by the
terms of this Credit Agreement and the other Credit Documents. All Collections
that would otherwise be applied to repay the principal of the Prepetition
Tranche A Term Loan under the Postpetition Collateral Agency Agreement shall be
remitted to the LFC Funds Administrator for the account of the Borrowers in
accordance with the deemed funding of the Term Loan under this Article 2A so
long as no Actionable Default has occurred and is continuing.
ARTICLE 3. LETTERS OF CREDIT.
3.1 ISSUANCE OF LETTERS OF CREDIT.
Subject to the terms and conditions hereof and in reliance on the
representations and warranties of the Borrowers set forth herein, the Agent
shall cause the Issuing Bank to issue Letters of Credit hereunder at the request
of the LFC Funds Administrator and for its account, as more specifically
described below. The Agent shall not be obligated to cause the Issuing Bank to
issue any Letter of Credit if:
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(A) issuance of the requested Letter of Credit (I)
would cause the Letter of Credit Obligations then outstanding to exceed
$25,000,000 or (II) would cause the sum of the Revolving Loans PLUS the
Letter of Credit Obligations then outstanding to exceed the lesser of
the Revolving Line of Credit and an amount equal to the lesser of (X)
the Aggregate Line of Credit and (Y) the Borrowing Base then in effect;
or
(B) issuance of the Letter of Credit is enjoined,
restrained or prohibited by any Governmental Authority, Requirement of
Law or any request or directive of any Governmental Authority (whether
or not having the force of law) or would impose upon the Agent or the
Issuing Bank any material restriction, reserve, capital requirement,
loss, cost or expense (for which the Agent or the Issuing Bank is not
otherwise compensated) not in effect or known as of the Closing Date.
3.2 TERMS OF LETTERS OF CREDIT.
The proposed amount, terms and conditions, and form of each Letter of
Credit (and of any drafts or acceptances thereunder) shall be subject to
approval by the Issuing Bank. The term of each standby Letter of Credit shall
not exceed 360 days, but may be subject to annual renewal. The term of each
documentary Letter of Credit shall not exceed 120 days. No Letter of Credit
shall have an expiry date later than five (5) Business Days prior to the
Expiration Date.
3.3 NOTICE OF ISSUANCE.
A request for issuance of a Letter of Credit (a "LETTER OF CREDIT
REQUEST") may be given in writing or electronically and, if requested by the
Agent, promptly confirmed in writing. A Letter of Credit Request must be
received by the Agent no later than 1:00 P.M. Chicago time at least three (3)
Business Days (or such shorter period as may be agreed to by the Issuing Bank)
in advance of the proposed date of issuance.
3.4 REVOLVING LENDERS' PARTICIPATION.
Immediately upon issuance or amendment of any Letter of Credit, each
Revolving Lender shall be deemed to have irrevocably and unconditionally
purchased and received from the Issuing Bank, without recourse or warranty, an
undivided interest and participation in all rights and obligations under such
Letter of Credit (other than fees and other amounts owing to the Issuing Bank)
in accordance with such Revolving Lender's Proportionate Share.
3.5 PAYMENTS OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
The Agent shall notify the LFC Funds Administrator of the receipt by
the Agent of notice from the Issuing Bank of a draft or other presentation for
payment or drawing under a Letter of Credit not later than 3:00 P.M. Chicago
time on the Business Day
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immediately prior to the date on which the Issuing Bank intends to honor such
drawing. Unless the procedures set forth in SECTION 9.2(C) shall be applicable,
the LFC Funds Administrator shall be deemed to have concurrently given a Notice
of Borrowing to the Agent to make a Revolving Loan in the amount of and at the
time of such drawing (which Loan shall be a Prime Rate Loan), the proceeds of
which shall be applied directly by the Agent to reimburse the Issuing Bank for
the amount of such drawing.
3.6 PAYMENT BY REVOLVING LENDERS.
If a Revolving Loan is not made in an amount sufficient to reimburse
the Issuing Bank in full for the amount of any draw under a Letter of Credit,
the Agent shall promptly notify each Revolving Lender of the unreimbursed amount
of such drawing and of such Revolving Lender's respective participation therein.
Each Revolving Lender shall make available to the Agent, for the account of the
Issuing Bank, the amount of its participation in immediately available funds not
later than 1:00 P.M. Chicago time on the next Business Day after such Revolving
Lender receives notice from the Agent of the amount of such Revolving Lender's
participation in such unreimbursed amount. If any Revolving Lender fails to make
available to the Agent the amount of such Revolving Lender's participation, the
Issuing Bank shall be entitled to recover such amount on demand from such
Revolving Lender together with interest at the Federal Funds Rate for the first
three Business Days and thereafter at the Prime Lending Rate. For each Letter of
Credit, the Agent shall promptly distribute to each Revolving Lender which has
funded the amount of its participation its Proportionate Share of all payments
subsequently received by the Agent from the Borrowers in reimbursement of
honored drawings.
3.7 OBLIGATIONS ABSOLUTE.
The joint and several obligations of the Borrowers to reimburse the
Revolving Lenders under SECTION 3.5 hereof shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Credit Agreement under all circumstances including, without limitation, upon the
occurrence and during the continuance of an Event of Default.
3.8 AGENT'S EXECUTION OF APPLICATIONS AND OTHER ISSUING BANK
DOCUMENTATION; RELIANCE ON CREDIT AGREEMENT BY ISSUING
BANK.
The Agent shall be authorized to execute, deliver and perform on behalf
of the Revolving Lenders such letter of credit applications, shipping
indemnities, letter of credit modifications and consents and other undertakings
for the benefit of the Issuing Bank as may be reasonably necessary or
appropriate in connection with the issuance or modification of Letters of Credit
requested by the Borrowers hereunder. The Revolving Lenders, the Term Lenders,
the Agent, the Borrowers and the LFC Funds Administrator all expressly agree
that the terms of this ARTICLE 3 and various other provisions of this Credit
Agreement identifying the Issuing Bank
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are also intended to benefit the Issuing Bank and the Issuing Bank shall be
entitled to enforce the provisions hereof which are for its benefit.
3.9 EXISTING LETTERS OF CREDIT.
Effective as of the Closing Date (I) the letters of credit issued for
the account of the Borrowers prior to the Closing Date pursuant to the
Prepetition Credit Agreements by Persons that are issuing Banks hereunder and
set forth on SCHEDULE 3.9 hereto (such letters of credit called the "EXISTING
LETTERS OF CREDIT") in an aggregate face amount not exceeding the total amount
set forth on such Schedule will be deemed to have been issued as, and be,
Letters of Credit under this Credit Agreement and (II) the Existing Letters of
Credit and the reimbursement and other obligations of the Borrowers in respect
thereof shall become Postpetition Obligations and shall no longer constitute
Prepetition Obligations.
ARTICLE 4. COMPENSATION, REPAYMENT AND REDUCTION
OF COMMITMENTS.
4.1 INTEREST ON REVOLVING LOANS.
(a) Interest on the unpaid principal amount of
Revolving Loans which are Prime Rate Loans shall be payable monthly in
arrears on the first Business Day of each month at an interest rate per
annum equal to the Prime Lending Rate PLUS one and one-half percent
(1.5%) calculated on the net balances owing to the Agent and the
Revolving Lenders at the close of business each day during such month.
The rate hereunder shall change each day the Prime Lending Rate
changes.
(B) Interest on the unpaid principal amount of
Revolving Loans which are LIBOR Rate Loans shall be payable on the
earlier to occur of (I) the last day of each Interest Period with
respect to such LIBOR Rate Loans, (II) ninety (90) days following the
commencement of such LIBOR Rate Loans, (III) the date of conversion of
such LIBOR Rate Loans (or a portion thereof) to a Prime Rate Loan and
(IV) the maturity of such LIBOR Rate Loans at an interest rate per
annum equal during the Interest Period for such LIBOR Rate Loans to the
LIBOR Rate for the Interest Period in effect for such LIBOR Rate Loans
PLUS three and three-quarters percent (3.75%). After maturity of such
LIBOR Rate Loans (whether by acceleration or otherwise), interest shall
be payable upon demand. The Agent upon determining the LIBOR Rate for
any Interest Period shall promptly notify the LFC Funds Administrator
and the Revolving Lenders by telephone (confirmed promptly in writing)
or in writing thereof. Each determination by the Agent of an interest
rate hereunder shall be conclusive and binding for all purposes, absent
demonstrable error.
(C) Notwithstanding the provisions of SECTION 4.1(B),
the Borrowers shall pay to each Revolving Lender, so long as
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and to the extent such Revolving Lender shall be required under
regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Revolving Loan comprised of LIBOR Rate
Loans of such Revolving Lender, from the date of such LIBOR Rate Loan
until such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by subtracting (I)
the LIBOR Rate for the applicable Interest Period for such LIBOR Rate
Loan from (II) the rate obtained by dividing such LIBOR Rate by a
percentage equal to 1 MINUS the stated maximum rate (stated as a
decimal) applicable two (2) Business Days before the first day of such
Interest Period of all reserves, if any, required to be maintained
against "EUROCURRENCY LIABILITIES" as specified in Regulation D (or
against any other category of liabilities which includes deposits by
reference to which the interest rate on LIBOR Rate Loans is determined
or any category of extensions of credit or other assets which includes
loans by a non-United States office of any Revolving Lender to United
States residents) having a term equal to the Interest Period applicable
to such LIBOR Rate Loan. Such Revolving Lender shall as soon as
practicable provide notice to the Agent and the LFC Funds Administrator
of any such additional interest arising in connection with such LIBOR
Rate Loan, which notice shall be conclusive and binding, absent
demonstrable error.
4.1A INTEREST ON TERM LOAN.
(a) Interest on the outstanding principal amount of the
Term Loan shall be payable monthly in arrears on the last Business Day
of each month of the Borrowers at an interest rate per annum equal to
16%.
4.1B INTEREST ON PREPETITION OBLIGATIONS.
Interest on the outstanding Prepetition Obligations shall be
payable monthly in arrears on the first Business Day of each month at
an interest rate per annum equal to the nondefault rate of interest
specified with respect to each component of the Prepetition Obligations
in the applicable Prepetition Credit Agreement., and each Lender in its
capacity as a Prepetition Lender hereby (i) agrees that Prepetition
Obligations that may bear interest at a rate based upon the LIBOR Rate
under the applicable Prepetition Credit Agreement may continue to bear
interest at such a rate in accordance with the terms of such
Prepetition Credit Agreement and (ii) waives its right to charge
interest on the outstanding Prepetition Obligations at the postdefault
rate specified in the applicable Prepetition Credit Agreement, in each
case so long as no Event of Default under this Credit Agreement has
occurred and is continuing.
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4.2 UNUSED LINE FEE.
The Borrowers shall pay to the Agent, for the ratable benefit of the
Revolving Lenders, a nonrefundable fee (the "UNUSED LINE FEE") equal to one-half
of one percent (0.50%) per annum of the unused portion of the Revolving Line of
Credit (with any outstanding Letters of Credit constituting usage of the
Revolving Line of Credit). The Unused Line Fee shall accrue daily from the
Closing Date until the Expiration Date and shall be due and payable monthly in
arrears on the first Business Day of each month and on the Expiration Date.
4.3 LETTER OF CREDIT FEES.
(a) The Agent, for the ratable benefit of the Revolving
Lenders, shall be entitled to charge to the account of the Borrowers on
the first Business Day of each month, a fee (the "LETTER OF CREDIT
FEE"), in an amount equal to two percent (2.0%) per annum of the daily
weighted average undrawn amount of Letters of Credit outstanding during
the immediately preceding month. In addition, the Agent, for its own
account, shall be entitled to charge to the account of the Borrowers on
the date of issuance of any standby Letter of Credit, a facing fee
equal to one-half of one percent (0.50%) on the initial face amount of
each such standby Letter of Credit (the "L/C FACING FEE").
(b) The Agent shall also be entitled to charge to the
account of the Borrowers, as and when incurred by the Agent or any
Revolving Lender, the customary charges, fees, costs and expenses
charged to the Agent or any Revolving Lender for the Borrower's account
by any Issuing Bank (the "ISSUING BANK FEES") in connection with the
issuance, transfer, drawing, amendment or negotiation of any Letters of
Credit by the Issuing Bank. Each determination by the Agent of Letter
of Credit Fees, L/C Facing Fees, Issuing Bank Fees and other fees,
costs and expenses charged under this SECTION 4.3 shall be conclusive
and binding for all purposes, absent manifest error.
4.4 FACILITY FEE.
The Borrowers shall pay to the Agent on the Closing Date, for the
ratable benefit of the Lenders a nonrefundable fee (the "Facility Fee") equal to
$2,600,000.
4.5 INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF
DEFAULT.
From the date of occurrence of an Event of Default until the earlier of
the date upon which (I) all Postpetition Obligations and Prepetition Obligations
shall have been paid and satisfied in full or (II) such Event of Default shall
have been waived: (A) interest on the Revolving Loans, the Term Loans, and
Letter of Credit Fees on Letter of Credit Obligations shall each be payable on
demand at
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a rate per annum equal to, with respect to the Revolving Loans and the Term
Loans, the rate in effect under SECTION 4.1 and 4.1A, respectively, PLUS two
percent (2.0%), and with respect to the Letter of Credit Obligations, the rate
at which Letter of Credit Fees are charged pursuant to the first sentence of
SECTION 4.3(A), PLUS two percent (2.0%) and (B) interest on all outstanding
Prepetition Obligations shall accrue and be payable on demand at a rate per
annum equal to the rate specified in the applicable Prepetition Credit Agreement
as the rate to be applied to such Prepetition Obligations following an event of
default under such Prepetition Credit Agreement.
4.6 EXPENSES.
The Borrowers shall reimburse the Expenses of the Agent and the Lenders
promptly upon demand.
4.7 MANDATORY PAYMENT OF REVOLVING LOANS; REDUCTIONS OF
REVOLVING COMMITMENTS.
(a) Except during the period described in SECTION
2.2(B)(II), the aggregate outstanding principal amount of Revolving
Loans PLUS Letter of Credit Obligations at any time in excess of an
amount equal to the lesser of (X) the Borrowing Base and (Y) the
Revolving Line of Credit MINUS, in each case, the aggregate outstanding
principal amount of all Prepetition Obligations other than any
Prepetition Obligations relating to the Prepetition Tranche A Term
Loan, shall be immediately due and payable without the necessity of any
demand.
(b) On the Expiration Date, the Revolving Commitment of
each Revolving Lender shall automatically reduce to zero (-0-) and may
not be reinstated.
(c) The Borrowers may reduce or terminate the Revolving
Line of Credit in whole or in part at any time and from time to time;
PROVIDED, THAT each such reduction must be in an amount not less than
$5,000,000 (and in increments of $1,000,000 in excess thereof). Once
reduced, no portion of the Revolving Line of Credit may be reinstated.
If the Borrowers seek to reduce the Revolving Line of Credit to less
than $25,000,000, then the Revolving Line of Credit shall be reduced to
zero (-0-).
(d) Upon any Asset Disposition, the Fixed Asset
Sublimit shall be reduced by the amount prescribed in the definition of
"Fixed Asset Sublimit" set forth in Article 1. After the Fixed Asset
Sublimit has been reduced to zero (-0-), the Revolving Commitment of
each Revolving Lender shall be reduced upon any Asset Disposition by
such Revolving Lender's Proportionate Share of the amount by which the
Fixed Asset Sublimit would have been reduced under the definition of
"Fixed Asset Sublimit." After all the Revolving Commitments have been
reduced to zero (-0-) and all Letter of Credit
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Obligations have been cash collateralized in the manner set forth in
SECTION 9.2(C), the Net Disposition Proceeds of any Asset Disposition
shall be applied to repay the outstanding Postpetition Obligations
relating to the Term Loan.
4.7A NO PERMITTED PREPAYMENT OF TERM LOAN.
Until payment in full of all Postpetition Obligations in respect of
Revolving Loans and Letter of Credit Obligations and termination of the
Revolving Commitments pursuant to the terms and provisions hereof, the Borrowers
may not prepay the Term Loan at any time in whole or in part.
4.8 MAINTENANCE OF REVOLVING LOAN ACCOUNT; STATEMENTS OF
ACCOUNT.
The Agent shall maintain an account on its books in the name of the
Borrowers (the "REVOLVING LOAN ACCOUNT") in which the Borrowers will be charged
with all loans and advances made by the Revolving Lenders to the Borrowers or
for the account of the Borrowers, including the Revolving Loans and all Letter
of Credit Obligations, the Fees, the Expenses and any other Postpetition
Obligations, as and when such payments become due. The Revolving Loan Account
will be credited with all payments received by the Agent from the Borrowers or
for the account of the Borrowers for application to the Postpetition Obligations
and the Prepetition Obligations. After the end of each month, the Agent shall
send the LFC Funds Administrator a monthly statement accounting for the charges,
loans, advances and other transactions occurring among and between the Agent,
the Revolving Lenders and the Borrowers during that month, PROVIDED, THAT the
failure of the Agent to send such statement to the LFC Funds Administrator shall
not relieve the Postpetition Borrowers of any Postpetition Obligations or
Prepetition Obligations. Absent demonstrable error, each monthly statement shall
be an account stated and shall be final, conclusive and binding on the
Borrowers.
4.9 PAYMENT PROCEDURES.
(a) Payments of Fees, principal of and interest on the Revolving
Loans and Expenses payable to the Agent or any Revolving Lender shall be made in
each case not later than 2:00 P.M. Chicago time on the day when due, in
immediately available funds, to the offices of the Agent, at the address set
forth in SECTION 11.7, or as the Agent may otherwise direct the LFC Funds
Administrator. The Borrowers hereby authorize the Agent to charge the Revolving
Loan Account with the amount of all payments to be made hereunder and under the
other Credit Documents, on account of Postpetition Obligations in respect of
Revolving Loans and Letter of Credit Obligations, including all Fees and
Expenses, as and when such payments become due. The joint and several obligation
of the Borrowers to the Revolving Lenders with respect to such payments shall be
discharged by making such payments to the Agent pursuant to this SECTION 4.9 or
by the charging of the Revolving Loan Account by the Agent.
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(b) Payments of principal and, other than as provided in SECTION
4.1A(C), interest in respect of the Term Loan and Expenses payable to any Term
Lender shall be made not later than 2:00 P.M. Chicago time on the day when due,
in immediately available funds, to the offices of the Agent, at the address set
forth in SECTION 11.7, or as the Agent may otherwise direct the LFC Funds
Administrator.
4.10 COLLECTION OF ACCOUNTS.
All Collections and other amounts received by each Borrower from any
account debtor, in addition to all other cash received by such Borrower from any
other Collateral, shall on a daily basis be deposited into one or more of the
Depositary Accounts, in each case in the identical form in which received,
whether by cash or check. Borrowers shall cause all available amounts deposited
in each Depositary Account to be transferred on each Business Day from and after
the Closing Date (and, with respect to each depositary account established by
any Borrower after the Closing Date, prior to the date such account is added to
SCHEDULE B, PART 8.10 pursuant to SECTION 11.11) into the Collateral Account.
Except for transfers to the Collateral Account pursuant to this SECTION 4.10,
from and after the Closing Date, no Borrower shall authorize or direct the
transfer of, or otherwise withdraw any funds from, any of the Depositary
Accounts.
4.11 DISTRIBUTION AND APPLICATION OF COLLECTIONS AND OTHER
AMOUNTS.
(a) All amounts received by the Collateral Agent in the
Collateral Account shall be distributed by the Collateral Agent for
application to the Prepetition Obligations and the Postpetition
Obligations, respectively, pursuant to SECTION 4 of the Postpetition
Collateral Agency Agreement.
(b) So long as no Actionable Default has occurred and
is continuing, all amounts distributed to the Agent pursuant to SECTION
4 of the Postpetition Collateral Agency Agreement for application to
the Postpetition Obligations and the Prepetition Obligations shall be
applied by the Agent in the following order: FIRST, to the payment of
any Prepetition Obligations payable to the Agent (in its capacity as
agent under the Prepetition Credit Agreements) and the Prepetition
Lenders under any of the Prepetition Credit Documents in the order
prescribed in SECTION 4.1 of the Postpetition Collateral Agency
Agreement and under the Prepetition Credit Agreements; SECOND, to the
payment of any Fees, Expenses or other Postpetition Obligations due and
payable to the Agent under any of the Credit Documents, including Agent
Revolving Advances and any other amounts advanced by the Agent on
behalf of the Revolving Lenders; THIRD, to the payment of any Fees,
Expenses or other Postpetition Obligations due and payable to the
Issuing Bank under any of the Credit Documents; FOURTH, to the ratable
payment of any Fees, Expenses or other Postpetition Obligations due and
payable to the Revolving
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Lenders under any of the Credit Documents other than those Postpetition
Obligations specifically referred to in this SECTION 4.11(B); FIFTH, to
the ratable payment of any Fees, Expenses or other Postpetition
Obligations due and payable to the Term Lenders under any of the Credit
Documents other than those Postpetition Obligations specifically
referred to in this SECTION 4.11(B); SIXTH, to the ratable payment of
interest due and payable on the Revolving Loans to the Revolving
Lenders; SEVENTH, to the ratable payment of principal due on the
Revolving Loans to the Revolving Lenders; EIGHTH, to the payment of
interest due and payable on the Term Loan to the Term Lenders; and
NINTH, to the payment of principal due on the Term Loan to the Term
Lenders; it being understood and agreed that, notwithstanding any
acceleration of the maturity of the Postpetition Obligations in respect
of the Term Loan pursuant to SECTION 9.2A or any other provision of
this Credit Agreement or any other Credit Document, no amounts shall be
distributed to the Term Lenders pursuant to the foregoing clause ninth
if no Actionable Default has occurred and is continuing until all
Postpetition Obligations owing to the Revolving Lenders have been
indefeasibly paid in full and the Revolving Commitments have been
terminated.
(c) After an Actionable Default has occurred and is
continuing, all amounts distributed to the Agent pursuant to SECTION 4
of the Postpetition Collateral Agency Agreement for application to the
Postpetition Obligations and the Prepetition Obligations shall be
applied by the Agent in the following order: FIRST, to the payment of
the Postpetition Obligations in the order prescribed in SECTION
4.11(B), except that in such circumstance no payments shall be made
pursuant to clauses fifth, eighth or ninth of Section 4.11(b) until all
Postpetition Obligations owing to the Revolving Lenders have been
indefeasibly paid in full and the Revolving Commitments have been
terminated; and SECOND, to the payment of the Prepetition Obligations
in the order prescribed in Section 4.2 of the Postpetition Collateral
Agency Agreement.
4.12 CALCULATIONS.
All calculations of (I) interest hereunder and (II) Fees, including,
without limitation, Unused Line Fees and Letter of Credit Fees, shall be made by
the Agent, on the basis of a year of 360 days, or, if such computation would
cause the interest and fees chargeable hereunder to exceed the Highest Lawful
Rate, 365/366 days, in each case for the actual number of days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest or Fees are payable. Each determination by the Agent of an
interest rate, Fee or other payment hereunder shall be conclusive and binding
for all purposes, absent manifest error.
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4.13 SPECIAL PROVISIONS RELATING TO LIBOR RATE LOANS.
(a) CONTINUATION. With respect to any Borrowing
consisting of LIBOR Rate Loans, the Borrowers may, subject to the
provisions of SECTION 4.13(C), elect to maintain such Borrowing or any
portion thereof as consisting of LIBOR Rate Loans by selecting a new
Interest Period for such Borrowing, which new Interest Period shall
commence on the last day of the immediately preceding Interest Period.
Each selection of a new Interest Period shall be made by notice given
not later than noon Chicago time on the third Business Day prior to the
date of any such continuation relating to LIBOR Rate Loans, by the LFC
Funds Administrator to the Agent. Such notice by the LFC Funds
Administrator of a continuation (a "NOTICE OF CONTINUATION") shall be
by telephone or facsimile transmission, and if by telephone, promptly
confirmed in writing, substantially in the form of EXHIBIT D, in each
case specifying (I) the date of such continuation, (II) the Type of
Revolving Loans subject to such continuation, (III) the aggregate
amount of Revolving Loans subject to such continuation and (IV) the
duration of the selected Interest Period. The Borrowers may elect to
maintain more than one Borrowing consisting of LIBOR Rate Loans by
combining such Borrowings into one Borrowing and selecting a new
Interest Period pursuant to this SECTION 4.13(A). If the Borrowers
shall fail to select a new Interest Period for any Borrowing consisting
of LIBOR Rate Loans in accordance with this SECTION 4.13(A), such
Revolving Loans will automatically, on the last day of the then
existing Interest Period therefor, convert into Prime Rate Loans. The
Agent shall give each Revolving Lender prompt notice by telephone or
facsimile transmission of each Notice of Continuation.
(b) CONVERSION. The Borrowers may on any Business Day
(so long as no Default or Event of Default has occurred and is
continuing), upon notice (each such notice, a "NOTICE OF CONVERSION")
given to the Agent, and subject to the provisions of SECTION 4.13(C),
convert the entire amount of or a portion of all Revolving Loans of one
Type comprising the same Borrowing into Revolving Loans of another
Type; PROVIDED, THAT any conversion of any LIBOR Rate Loans into
Revolving Loans of another Type shall be made on, and only on, the last
day of an Interest Period for such LIBOR Rate Loans and, upon
conversion of any Prime Rate Loans into Revolving Loans of another
Type, the Borrowers shall pay accrued interest to the date of
conversion on the principal amount converted. Each such Notice of
Conversion shall be given not later than Noon Chicago time on the
Business Day prior to the date of any proposed conversion into Prime
Rate Loans and on the third Business Day prior to the date of any
proposed conversion into LIBOR Rate Loans. Subject to the restrictions
specified above, each Notice of Conversion shall be by telephone or
facsimile transmission, and if by telephone, promptly confirmed in
writing, substantially in the form of EXHIBIT E, in each case
specifying (I) the requested date of such
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conversion, (II) the Type of Revolving Loans to be converted (III) the
portion of such Type of Revolving Loan to be converted, (IV) the Type
of Revolving Loans such Revolving Loans are to be converted into and
(V) if such conversion is into LIBOR Rate Loans, the duration of the
Interest Period of such Revolving Loan. Each conversion shall be in an
aggregate amount of not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof. The Borrowers may elect to convert the
entire amount of or a portion of all Revolving Loans of one Type
comprising more than one Borrowing into Revolving Loans of another Type
by combining such Borrowings into one Borrowing; PROVIDED, THAT if the
Borrowings so combined consist of LIBOR Rate Loans, such Loans shall
have Interest Periods ending on the same date.
(C) CERTAIN LIMITATIONS ON LIBOR RATE LOANS. The right
of the Borrowers to maintain, select, continue or convert LIBOR Rate
Loans shall be limited as follows:
(i) If the Agent is advised by Bankers Trust
Company that it is not offering United States dollar deposits
(in the applicable amounts) in the London inter-bank market,
or the Agent determines that adequate and fair means do not
otherwise exist for ascertaining the LIBOR Rate or LIBOR Rate
Loans comprising any requested Borrowing, continuation or
conversion, the right of the Borrowers to select or maintain
LIBOR Rate Loans for such Borrowing or any subsequent
Borrowing shall be suspended until the Agent shall notify the
LFC Funds Administrator and the Revolving Lenders that the
circumstances causing such suspension no longer exists, and
each Revolving Loan shall be made as a Prime Rate Loan.
(ii) If the Majority Lenders shall, at least
one Business Day before the date of any requested Borrowing,
continuation or conversion, notify the Agent that the LIBOR
Rate for Revolving Loans comprising such Borrowing will not
adequately reflect the cost to such Revolving Lenders of
making or funding their respective Revolving Loans for such
Borrowing, the right of the Borrowers to select LIBOR Rate
Loans for such Borrowing shall be suspended until the Agent
shall notify the LFC Funds Administrator and the Revolving
Lenders that the circumstances causing such suspension no
longer exist, and each Revolving Loan comprising such
Borrowing and each other Borrowing requested during such
period of suspension shall be made as a Prime Rate Loan.
(iii) If at any time any Revolving Lender
determines (which determination shall, absent manifest error,
be conclusive and binding on all parties) that the making,
continuation or conversion of any Revolving Loan as a LIBOR
Rate Loan by such Revolving Lender has become unlawful or
impermissible by reason of compliance by that Revolving Lender
with any law, governmental rule,
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regulation or order of any Governmental Authority (regardless
whether having the force of law), then, and in any such event,
such Revolving Lender may give notice of that determination in
writing, to the Agent and the LFC Funds Administrator and the
Agent shall promptly transmit the notice to each other
Revolving Lender. Until such Revolving Lender gives notice
otherwise, the right of the Borrowers to select LIBOR Rate
Loans from that Revolving Lender shall be suspended and each
Revolving Loan made by that Revolving Lender, notwithstanding
the Type of Revolving Loan made by the other Revolving
Lenders, shall be a Prime Rate Loan and each LIBOR Rate Loan
outstanding from that Revolving Lender shall automatically, on
the last day of the existing Interest Period therefor (or
earlier, if so required under such law, rule, regulation or
order), convert to a Prime Rate Loan.
(IV) No Agent Revolving Advance shall be made
as a LIBOR Rate Loan.
(V) No Revolving Loans may be made, continued
or converted as or to LIBOR Rate Loans at any time that a
Default or Event of Default shall have occurred and be
continuing.
(D) COMPENSATION.
(i) Each Notice of Continuation and Notice of
Conversion shall be irrevocable by and binding on the
Borrowers. In the case of any Borrowing, continuation or
conversion that the related Notice of Borrowing, Notice of
Continuation or Notice of Conversion specifies is to be
comprised of LIBOR Rate Loans, the Borrowers shall indemnify
each Revolving Lender against any loss, cost or expense
incurred by such Person as a result of any failure to fulfill,
on or before the date for such Borrowing, continuation or
conversion specified in such Notice of Borrowing, Notice of
Continuation or Notice of Conversion, the applicable
conditions set forth in ARTICLE 5, including, without
limitation, any loss (excluding loss of anticipated profits),
cost or expense incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by such
Revolving Lender to fund the Revolving Loan to be made by such
Revolving Lender as part of such Borrowing, continuation or
conversion.
(ii) If any payment of principal of, or
conversion or continuation of, any LIBOR Rate Loan is made
other than on the last day of the Interest Period for such
Loan as a result of a payment, prepayment, conversion or
continuation of such Loan or acceleration of the maturity of
the Revolving Notes or for any other reason, the Borrowers
shall, upon demand by any Revolving Lender
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(with a copy of such demand to the Agent), pay to the Agent
for the account of such Revolving Lender any amounts required
to compensate such Revolving Lender for any additional losses,
costs or expenses which it may reasonably incur as a result of
such payment, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense
incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by any Revolving Lender to
fund or maintain such Loan.
(iii) Calculation of all amounts payable to a
Revolving Lender under this SECTION 4.13(D) shall be made as
though such Revolving Lender elected to fund all LIBOR Rate
Loans by purchasing United State dollar deposits in its LIBOR
Lending Office's interbank eurodollar market.
4.14 INDEMNIFICATION IN CERTAIN EVENTS.
(a) INCREASED COSTS. If after the Closing Date, either
(I) any change in or in the interpretation of any law or regulation is
introduced, including, without limitation, with respect to reserve
requirements applicable to the Agent, to any of the Lenders, Bankers
Trust Company or any other affiliated banking or financial institution
from whom any of the Lenders borrows funds or obtains credit (a
"FUNDING BANK"), or (II) the Agent, a Funding Bank or any of the
Lenders complies with any future guideline or request from any central
bank or other Governmental Authority proposed or promulgated after the
date of the Agreement or (III) the Agent, a Funding Bank or any of the
Lenders determines that the adoption of any applicable law, rule or
regulation regarding capital adequacy or any change therein, or any
change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof announced after the date
of this Credit Agreement has or would have the effect described below,
or the Agent, a Funding Bank or any of the Revolving Lenders complies
with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or
comparable agency announced after the date of this Credit Agreement and
in the case of any event set forth in this clause (III), such adoption,
change or compliance has or would have the direct or indirect effect of
reducing the rate of return on any of such Person's capital as a
consequence of its obligations hereunder to a level below that which
such Person could have achieved but for such adoption, change or
compliance (taking into consideration such Person's policies with
respect to capital adequacy) by an amount deemed by such Person to be
material, and any of the foregoing events described in CLAUSES (I),
(II) OR (III) increases the cost to the Agent, or any of the Lenders of
(A) funding or maintaining any Commitment or (B) issuing, causing the
issuance of making or maintaining any Letter of Credit or of purchasing
or main-
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taining any participation therein, or reduces the amount receivable in
respect thereof by the Agent or any Lender, then the Borrowers shall
upon demand by the Agent at any time within one hundred eighty (180)
days after the date on which an officer of the Agent, such Funding Bank
or such Lender, as the case may be, responsible for overseeing this
Credit Agreement knows or has reason to know of its right to additional
compensation under this SECTION 4.14(A), pay to the Agent, for the
account of such Lender or, as applicable, the Agent or a Funding Bank,
additional amounts sufficient to reimburse the Agent, such Funding Bank
and such Lender against such increase in cost or reduction in amount
receivable; PROVIDED, HOWEVER, that if the Agent or any such Lender or
Funding Bank, as the case may be, fails to deliver such demand within
such 180 day period, such entity shall only be entitled to additional
compensation for any such costs incurred from and after the date that
is one hundred eighty (180) days prior to the date the Borrowers
received such demand; and PROVIDED FURTHER, HOWEVER, that before making
any such demand, the Agent and each Revolving Lender agree to use
reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for, or
reduce the amount of, such increased cost and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to
such Lender. A certificate as to the amount of such increased cost, and
setting forth in reasonable detail the calculation thereof, shall be
submitted to the LFC Funds Administrator by the Agent, or the
applicable Lender or Funding Bank, and shall be conclusive absent
demonstrable error.
(b) Each Lender will promptly notify the Agent, and the
Agent will promptly notify the LFC Funds Administrator, of any event of
which it has knowledge that would entitle such entity to additional
compensation under this SECTION 4.14. Neither the Agent nor any Lender
shall request any additional compensation under this SECTION 4.14
unless it is generally making similar requests of other borrowers
similarly situated, and the Agent and each Lender agrees to use a
reasonable basis for calculating amounts allocable to its commitment to
lend or its Loans and Letter of Credit Obligations, if any, hereunder.
4.15 TAXES.
(a) Each payment by the Borrowers hereunder or under
the Notes (A "PAYMENT") to the Agent or any Lender (A "PAYEE") shall be
made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, imposed by the United States or
any political subdivision or taxing authority thereof or therein (all
such taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "U.S. TAXES". If any U.S.
Taxes shall be required by law to be deducted from or
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in respect of any sum payable hereunder to any Payee, (I) the sum
payable by the Borrowers shall be increased as may be necessary so that
after making all required deductions (including deductions applicable
to additional sums payable under this SECTION 4.15) the recipient shall
receive an amount equal to the sum it would have received had no such
deductions been made, (II) the Borrowers shall make such deductions and
(III) the Borrowers shall pay the full amount deducted to the relevant
taxing authority in accordance with applicable law. Within 30 days
after the date of any payment of U.S. Taxes withheld by the Borrowers
in respect of any payment to any Payee, the Borrowers will furnish to
the Agent the official receipt or receipts (or certified copies
thereof) from the relevant taxation or other authorities for the full
amount so deducted or withheld.
(b) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any State thereof shall
deliver to the Agent for transmission to the Borrowers at such times as
may be necessary in the determination of the Borrowers or the Agent
(each in the reasonable exercise of its discretion), such certificates,
documents or other evidence, properly completed and duly executed by
such Lender (including, without limitation, Internal Revenue Service
Form W-8 or Form 1001 or any other certificate or statement of
exemption required by Treasury Regulation section 1.441-6(c) or any
successor thereto) to establish that such Lender is not subject to
deduction or withholding of United States federal income tax under
section 1441 or 1442 of the Code or otherwise (or under any comparable
provisions of any successor statute) with respect to any payments to
such Lender of principal, interest, fees or other amounts payable under
any of the Loans.
(c) Notwithstanding the preceding provisions of this
SECTION 4.15, the Borrowers shall not be obligated to make additional
payments under CLAUSE (A) above to any Payee that is an assignee of a
Loan pursuant to SECTION 11.8 and is organized under the laws of any
jurisdiction outside of the United States or any State for U.S. Taxes
which both (I) would not have been required had such assignee been
organized under the laws of the United States and (II) did not result
from a change in law or regulation or the interpretation thereof from
the law, regulation or interpretation prevailing at the time such
assignee became a Lender. Each Lender which is a Lender as of the
Closing Date and is not organized under the laws of the United States
or any State represents that as of the Closing Date, the Borrowers are
not required to make additional payments under CLAUSE (A) above to it
hereunder or under the Notes.
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ARTICLE 5. CONDITIONS PRECEDENT.
5.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF
CREDIT.
The obligation of each Revolving Lender to fund its Proportionate Share
of the initial Borrowing (or, if it shall occur earlier and the obligation of
the Agent to cause the issuance by the Issuing Bank of the initial Letter of
Credit) are subject to the satisfaction or waiver of the following conditions
precedent:
(A) CLOSING DOCUMENT LIST. The Agent and the Lenders
shall have received each of the agreements, opinions, reports,
approvals, consents, certificates and other documents set forth on the
closing document list attached hereto as SCHEDULE A (the "CLOSING
DOCUMENT LIST").
(B) FEES AND EXPENSES. All Fees and Expenses payable by
the Borrowers hereunder, and all fees payable by the Borrowers to the
Collateral Agent under the Postpetition Collateral Agency Agreement, in
each case on or before the Closing Date, shall have been paid in full.
(C) INTERIM FINANCING ORDER. The Bankruptcy Court shall have
entered the Interim Financing Order in the form and substance
satisfactory to the Agent. Such Interim Financing Order shall be in
full force and effect and shall not have been vacated, reversed,
modified or stayed in any respect and, if such order is the subject of
any pending appeal, no performance of any obligation of any party
hereto shall have been stayed pending such appeal.
(D) PAYMENTS. Prior to the Petition Date, the Borrowers
shall have paid all accrued interest, fees and expenses with respect to
the Prepetition Obligations (including without limitation all legal
fees and expenses incurred in connection with the preparation,
negotiation and consummation of this Credit Agreement).
(E) GECC ACCOUNT PURCHASE AGREEMENT. The Borrowers
shall have entered into an arrangement with GECC satisfactory in all
respects to the Agent and the Lenders to continue the effectiveness and
operation of the GECC Account Purchase Agreement on a postpetition
basis.
5.2 CONDITIONS PRECEDENT TO ALL REVOLVING LOANS AND LETTERS
OF CREDIT.
The obligation of each Revolving Lender to fund its Proportionate Share
of any requested Revolving Loan (or of the Agent to cause the Issuing Bank to
issue any requested Letter of Credit) are subject to the satisfaction of the
conditions precedent set forth below. Each Notice of Borrowing, each Letter of
Credit Request, and each issuance by any Borrower of a check drawn against, or
request for transfer from, the Disbursement Account
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shall constitute a representation and warranty to the Agent and each Lender by
the Borrowers that such conditions are satisfied.
(A) All representations and warranties contained in
this Credit Agreement and the other Credit
Documents are true and correct in all material
respects on and as of the date of such Notice of
Borrowing, Letter of Credit Request, or issuance of
a check drawn against, or request for transfer
from, the Disbursement Account, both before and
after giving effect thereto and to the application
of the proceeds thereof, in each case as if then
made, other than representations and warranties
that expressly relate solely to an earlier date (in
which case such representations and warranties
shall have been true and accurate on and as of such
earlier date);
(B) No Default or Event of Default shall have
occurred or could reasonably be expected to result
from the making of the requested Loan or the issuance
of the requested Letter of Credit, that has not been
waived (or, in the case of a Default, cured) pursuant
to the terms hereof; and
(C) No event shall have occurred since the date of
this Credit Agreement that has had or could
reasonably be expected to have a Material Adverse
Effect.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES.
To induce the Agent and the Lenders to enter into this Credit Agreement
and to induce the Lenders to make the Loans and other financial accommodations
described herein, each of the Borrowers hereby represents and warrants to the
Agent and the Lenders that the representations and warranties contained in this
ARTICLE 6 are true and correct. Such representations and warranties, and all
other representations and warranties made by the Borrowers in any other Credit
Documents, shall survive the execution and delivery of this Credit Agreement and
such other Credit Documents.
6.1 ORGANIZATION AND QUALIFICATION.
Each Borrower and each Subsidiary of each Borrower (I) are corporations
duly organized, validly existing and in good standing under the laws of the
respective states or other jurisdictions of their incorporation, (II) have the
power and authority to own their respective properties and assets and to
transact their respective businesses in which they presently are, or propose to
be, engaged and (III) are duly qualified and are authorized to do business and
are in good standing in each of the respective jurisdictions where they
presently are, or propose to be, engaged in business, in each case, except where
any failures to do so could not reasonably be expected singly or in the
aggregate to have a Material Adverse
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Effect. SCHEDULE B, PART 6.1 lists all jurisdictions in which each Borrower and
each Subsidiary of each Borrower are qualified to do business as foreign
corporations.
6.2 AUTHORITY.
The execution, delivery and performance by each Borrower of the Credit
Documents and all instruments and documents to be delivered by such Borrower, to
the extent it is party thereto: (i) are within such Borrower's corporate power;
(ii) have been duly authorized by all necessary or proper corporate action and
by the Closing Date will be authorized by the Interim Financing Order pursuant
to sections 363 and 364 of the Bankruptcy Code; (iii) are not in contravention
of any provision of such Borrower's certificates or articles of incorporation or
by-laws; (iv) will not, upon the entry of the Interim Financing Order by the
Bankruptcy Court, violate any law or regulation, or any order or decree of any
court or governmental instrumentality; (v) will not conflict with or result in
the breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which such Borrower is a party or by which such
Borrower or any of its property is bound and the effect of which will not be
subject to the automatic stay pursuant to Section 362 of the Bankruptcy Code
upon the entry of the Interim Financing Order by the Bankruptcy Court; (vi) will
not result in the creation or imposition of any Lien upon any of the property of
such Borrower (other than the Liens existing or created under the Collateral
Documents); and (vii) do not require the consent or approval of any governmental
body, agency, authority or any other Person other than the entry by the
Bankruptcy Court of the Interim Financing Order, which by the Closing Date will
be in full force and effect and the Permanent Financing Order. Each of the
Credit Documents has been duly executed and delivered for the benefit of or on
behalf of the Borrowers and each constitutes a legal, valid and binding
obligation of the Borrowers, enforceable against them in accordance with its
terms.
6.3 ENFORCEABILITY.
This Credit Agreement and each of the other Credit Documents,
including, without limitation, each Revolving Note, are the legal, valid and
binding obligations of each Borrower and each Subsidiary of each Borrower that
are parties thereto, enforceable in accordance with their respective terms.
6.4 RESERVED.
6.5 CONSENTS AND FILINGS.
No consent, authorization, permit or filing is required in connection
with the execution, delivery and performance of this Credit Agreement or any
Credit Document by any Borrower or any Subsidiary of any Borrower that are
parties thereto, or in
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connection with the continuing operations of such Persons, except those that
have been obtained or made.
6.6 GOVERNMENT REGULATION.
No Borrower nor any Subsidiary of any Borrower is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
similar Requirement of Law that limits the respective abilities of such Persons
to incur indebtedness or consummate the transactions contemplated in this Credit
Agreement and the other Credit Documents.
6.7 RIGHTS IN COLLATERAL; PRIORITY OF LIENS.
All property constituting Collateral is owned or leased by the
Borrowers. Upon entry of the Interim Financing Order, the security interests
granted pursuant to the Credit Documents constitute valid, enforceable and
perfected Liens on the Collateral, including without limitation all of the
Borrowers' respective interests in real property, with the priority set forth in
the Interim Financing Order.
6.8 FINANCIAL DATA.
The Borrowers have or caused to be provided to the Agent and each of
the Revolving Lenders complete and accurate copies of (I) annual audited
Financial Statements for the fiscal years ended March 31, 1997, and (II)
unaudited Financial Statements for the quarterly and monthly fiscal periods
ended June 30, 1997 and July 31, 1997, respectively. All such Financial
Statements have been prepared in accordance with GAAP consistently applied
throughout the periods involved and fairly present the respective consolidated
financial positions, results of operations and cash flows of the Consolidated
Entity for each of the periods covered subject, in the case of the Financial
Statements described in CLAUSES (I) and (II) above, to normal year-end audit
adjustments. The Consolidated Entity has no Contingent Obligation (or any other
material liabilities which were not incurred by the Borrowers in the ordinary
course of business) which is not reflected in such Financial Statements or the
footnotes thereto, or is not otherwise disclosed on SCHEDULE B, PART 6.8.
6.9 LOCATIONS OF OFFICES, RECORDS AND INVENTORY.
(A) The address of the principal place of business and, if there is
more than one principal place of business, the chief executive office, of each
Borrower is set forth on SCHEDULE B, PART 6.9(A), as the same may be amended
after the Closing Date in accordance with SECTION 11.11. The books and records
of each Borrower, and all its chattel paper, if any, and records of Accounts,
are maintained exclusively at one or more of such locations.
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(B) There is no location in which any Borrower has any Collateral
(except for vehicles and Inventory in transit) other than those locations
identified on SCHEDULE B, PART 6.9(B), as the same may be amended after the
Closing Date in accordance with SECTION 11.11. A complete list of the legal name
and address of each warehouse at which Inventory of any Borrower is stored is
set forth on SCHEDULE B, PART 6.9(B), as the same may be amended after the
Closing Date in accordance with SECTION 11.11. None of the receipts received and
to be received by any Borrower from any warehouseman state that the Inventory
covered thereby is to be delivered to bearer or to the order of a named Person
or to a named Person and such named Person's assigns, in each case other than
such Borrower.
(C) No Borrower owns any real property other than those locations
identified as real property owned by a Borrower on SCHEDULE B, PART 6.9(B).
6.10 SUBSIDIARIES; OWNERSHIP OF STOCK.
As of the Closing Date, (I) the only direct or indirect Subsidiaries of
the respective Borrowers are those listed on SCHEDULE B, PART 6.10, (II) each
Borrower is the record and beneficial owner of all of the respective shares of
capital stock of each of its Subsidiaries listed on SCHEDULE B, PART 6.10, (III)
there are no proxies, irrevocable or otherwise, with respect to such shares, and
no equity securities of any of such Subsidiaries are or may become required to
be issued by reason of any options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of any capital stock of any
such Subsidiary, and (IV) there are no contracts, commitments, understandings or
arrangements by which any such Subsidiary is or may become bound to issue
additional shares of its capital stock or securities convertible into or
exchangeable for such shares. All of such shares so owned by any Borrower are
owned by such Borrower free and clear of any Liens.
6.11 NO JUDGMENTS OR LITIGATION.
No judgments, orders, writs or decrees are outstanding against any
Borrower or any Subsidiary of any Borrower, nor is there now pending or, to the
best of the Borrower's knowledge after diligent inquiry, threatened, any
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against any Borrower or any Subsidiary of any Borrower other
than (I) as set forth on SCHEDULE B, PART 6.11, or (II) with respect to matters
arising after the Closing Date, that singly or in the aggregate could reasonably
be expected to have a Material Adverse Effect.
6.12 LABOR MATTERS.
SCHEDULE B, PART 6.12 accurately sets forth all labor contracts to
which any Borrower or any Subsidiary of any Borrower
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is a party as of the Closing Date (including their dates of expiration). There
are no existing or, to the knowledge of any Borrower, threatened strikes,
lockouts or other disputes relating to any collective bargaining or similar
agreement to which any Borrower or any Subsidiary of any Borrower is a party
that singly or in the aggregate could reasonably be expected to have a Material
Adverse Effect.
6.13 COMPLIANCE WITH LAW.
No Borrower nor any Subsidiary of any Borrower has violated or failed
to comply in any material respect with any Requirements of Law applicable to the
Collateral or any part thereof, or to the operation of its business or its
assets generally.
6.14 ERISA.
No Borrower, no Subsidiary of any Borrower and no ERISA Affiliate
maintains or contributes to any Plan other than those listed on SCHEDULE B, PART
6.14. Each Plan has been and is maintained and funded in accordance with its
terms and in compliance with all applicable provisions of ERISA and the Internal
Revenue Code. Each Borrower, each Subsidiary of a Borrower and each ERISA
Affiliate has fulfilled all contribution obligations for each Plan (including
obligations related to the minimum funding standards of ERISA and the Internal
Revenue Code). No Termination Event has occurred nor has any other event
occurred that may result in a Termination Event. No Borrower, no Subsidiary of
any Borrower, no ERISA Affiliate, and no fiduciary of any Plan is subject to any
direct or indirect liability with respect to any Plan under any Requirement of
Law or agreement. No Borrower, no Subsidiary of a Borrower and no ERISA
Affiliate, is required to provide security to any Plan under section 401(a)(29)
of the Internal Revenue Code.
6.15 COMPLIANCE WITH ENVIRONMENTAL LAWS.
Except as disclosed on SCHEDULE B, PART 6.15 or, with respect to
matters arising after the Closing Date, as could not singly or in the aggregate
reasonably be expected to have a Material Adverse Effect, (I) the operations of
each Borrower and each Subsidiary of each Borrower comply with all applicable
federal, state and local environmental, health and safety statutes, regulations,
directions, ordinances, criteria and guidelines; (II) no Borrower has received
notice that any of the operations of such Borrower or any of its Subsidiaries is
the subject of any judicial or administrative proceeding alleging the violation
of any federal, state or local environmental, health or safety statute,
regulation, direction, ordinance, criteria or guideline; (III) none of the
operations of such Borrower or any of its Subsidiaries is the subject of any
federal or state investigation evaluating whether such Borrower or any of its
Subsidiaries disposed of any Hazardous Substances at any site that may require
remedial action, or any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any Hazardous Substance
into the
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environment; (IV) no Borrower nor any Subsidiary of any Borrower has filed any
notice under any federal or state law indicating past or present treatment,
storage or disposal of a Hazardous Substance or reporting a spill or release of
a Hazardous Substance into the environment; (V) no Hazardous Substances or
underground storage tanks are present in, under or on any property owned,
operated or leased by any Borrower or Subsidiary other than in compliance with
Environmental Law; and (VI) there are no past or pending Environmental Claims
against any Borrower or Subsidiary related to any of their respective operations
that have not been dismissed, withdrawn, settled or otherwise resolved.
6.16 INTELLECTUAL PROPERTY.
Each Borrower and each Subsidiary of each Borrower possesses such
assets, licenses, patents, patent applications, copyrights, service marks,
trademarks and trade names as are necessary or advisable to continue to conduct
their respective present and proposed business activities.
6.17 LICENSES AND PERMITS.
Each Borrower and each Subsidiary of each Borrower has obtained and
holds in full force and effect, all franchises, licenses, leases, permits,
certificates, authorizations, qualifications, easements, rights of way and other
rights and approvals which are necessary or advisable for the operation of its
business as presently conducted and as proposed to be conducted.
6.18 TAXES AND TAX RETURNS.
(A) Except as set forth on SCHEDULE B, PART 6.18, each
Borrower and each Subsidiary of each Borrower has timely filed, without
request for extension, all income tax returns it is required to file.
The information filed is complete and accurate in all material
respects. All deductions taken in such income tax returns are
appropriate and in accordance with applicable laws and regulations,
except deductions that may have been disallowed but are being
challenged in good faith and for which adequate reserves have been made
in accordance with GAAP.
(B) All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date hereof, have been
timely paid and no Borrower nor any Subsidiary of any Borrower has any
liability for taxes in excess of the amounts so paid or reserves so
established.
(C) Except as set forth in SCHEDULE B, PART 6.18, no
material deficiencies for taxes have been claimed, proposed or assessed
by any taxing or other Governmental Authority against any Borrower or
any Subsidiary of any Borrower and no tax liens have been filed. Except
as set forth in SCHEDULE B, PART 6.18, there are no pending or
threatened audits, investigations or claims for or relating to any
liability for
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taxes and there are no matters under discussion with any Governmental
Authority which could reasonably be expected to result in a material
additional liability for taxes. As of the Closing Date, either the
federal income tax returns of each Borrower have been audited by the
Internal Revenue Service and such audits have been closed, or the
period during which any assessments may be made by the Internal Revenue
Service has expired without waiver or extension for all years up to and
including the fiscal year of the Consolidated Entity ended March 31,
1990. Except as set forth in SCHEDULE B, PART 6.18, as of the Closing
Date, no extension of a statute of limitations relating to taxes,
assessments, fees or other governmental charges is in effect with
respect to any Borrower or any Subsidiary of any Borrower.
(D) Except as set forth on SCHEDULE B, PART 6.18, no
Borrower nor any Subsidiary of any Borrower has any obligation under
any written tax sharing agreement or agreement regarding payments in
lieu of taxes.
6.19 MATERIAL CONTRACTS.
SCHEDULE B, PART 6.19, contains a true, correct and complete list of
all the Material Contracts in effect on the Closing Date. Except as described on
SCHEDULE B, PART 6.19, no Material Contract contains any burdensome restrictions
on any Borrower or any Subsidiary of any Borrower or any of their respective
properties that could prevent such Borrower or Subsidiary from conducting its
business as conducted on the Closing Date. As of the Closing Date, all of the
Material Contracts are in full force and effect, and no defaults currently exist
thereunder by any Borrower or Subsidiary of a Borrower that is a party thereto
(other than defaults that need not be cured under section 365(b)(2) of the
Bankruptcy Code), or to the knowledge of the Borrowers, any other party thereto.
6.20 ACCURACY AND COMPLETENESS OF INFORMATION.
All factual information furnished by or on behalf of any Borrower or
any Subsidiary of any Borrower in writing to the Agent or any Revolving Lender
for purposes of or in connection with this Credit Agreement or any Credit
Documents or any transaction contemplated hereby or thereby, is or will be true
and accurate in all material respects on the date as of which such information
is dated or certified and, taken as a whole, is not incomplete by omitting to
state any material fact necessary to make such information not misleading at
such time.
6.21 NO CHANGE.
Since the date of this Credit Agreement, no event has occurred that has
had or could reasonably be expected to have a Material Adverse Effect.
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ARTICLE 7. AFFIRMATIVE COVENANTS.
Until termination of this Credit Agreement and payment and satisfaction
of all Obligations due hereunder:
7.1 FINANCIAL REPORTING.
The Borrowers shall timely deliver to each Lender the following
information:
(A) AUDITOR'S ENGAGEMENT LETTER. As soon as available,
but in any event not later than the earlier of (I) 15 days prior to the
end of each fiscal year or (II) prior to the date the Auditors commence
work on the preparation of the annual audited Financial Statement, a
copy of the engagement letter between the Borrowers and their Auditors,
which engagement letter shall notify such Auditors that such annual
audited Financial Statement will be delivered by the Borrowers to the
Agent and the Lenders, and stating that the Agent and the Lenders shall
be entitled to rely thereon with respect to the transactions which are
the subject of this Credit Agreement.
(B) ANNUAL FINANCIAL STATEMENTS. As soon as available,
but not later than 90 days after each fiscal year end: (I) the annual
audited consolidated Financial Statements of the Consolidated Entity;
(II) a comparison in reasonable detail to the prior year annual audited
and unaudited Financial Statements; (III) the Auditors' opinion,
"Management Letter" (if any) and statement indicating whether the
Auditors have obtained knowledge of the existence of any Default or
Event of Default during their audit; (IV) a narrative discussion of the
consolidated financial condition and results of operations and the
consolidated liquidity and capital resources of the Consolidated Entity
for such fiscal year, prepared by the chief financial officer of LFI;
and (V) a compliance certificate substantially in the form of EXHIBIT F
with an attached schedule of calculations demonstrating compliance with
the financial covenants set forth in ARTICLE 8.
(C) MONTHLY AND ANNUAL PROJECTIONS. Not later than 45
days after each fiscal year end, beginning with the fiscal year ended
March 31, 1998, monthly projections of the statements of operations of
the Consolidated Entity for the next succeeding year, quarterly
projections for the second succeeding year, and annual projections for
each succeeding fiscal year thereafter, through and including the
fiscal year in which the Expiration Date will occur, in the case of
quarterly and annual projections, containing projected consolidated
balance sheets, statements of operations, statements of cash flows and
statements of changes in shareholders equity.
(D) QUARTERLY FINANCIAL STATEMENTS. As soon as avail-
able, but not later than 45 days after each end of each of the
first three fiscal quarters, and 90 days after the end of the
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last fiscal quarter: (I) Financial Statements of the Consolidated
Entity as of the fiscal quarter then ended, and for the fiscal year to
date; (II) a comparison in reasonable detail to the Financial
Statements for the corresponding periods of the prior fiscal year;
(III) the certification of the chief executive officer or chief
financial officer of LFI that such Financial Statements have been
prepared in accordance with GAAP (subject to year-end audit
adjustments); (IV) a narrative discussion of the consolidated financial
condition and results of operations and the consolidated liquidity and
capital resources of the Consolidated Entity for such fiscal quarter
and fiscal year to date, prepared by the chief financial officer of
LFI; and (V) a compliance certificate substantially in the form of
EXHIBIT F with an attached schedule of calculations demonstrating
compliance with the financial covenants set forth in ARTICLE 8.
(E) MONTHLY FINANCIAL STATEMENTS. As soon as available,
but not later than 30 days after the end of each of the first eleven
months, and 45 days after end of the last month: (I) a balance sheet
for the Consolidated Entity as at the end of such month and for the
fiscal year to date and statements of operations and cash flows for
such month and for the fiscal year to date; (II) a comparison to the
balance sheet, statement of operations and statement of cash flows for
the same periods in the prior year; (III) a certification by the chief
executive officer or chief financial officer of LFI that such balance
sheet, statement of operations and statement of cash flows have been
prepared in accordance with GAAP (subject to year-end audit
adjustments); and (IV) a compliance certificate substantially in the
form of EXHIBIT F with an attached schedule of calculations
demonstrating compliance with the financial covenants set forth in
ARTICLE 8.
(F) MONTHLY COMPARISON TO PRIOR PROJECTIONS. As soon as
available, but not later than 30 days after the end of each of the
first eleven months, and 45 days after end of the last month, a
comparison of actual results of operations, cash flow and capital
expenditures for the Consolidated Entity for such month and for the
period from the beginning of the current fiscal year through the end of
such month with amounts previously projected for those periods (see
SECTION 7.1(C)) and with actual results for corresponding periods in
the previous fiscal year.
(G) PUBLIC REPORTING. Promptly upon their becoming
available, copies of all regular and periodic reports, proxy statements
and other materials filed by any Borrower with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or
all of the functions of such Commission, or with any national
securities exchange, or distributed to the stockholders of any
Borrower.
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7.2 COLLATERAL REPORTING.
The Borrowers shall timely deliver to the Agent the following
certificates and reports:
(A) WEEKLY AND MONTHLY BORROWING BASE CERTIFICATES.
Weekly, before 12:00 noon on the second Business Day of each week
(except the last week of each month), monthly, within 2 Business Days
after the last Business Day of each month, and at any other time
reasonably requested by the Agent, a Borrowing Base Certificate, which
shall be: (I) substantially in the form of EXHIBIT A, detailing the
Eligible Accounts Receivable and Eligible Inventory, in each case of
each of the Borrowers, as of each Friday of the immediately preceding
week (if a weekly Borrowing Base Certificate), or as of the last
Business Day of the immediately preceding month (if a monthly Borrowing
Base Certificate), or as of such other date as the Agent may request;
and (II) prepared by or under the supervision of the chief executive
officer or chief financial officers of each Borrower and certified by
such officer subject only to adjustment upon completion of the normal
annual audit of physical inventory. Each Borrowing Base Certificate
shall have attached to it such additional schedules and other
information as the Agent may reasonably request, including, without
limitation, an Accounts Receivable Operational Report.
(B) APPRAISALS. When requested by the Agent, (I) so
long as an Event of Default shall not have occurred and be continuing,
not more than twice in any fiscal year of the Consolidated Entity and
(II) upon the occurrence and during the continuance of an Event of
Default, at any time, a report of Inventory of each Borrower, based
upon a physical count or rack cycle count procedure, which shall
describe each Borrower's Inventory by category and by item (in
reasonable detail) and report the then appraised value (at lower of
cost or market) of such Inventory.
(C) FURTHER ASSURANCES. When requested by the Agent,
any further information regarding the Collateral, business affairs and
financial condition of LFI, any Borrower or any Subsidiary of any
Borrower.
7.3 NOTIFICATION REQUIREMENTS.
The Borrowers shall timely give to the Agent and each of the Lenders
the following notices:
(A) NOTICE OF DEFAULTS. Promptly, and in any event
within two (2) Business Days after becoming aware of the occurrence of
a Default or Event of Default, a certificate of the chief executive
officer or chief financial officer of the LFC Funds Administrator
specifying the nature thereof and the proposed response of the
Borrowers thereto, each in reasonable detail.
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(B) PROCEEDINGS OR ADVERSE CHANGES. Promptly, and in
any event within five (5) Business Days after any Borrower becomes
aware of (I) any proceeding being instituted or threatened to be
instituted by or against such Borrower or any of its Subsidiaries in
any federal, state, local or foreign court or before any commission or
other regulatory body (federal, state, local or foreign) which could
reasonably be expected to result in uninsured liability in excess of
$1,000,000 for any Borrower, (II) any order, judgment or decree in
excess of $1,000,000 being entered against such Borrower or any of its
Subsidiaries or any of their respective properties or assets or (III)
any actual or prospective change, development or event which has had or
could reasonably be expected to have a Material Adverse Effect, a
written statement describing such proceeding, order, judgment, decree,
change, development or event and any action being taken with respect
thereto by such Borrower or such Subsidiary.
(C) ERISA NOTICES. (I) Promptly, and in any event
within ten (10) Business Days after any Borrower, any Subsidiary of any
Borrower or any ERISA Affiliate knows or has reason to know that a
Termination Event has occurred, a written statement of the chief
financial officer of LFC Funds Administrator describing such
Termination Event and any action that is being taken with respect
thereto by such Borrower, such Subsidiary or such ERISA Affiliate, and
any action taken or threatened by the Internal Revenue Service,
Department of Labor or Pension Benefit Guaranty Corporation. Each
Borrower, each Subsidiary of each Borrower and each ERISA Affiliate
shall be deemed to know all facts known by the administrator of any
Benefit Plan of which it is the plan sponsor; (II) promptly, and in any
event within three (3) Business Days after the filing thereof with the
Internal Revenue Service, a copy of each funding waiver request filed
with respect to any Benefit Plan and all communications received by any
Borrower, any Subsidiary of any Borrower or any ERISA Affiliate with
respect to such request; and (III) promptly, and in any event within
three (3) Business Days after receipt by any Borrower, any Subsidiary
of any Borrower or any ERISA Affiliate, of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a
Benefit Plan, copies of each such notice.
(D) ENVIRONMENTAL AND HEALTH AND SAFETY NOTICES.
Promptly, and in any event within ten (10) Business Days after receipt
by any Borrower or any Subsidiary of any Borrower of any notice,
complaint or order alleging any actual or prospective violation of any
environmental, health or safety Requirement of Law or alleging
responsibility for costs of a cleanup, together with a copy of such
notice, complaint, or order and a written statement describing any
action being taken with respect thereto by such Borrower or Subsidiary.
(E) MATERIAL CONTRACTS. Promptly, and in any event
within ten (10) Business Days after any Material Contract of
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any Borrower or any Subsidiary of any Borrower is terminated or amended
or any new Material Contract is entered into, a written statement
describing such event, with copies of amendments or new contracts, and
an explanation of any actions being taken with respect thereto.
(F) COLLATERAL MATTERS. At least thirty (30) Business
Days prior written notice to the Agent of any additional location of
any Collateral of any Borrower or in the location of the chief
executive office or places of business of any Borrower or any
Subsidiary of any Borrower from the respective locations specified in
SCHEDULE B, PART 6.9. At least twenty (20) Business Days prior to any
such change, the Borrowers shall cause to be executed and delivered to
the Agent any financing statements or other documents reasonably
required by the Agent, all in form and substance reasonably
satisfactory to the Agent.
7.4 CORPORATE EXISTENCE.
Each Borrower shall, and shall cause each of its Subsidiaries to, (I)
maintain its corporate existence, (II) maintain in full force and effect all
licenses, bonds, franchises, leases, trademarks and qualifications to do
business, and all patents, contracts and other similar rights necessary or
advisable for the profitable conduct of their businesses, (III) continue in, and
limit their operations to, the same general lines of business as presently
conducted by them and (IV) in the case of a Borrower, maintain all material
terms and provisions of its corporate charter and bylaws in the form in effect
on the Closing Date.
7.5 BOOKS AND RECORDS; INSPECTIONS.
Each Borrower agrees to maintain, and to cause each of its Subsidiaries
to maintain, books and records pertaining to the Collateral in such detail, form
and scope as is consistent with good business practice. Each Borrower agrees
that the Agent and its agents, may enter upon the premises of such Borrower or
any of its Subsidiaries at any time and from time to time, during normal
business hours and upon reasonable notice under the circumstances, and at any
time at all upon the occurrence and during the continuance of an Event of
Default, for the purposes of (I) inspecting and verifying the Collateral, (II)
inspecting and/or copying (at the expense of such Borrower) any and all records
pertaining thereto, and (III) discussing the affairs, finances and business of
such Borrower with any officers, employees and directors of such Borrower or,
upon reasonable notice to such Borrower of its intention to do so, with the
Auditors.
7.6 INSURANCE.
Each Borrower agrees to maintain, and to cause each of its Subsidiaries
to maintain, public liability insurance, fire and extended coverage insurance
and replacement value insurance on the Collateral under such policies of
insurance, with such insurance
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companies, in such amounts and covering such risks as are at all times
satisfactory to the Agent in its commercially reasonable judgment; PROVIDED,
THAT the Agent acknowledges that the insurance coverage maintained by the
Borrowers and disclosed in writing to the Agent, in each case on or prior to the
Closing Date, satisfies the foregoing requirements. All policies covering the
Collateral are to name the Collateral Agent as an additional insured and/or the
loss payee in case of loss, and are to contain such other provisions as the
Agent may reasonably require to fully protect the Collateral Agent's interest in
the Collateral and to any payments to be made under such policies.
7.7 POSTPETITION CHARGES.
(A) Subject to SECTION 7.7(B), each Borrower shall pay and discharge or
cause to be paid and discharged promptly all Postpetition Charges payable by it,
including (i) Postpetition Charges imposed upon it, its income and profits, or
any of its property (real, personal or mixed) and all Postpetition Charges with
respect to tax, social security and unemployment withholding with respect to its
employees, and (ii) lawful claims incurred after the Petition Date for labor,
materials, supplies and services or otherwise, before any thereof shall become
past due.
(B) Each Borrower may in good faith contest, by appropriate
proceedings, the validity or amount of any Postpetition Charges or claims
described in SECTION 7.7(A); PROVIDED THAT (i) at the time of commencement of
any such contest no Event of Default shall have occurred and be continuing; (ii)
adequate reserves with respect to such contest are maintained on the books of
such Borrower, in accordance with GAAP; (iii) such contest is maintained and
prosecuted continuously and with diligence and operates to suspend collection or
enforcement of such Postpetition Charges or claims or any Lien in respect
thereof; (iv) no Lien shall be imposed to secure payment of such Postpetition
Charges or claims other than Permitted Liens; (v) such Borrower shall promptly
pay or discharge such contested Postpetition Charges or claims and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Agent evidence acceptable to Agent of such compliance, payment or discharge,
if such contest is terminated or discontinued adversely to such Borrower or the
conditions set forth in this SECTION 7.7(B) are no longer met; and (vi) Agent
has not advised Borrowers in writing that Agent reasonably believes that
nonpayment or nondischarge thereof could have or result in a Material Adverse
Effect.
7.8 COMPLIANCE WITH LAWS.
Each Borrower agrees to comply, and to cause each of its Subsidiaries
to comply, in all material respects with all Requirements of Law applicable to
the Collateral or any part thereof, or to the operation of its business or its
assets generally, unless such Borrower contests any such Requirements of Law in
a reasonable manner and in good faith.
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7.9 USE OF PROCEEDS.
Each Borrower agrees that the proceeds of the Loans may be used only
for general corporate purposes (including expenses of administration) and for
Permitted Expenses. Notwithstanding the foregoing, no amounts shall be paid or
used pursuant to this SECTION 7.9 for, and Permitted Expenses shall not include,
fees and disbursements incurred by professionals including, without limitation,
any professionals retained by the Borrowers, to the extent incurred to contest
in any proceeding or any other action (a) the validity, binding effect or
enforceability of any of the Credit Documents or the amount of the Loans or the
other Postpetition Obligations outstanding hereunder or (b) any other rights or
interests of the Agent or any Lender under the Credit Documents. Nothing herein
shall in any way prejudice or prevent the Agent or any Lender from objecting,
for any reason, to any requests or applications made by any party for
compensation or reimbursement of expenses pursuant to section 330 or 331 of the
Bankruptcy Code for which the Borrowers may seek to use proceeds of the Loans as
a Permitted Expense.
7.10 FISCAL YEAR.
Each Borrower agrees to maintain, and to cause each of its Subsidiaries
to maintain, its fiscal year as a year ending March 31.
7.11 MAINTENANCE OF PROPERTY.
Each Borrower agrees to keep, and to cause each of its Subsidiaries to
keep, all property useful and necessary to their respective businesses in good
working order and condition (ordinary wear and tear excepted) in accordance with
their past operating practices and not to commit or suffer any waste with
respect to any of their properties.
7.12 ERISA DOCUMENTS.
Each Borrower will cause to be delivered to the Agent, upon the Agent's
request, each of the following: (I) a copy of each Plan (or, where any such plan
is not in writing, complete description thereof) (and if applicable, related
trust agreements or other funding instruments) and all amendments thereto, all
written interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of such Borrower or any of its
Subsidiaries within two (2) years of the Closing Date; (II) the most recent
determination letter issued by the Internal Revenue Service with respect to each
Benefit Plan; (III) for the three most recent plan years, Annual Reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (IV) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (V) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by such
Borrower or any ERISA Affiliate to each such plan and copies of the collective
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bargaining agreements requiring such contributions; (VI) any information that
has been provided to such Borrower or any ERISA Affiliate regarding withdrawal
liability under any Multiemployer Plan; and (VII) the aggregate amount of the
most recent annual payments made to former employees of such Borrower or any
ERISA Affiliate under any Retiree Health Plan.
7.13 ENVIRONMENTAL AND OTHER MATTERS.
(A) Each Borrower and each of its Subsidiaries will
conduct their businesses so as to comply in all material respects with
all environmental, land use, occupational, safety or health laws,
regulations, directions, ordinances, criteria and guidelines in all
jurisdictions in which any of them is or may at any time be doing
business, except to the extent that such Borrower or such Subsidiary is
contesting, in good faith by appropriate legal proceedings, any such
law, regulation, direction, ordinance, criteria, guideline, or
interpretation thereof or application thereof; PROVIDED, THAT such
Borrower and each of its Subsidiaries shall comply with the order of
any court or other Governmental Authority relating to such laws unless
such Borrower or such Subsidiary shall currently be prosecuting an
appeal or proceedings for review and shall have secured a stay of
enforcement or execution or other arrangement postponing enforcement or
execution pending such appeal or proceedings for review.
(B) If the Agent reasonably believes, or the Majority
Lenders reasonably believe, that the facts or circumstances evidence or
suggest that any Borrower or any Subsidiary of any Borrower is in
material non compliance with any environmental law and that such non
compliance could reasonably be expected to have a Material Adverse
Effect, then at the written request of the Agent or the Majority
Lenders, which request shall specify in reasonable detail the basis
therefor, at any time and from time to time, such Borrower will provide
at its sole cost and expense a Phase I or Phase II environmental site
assessment report or update report concerning the site owned, operated
or leased by such Borrower or such Subsidiary in respect of which such
material non compliance is believed to have occurred and be continuing,
such report to be prepared by an environmental consulting firm approved
by the Agent and the Majority Lenders, indicating the presence, release
or absence of hazardous materials on or from such site and the
potential cost of any removal, remedial or corrective action in
connection with any such hazardous materials on such site.
7.14 RESTORATION AND REPAIR OF BORROWERS' REAL PROPERTY.
Upon receipt of insurance or other proceeds of any Casualty Loss, the
Borrowers shall, insofar as is reasonably practicable, promptly commence and
diligently continue to restore, repair and rebuild the property subject to such
Casualty Loss as nearly as possible to its value, condition and character
immediately prior to such Casualty Loss and in the event such restoration,
repair and
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rebuilding are not practicable, the Borrowers shall promptly invest an amount at
least equal to such proceeds in substitute or replacement fixed assets of like
or greater value, which shall be subjected to the Lien of the Mortgages, and/or
the other applicable Collateral Documents; PROVIDED, THAT in the case of
Casualty Losses affecting properties held under capital leases such restoration,
repair or replacement shall be subject to all of the terms of such leases; and
FURTHER PROVIDED that the Borrowers may elect to apply proceeds of a Casualty
Loss to satisfaction of any Liens on the property subject thereto prior to the
Lien of the Collateral Documents (including, in the case of property subject to
a capital lease, the Lien of the capital lessor). The Borrowers shall provide
the Lenders with such information with respect to such repair, replacement or
restoration as the Agent may reasonably request. The obligations of the
Borrowers pursuant to this SECTION 7.14 with respect to restoration, repair and
rebuilding are not limited to the amount of Casualty Loss proceeds received by
the Borrowers.
7.15 STORE CLOSINGS.
The Borrowers collectively shall close and cease conducting retailing
operations at no fewer than 20 of the store locations at which the Borrowers
conducted retailing operations on the Petition Date no later than January 31,
1998.
7.16 FURTHER ASSURANCES.
Each Borrower shall take, and shall cause each of its Subsidiaries to
take, all such further actions and execute all such further documents and
instruments as the Agent may at any time determine in its sole discretion to be
necessary or desirable to further carry out and consummate the transactions
contemplated by the Credit Documents, to cause the execution, delivery and
performance of the Credit Documents to be duly authorized and to perfect or
protect the Liens (and the priority status thereof) of the Collateral Agent on
the Collateral.
ARTICLE 8. NEGATIVE COVENANTS.
Until termination of this Credit Agreement and payment and satisfaction
of all Prepetition Obligations and Postpetition Obligations due hereunder, each
Borrower shall comply with, and, where required, shall cause each of its
Subsidiaries to comply with, the following covenants:
8.1 MINIMUM EBITDA.
At the end of each period beginning on the Petition Date and ending on
the last day of each month set forth below, EBITDA for such period shall be an
amount not less than the following:
PERIOD FROM PETITION
DATE TO END OF AMOUNT
-------------------- -------
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October 1997 $(1,800,000)
November 1997 2,700,000
December 1997 4,400,000
January 1997 4,700,000
February 1998 4,700,000
March 1998 5,000,000
8.2 CAPITAL EXPENDITURES.
The Borrowers shall not make payments for Capital Expenditures in the
aggregate for all Borrowers in excess of $5,000,000 during the period from the
Petition Date to and including March 31, 1998.
8.2A ESTABLISHMENT OF CONTINUING FINANCIAL COVENANTS.
The Borrowers and the Lenders intend that the financial covenants set
forth in SECTION 8.1 and 8.2 remain in effect until the Expiration Date, but
have not provided required levels for such covenants beyond March 1998 as of the
Closing Date because the Borrowers have not yet finalized their financial
projections and expectations beyond such date. Therefore, the Borrowers hereby
agree that on or before January 31, 1998, the Borrowers will provide the Agent
and the Lenders with financial forecasts and projections sufficient to enable
the Agent and the Majority Lenders to establish appropriate levels for such
financial covenants for the remaining term of this Credit Agreement, which the
Agent and the Majority Lenders will establish in their reasonable discretion.
8.3 ADDITIONAL INDEBTEDNESS. No Borrower nor any Subsidiary of any
Borrower shall directly or indirectly incur, create, assume or suffer to exist
any Indebtedness other than:
(A) Indebtedness under the Credit Documents;
(B) Indebtedness in the ordinary course of business
under Interest Rate Agreements entered into after the Petition Date in
form and substance satisfactory to the Agent;
(C) intercompany loans and advances permitted pursuant
to SECTION 8.8;
(D) Indebtedness described on SCHEDULE B, PART 8.3;
(E) Indebtedness secured by purchase money Liens on
equipment acquired after the Petition Date not to exceed $2,000,000 in
the aggregate for all of the Borrowers outstanding at any one time
("PURCHASE MONEY LIENS") so long as (I) such Indebtedness shall be from
parties and on terms and conditions satisfactory to the Agent, (II)
each Purchase Money Lien shall attach only to the property to be
acquired, (III) a description shall have been furnished to the Agent
for any item of equipment for which the purchase price is greater than
$100,000, and (IV) the debt incurred shall not exceed one hundred
percent (100%) of the purchase price of the item or items of equipment
purchased;
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(F) Indebtedness and other obligations under the GECC
Account Purchase Agreement, without giving effect to any amendments or
modifications or restatements thereof, or supplements thereto;
(G) Guarantees by any Borrower of the obligations of
any other Borrower incurred after the Petition Date, to the extent
incurred in the ordinary course of business and not otherwise
prohibited hereunder to the extent approved by the Bankruptcy Court;
and
(I) Indebtedness under capital leases incurred after
the Petition Date not to exceed $5,000,000 in the aggregate for all of
the Borrowers outstanding at any one time to the extent approved by the
Bankruptcy Court.
8.4 LIENS.
No Borrower nor any Subsidiary of any Borrower shall directly or
indirectly create, incur, assume, or suffer to exist any Lien on any of its
property now owned or hereafter acquired except:
(A) Liens granted to the Collateral Agent under the
Credit Documents;
(B) Liens granted to GECC under the GECC Account
Purchase Agreement;
(C) Liens listed on SCHEDULE B, PART 8.4;
(D) Purchase Money Liens and the interest of lessors
under capital leases permitted under SECTION 8.3 to the extent
approved by the Bankruptcy Court;
(E) Liens of warehousemen, mechanics, materialmen,
workers, repairmen, common carriers, or landlords, liens for taxes,
assessments or other governmental charges, and other similar Liens
arising after the Petition Date by operation of law, in each case for
amounts that are not yet due and payable or that are being diligently
contested in good faith by a Borrower or Subsidiary of a Borrower, so
long as the Agent has been notified thereof and adequate reserves are
maintained by such Person for their payment in accordance with GAAP;
(F) Attachment or judgment Liens arising after the
Petition Date not to exceed an aggregate of $1,000,000 for all of the
Borrowers, excluding amounts (I) bonded to the reasonable satisfaction
of the Agent or (II) covered by insurance to the reasonable
satisfaction of the Agent;
(G) Deposits or pledges made after the Petition Date to
secure obligations under workmen's compensation, social security or
similar laws, under unemployment insurance, or to secure public or
statutory obligations not to exceed an aggregate of $1,000,000 for all
Borrowers;
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(H) Deposits or pledges made after the Petition Date to
secure bids, tenders, contracts (other than contracts for the payment
of money), leases, statutory obligations, surety and appeal bonds and
other obligations of like nature arising in the ordinary course of
business not to exceed an aggregate of $1,000,000 for all Borrowers;
(I) Easements, rights-of-way, restrictions and other
similar encumbrances on title to, or restrictions on the use of, real
property, that, in the aggregate, do not materially detract from the
value of the item of property subject thereto or materially interfere
with the ordinary conduct of the business of any Borrower or any
Subsidiary of any Borrower and all title exceptions under the title
policies delivered to the Prepetition Collateral Agent under the
Prepetition Credit Agreements in respect of the Borrowers' real
property; and
(J) Extensions and renewals of any of the foregoing so
long as the aggregate amount of extended or renewed Liens are not
increased and are on terms and conditions no more restrictive than the
terms and conditions of the Liens extended or renewed.
8.5 CONTINGENT OBLIGATIONS.
No Borrower nor any Subsidiary of any Borrower shall directly or
indirectly incur, assume, or suffer to exist any Contingent Obligation,
excluding Contingent Obligations for Indebtedness permitted to be incurred under
SECTION 8.3, and Investments permitted under SECTION 8.8.
8.6 SALE OF ASSETS.
Notwithstanding any other provision of this Credit Agreement no
Borrower shall, or shall permit any of its Subsidiaries to, directly or
indirectly, sell, lease, assign, transfer or otherwise dispose of any assets
other than (to the extent not prohibited by the Bankruptcy Code) (I) GECC
Accounts pursuant to the GECC Account Purchase Agreement, (II) Inventory in the
ordinary course of business; (III) sales or other dispositions of real estate
(including without limitation leasehold estates) or other fixed assets for cash
or Cash Equivalents and for not less than fair market value so long as such sale
is approved by the Bankruptcy Court, (IV) obsolete or worn out property disposed
of in the ordinary course of business; and (V) to any Borrower.
8.7 RESTRICTED PAYMENTS.
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, (A) declare or pay any dividend (other than dividends payable
solely in capital stock of such Person) on, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of capital stock of such Person or any warrants, options or rights to
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purchase any such capital stock, whether now or hereafter outstanding, or make
any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of such Person or any of its
Subsidiaries; (B) make any optional payment or optional prepayment on or
optional redemption (including, without limitation, by making payments to a
sinking or analogous fund) or optional repurchase of any Indebtedness (other
than Indebtedness pursuant to this Credit Agreement); PROVIDED, THAT,
notwithstanding the foregoing:
(I) any Borrower may make payments or prepayments on
account of Indebtedness owing to any other Borrower;
(II) any Borrower may prepay or redeem Indebtedness of
the type described in SECTIONS 8.3(E) OR (I), PROVIDED, THAT, in each
case, (A) such Indebtedness is paid in full, (B) effective upon
repayment of such Indebtedness, such Borrower acquires title to any
property or assets encumbered thereby and (C) concurrently with such
prepayment, such property is subjected to a first priority perfected
Lien thereon in favor of the Collateral Agent;
(III) any Subsidiary of a Borrower may declare and pay
dividends to such Borrower or any Subsidiary of such Borrower;
(IV) LFC may make distributions to LFI to permit LFI to
pay postpetition Federal, state and local income taxes attributable to
LFC and its Subsidiaries; PROVIDED, THAT such distributions do not
exceed actual payments by LFI for postpetition Federal, state and local
income taxes; and
(V) so long as before and after giving effect thereto
no Default or Event of Default shall have occurred and be continuing,
LFC may make distributions to LFI to permit LFI to pay its franchise
taxes and reasonable administrative expenses (including reasonable
professional fees and expenses); PROVIDED, THAT the aggregate amount of
all such distributions shall not exceed $250,000 in any fiscal year of
the Consolidated Entity.
8.8 INVESTMENTS.
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, make any Investment in any Person, whether in cash, securities,
or other property of any kind including, without limitation, any Subsidiary or
Affiliate of any Borrower, other than:
(A) Advances or loans made in the ordinary course of business
not to exceed $500,000 outstanding at any time to any one Person and
$1,000,000 in the aggregate outstanding at any one time;
(B) Loans, investments and advances between such
Borrower and any other Borrower;
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(C) Cash Equivalents;
(D) Loans, investments and advances between LFC and LFI, in an
aggregate amount, when added to the aggregate amount of distributions
made by LFC to LFI pursuant to SECTIONS 8.7(IV) and (V), not exceeding
the amount permitted to be distributed by LFC to LFI pursuant thereto;
(E) Investments in account debtors received in
connection with the bankruptcy or reorganization, or in settlement of
delinquent obligations of customers, in the ordinary course of business
and in accordance with applicable collection and credit policies
established by such Borrower or such Subsidiary, as the case may be;
(F) Deposits permitted pursuant to SECTION 8.11; and
(G) Such other Investments as the Agent may approve in
writing in the exercise of its sole discretion.
8.9 AFFILIATE TRANSACTIONS.
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, enter into any transaction with (including, without limitation,
the purchase, sale or exchange of property or the rendering of any service to)
any Subsidiary or Affiliate of any Borrower, except in the ordinary course of
and pursuant to the reasonable requirements of such Borrower's or such
Subsidiary's business, as the case may be, and upon fair and reasonable terms no
less favorable in any material respect to such Borrower or such Subsidiary than
could be obtained in a comparable arm's-length transaction with an unaffiliated
Person, except for transactions between or among Borrowers, to the extent not
otherwise prohibited under the Credit Documents, and transactions otherwise
permitted under SECTIONS 8.7 and 8.8;
8.10 ADDITIONAL BANK ACCOUNTS.
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, open, maintain or otherwise have any checking, savings or other
accounts at any bank or other financial institution, or any other account where
money is or may be deposited or maintained with any Person, other than the
Disbursement Account, payroll accounts, accounts satisfying the requirements of
SECTION 8.11 and the depositary accounts set forth on SCHEDULE B, PART 8.10
(each a "DEPOSITARY ACCOUNT") with the respective banks (each a "DEPOSITARY
BANK") indicated.
8.11 EXCESS CASH.
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, maintain in deposit accounts (other than the Disbursement
Account, the Depository Accounts, subject to the daily transfer requirements set
forth in SECTION 4.9, and payroll accounts), cash balances and Investments in
excess of $500,000 in
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the aggregate for all Borrowers, at any time during which any Revolving Loans
are outstanding hereunder.
8.12 ADDITIONAL NEGATIVE PLEDGES.
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective,
(A) any prohibition or restriction (including any agreement to provide equal and
ratable security to any other Person in the event a Lien is granted to or for
the benefit of the Agent and the Lenders) on the creation or existence of any
Lien upon the assets of such Borrower or any of its Subsidiaries; or (B) any
contractual obligation which may restrict or inhibit the Collateral Agent's
rights or ability to sell or otherwise dispose of the Collateral or any part
thereof after the occurrence of an Event of Default, other than (I) Permitted
Liens, (II) Indebtedness permitted to be incurred under SECTION 8.3(D), (III)
restrictions set forth in the GECC Account Purchase Agreement, (IV) restrictions
consisting of customary non-assignment provisions in contracts which restrict
the assignment of such contracts or the Borrowers' interest thereunder, (V) any
restriction on the transfer of an asset pursuant to an agreement to sell such
asset to the extent such sale would be permitted under the terms hereof, and
(VI) restrictions on pledge or transfer of assets subject to Indebtedness
permitted under SECTION 8.3(E) or (I).
8.13 ADDITIONAL SUBSIDIARIES.
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, form or acquire any new Subsidiaries.
8.14 CHANGES TO CERTAIN DOCUMENTS.
No Borrower shall, or shall permit any of its Subsidiaries to, amend,
restate, supplement or otherwise modify (I) the GECC Account Purchase Agreement
and (II) any of the Note Documents.
8.15 RETURNS TO VENDORS.
No Borrower shall enter into any agreement to return any inventory to
any of its creditors for application against any Prepetition Indebtedness under
section 546(g) of the Bankruptcy Code, unless, after full performance of any
such agreement, no Default or Event of Default would occur as a result thereof,
and in no event shall the book value of such inventory exceed $2,000,000 in the
aggregate.
8.16 RECLAMATION CLAIMS.
No Borrower shall return goods to vendors pursuant to reclamation
claims unless ordered to do so by the Bankruptcy Court and unless, after giving
effect to any such return, no Default or Event of Default would occur as a
result thereof (and in no event shall the book value of such goods exceed
$2,000,000 in the
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aggregate), and no Borrower shall pay administrative priority claims on account
of reclamation claims prior to the indefeasible payment in full of all
Postpetition Obligations and Prepetition Obligations.
8.17 APPLICATION TO THE BANKRUPTCY COURT.
No Borrower shall apply to the Bankruptcy Court for authority to (a)
take any action that is prohibited by the terms of this Credit Agreement or the
other Loan Documents, (b) refrain from taking any action that is required to be
taken by the terms of this Credit Agreement or the other Credit Documents or (c)
permit any Indebtedness or claim to be pari passu with or senior to the
Postpetition Obligations, except, prior to the occurrence of an Event of
Default, for Permitted Prepetition Claim Payments and, after the occurrence of
an Event of Default, Permitted Expenses may be senior to the Postpetition
Obligations.
8.18 MODIFICATIONS TO INTERIM FINANCING ORDER OR PERMANENT
FINANCING ORDER.
(A) No Borrower shall consent to any amendment, supplement or
other modification of any of the terms or provisions contained in, or applicable
to the Interim Financing Order of the Permanent Financing Order.
(B) No Borrower shall make any Permitted Prepetition Claim
Payments after the occurrence and during the continuance of a Default or an
Event of Default.
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES.
9.1 EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an event
of default (each an "EVENT OF DEFAULT") hereunder:
(a) FAILURE TO PAY. The Borrowers shall fail to pay any
Postpetition Obligations in respect of principal of or interest on the
Loans, in each case when the same shall become payable, or shall fail
to pay, within two (2) days after the same shall become payable, any
other amount due under this Credit Agreement or any of the other Credit
Documents.
(b) BREACH OF CERTAIN COVENANTS. Any Borrower shall
fail to comply with any covenant contained in ARTICLE 7 (other than
SECTION 7.4, 7.8, 7.11, 7.12 OR 7.13) or ARTICLE 8.
(c) BREACH OF REPRESENTATION OR WARRANTY. Any
representation or warranty made or deemed to be made by the LFC Funds
Administrator or any Borrower in this Credit Agreement or in any other
Credit Document (and in any statement or certificate given under this
Credit Agreement or any other Credit Document), shall be false or
misleading in any material respect when made or deemed to be made.
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(d) BREACH OF OTHER COVENANTS. The LFC Funds
Administrator or any Borrower shall fail to comply with any covenant
contained in this Credit Agreement or any other Credit Document, other
than as set forth in SECTION 9.1(B), and such failure shall continue
for fifteen (15) days after its occurrence.
(e) DISSOLUTION. Except for the merger or consolidated
of such Borrower with any other Borrower, any Borrower shall
dissolve, wind up or otherwise cease its business.
(F) CHANGE OF CONTROL. A Change of Control shall occur.
(G) DEFAULT UNDER GECC ACCOUNT PURCHASE AGREEMENT. Any
default or breach by any Borrower shall occur and be continuing under
the GECC Account Purchase Agreement or the GECC Account Purchase
Agreement shall be terminated for any reason.
(H) BANKRUPTCY COURT APPROVAL OF GECC ACCOUNT PURCHASE
AGREEMENT. (i) An interim order authorizing assumption of the GECC
Account Purchase Agreement in form and substance satisfactory to the
Lenders has not been entered by the Bankruptcy Court on or prior to the
date the Permanent Financing Order is entered, or the interim order of
the Bankruptcy Court authorizing assumption of the GECC Account
Purchase Agreement is reversed, modified, amended or stayed in any
respect, or (ii) a Final Order authorizing assumption of the GECC
Account Purchase Agreement in form and substance satisfactory to the
Lenders has not been entered by the Bankruptcy Court on or prior to
October 15, 1997.
(I) FAILURE OF ENFORCEABILITY OF CREDIT DOCUMENTS;
SECURITY. Any covenant, agreement or obligation of any Borrower
contained in or evidenced by any of the Credit Documents shall cease to
be enforceable, or shall be determined to be unenforceable, in
accordance with its terms; any Borrower shall deny or disaffirm its
obligations under any of the Credit Documents or any Liens granted in
connection therewith; or, any Liens granted in any of the Collateral
shall be determined to be void, voidable, invalid or unperfected, are
subordinated or not given the priority contemplated by this Credit
Agreement and the Postpetition Collateral Agency Agreement.
(J) MATERIAL ADVERSE EFFECT. There shall occur any event that
would have a Material Adverse Effect that has not been stayed as a
consequence of the Chapter 11 cases of the Borrowers; PROVIDED,
HOWEVER, no event disclosed by the Projections shall be deemed to have
a Material Adverse Effect if the effect of such event is not
substantially different than reflected in the Projections.
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(K) APPOINTMENT OF TRUSTEE. The Bankruptcy Court shall enter
an order appointing a trustee under section 1104(a) of the Bankruptcy
Code in any Credit Party's chapter 11 case.
(L) BANKRUPTCY COURT ORDERS. (i) The Interim Financing Order
shall cease to be in full force and effect and the Permanent Financing
Order shall not have been entered prior to such cessation, or (ii) the
Permanent Financing Order shall not have been entered by the Bankruptcy
Court on or before October 5, 1997 or (iii) the Permanent Financing
Order shall fail to contain findings, binding on all parties in
interest (including any statutorily appointed committees) that (x) all
Prepetition Obligations are valid and enforceable against the
Borrowers, (y) all Liens granted by the Borrowers to secure the
Prepetition Obligations are valid, enforceable and fully perfected, and
(z) the liquidation value of the Collateral that was pledged to secure
the Prepetition Obligations exceeds the outstanding amount of the
Prepetition Obligations and that, upon the granting of the Replacement
Liens (as defined in the Interim Financing Order) the liquidation value
of the collateral securing the Prepetition Obligations exceeds the
aggregate amount of the sum of the Prepetition Obligations plus the
aggregate amount of all additional credit made available to Borrowers
under this Credit Agreement (including Collateral pledged to secure
both Prepetition Obligations and Postpetition Obligations) exceeds the
aggregate amount of the Commitments; or (iv) from and after the date of
entry thereof, the Permanent Financing Order shall cease to be in full
force and effect, or (v) any Borrower shall fail to comply with the
terms of the Interim Financing Order or the Permanent Financing Order
in any material respect, or (vi) the Interim Financing Order or the
Permanent Financing Order shall be amended, supplemented, stayed,
reversed, vacated or otherwise modified (or any of the Borrowers shall
apply for authority to do so).
(M) APPOINTMENT OF EXAMINER. The Bankruptcy Court shall enter
an order appointing a responsible officer or an examiner with powers
beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy
Code under section 1106(b) of the Bankruptcy Code, in any Borrower's
chapter 11 case.
(N) PLAN OF REORGANIZATION. The Bankruptcy Court shall enter
an order confirming a Plan of Reorganization in either Borrower's
chapter 11 case and such Plan of Reorganization shall have been
consummated.
(O) OTHER CLAIMS. There shall arise any other Claim having
priority senior to or pari passu with the claims of the Lenders under
the Credit Documents or any other claim having priority over any and
all administrative expenses of the kind specified in section 503(b) or
507(b) of the Bankruptcy Code (other than Permitted Expenses), or there
shall arise any Lien on any property of any Borrower, except as
expressly permitted under the terms of the Loan Documents.
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(P) CONVERSION OF CHAPTER 11 CASE. The Bankruptcy Court shall
enter an order converting any Credit Party's chapter 11 case to a case
under chapter 7 of the Bankruptcy Code or dismissing any Borrower's
chapter 11 case.
9.2 REMEDIES.
(A) SUSPENSION OF ADDITIONAL CREDIT. If any Event of
Default shall have occurred and be continuing or if a Default shall
have occurred and be continuing and the Agent or Majority Lenders shall
have determined not to make any Loans (other than the Term Loan
automatically incurred pursuant to ARTICLE 2A) or incur any Letter of
Credit Obligations so long as that specific Default is continuing, the
Agent may (and at the written request of the Majority Lenders shall),
without notice, suspend the ability of the Borrowers under this Credit
Agreement to borrow any further Loans and/or to incur any further
Letter of Credit Obligations whereupon any further Loans and Letter of
Credit Obligations shall be made or extended in the Agent's sole
discretion (or in the sole discretion of the Majority Lenders, if such
suspension occurred at their direction) so long as such Default or
Event of Default is continuing.
(B) TERMINATION AND ACCELERATION. If any Event of
Default shall have occurred and be continuing, the Agent may (and at
the written request of the Majority Lenders shall) immediately (i)
terminate the ability of the Borrowers under this Credit Agreement to
borrow any further Loans or to incur any further Letter of Credit
Obligations; (ii) declare all or any portion of the Postpetition
Obligations, including all or any portion of any Loan to be immediately
due and payable, and require that the Letter of Credit Obligations be
cash collateralized as provided in SECTION 9.2(C), all without
presentment, demand, protest or further notice of any kind, all of
which are expressly waived by the Borrowers; and (iii) exercise any
rights and remedies provided to the Agent under the Credit Documents
and/or at law or equity; PROVIDED THAT the Agent may not exercise any
of the rights and remedies referred to in clause (iii) above without
first providing the Borrowers, the United States Trustee and counsel
for any statutorily appointed committee four (4) Business Days' prior
written notice of its intent so to exercise.
(C) CASH COLLATERALIZATION. If any Event of Default
shall have occurred and be continuing, on demand of the Agent or the
Majority Lenders, the Borrowers shall immediately deposit with the
Agent for each Letter of Credit then outstanding cash or Cash
Equivalents in an amount equal to 110% of the greatest amount drawable
thereunder. Such deposit shall be held by the Agent and used to
reimburse the Issuing Bank for the amount of each drawing made under
such Letters of Credit, as and when each such drawing is made.
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(D) AUTOMATIC STAY. Upon the occurrence and during the
continuation of an Event of Default, after four (4) business days
written notice by the Agent to the Borrowers, the automatic stay
provided by section 362 of the Bankruptcy Code shall be deemed
automatically vacated without further order of the Bankruptcy Code and
the Lenders shall be immediately permitted to, INTER ALIA, pursue any
and all of their remedies against the Credit Parties and seek payment
in respect of all Postpetition Obligations and Prepetition Obligations.
9.2A ACCELERATION OF POSTPETITION OBLIGATIONS IN RESPECT OF
TERM LOANS.
Upon the occurrence and during the continuance of any Event of Default
under (I) SECTION 8.6 or (II) SECTION 9.1(A), by reason of the Borrowers'
failure to make any payment of interest on the Term Loan when the same shall
become payable, then, without prejudice to the rights of the Agent or Term
Lender to enforce its claims against the Borrowers, upon the written request of
the Term Lenders and by delivery of written notice to the LFC Funds
Administrator from the Agent, all Postpetition Obligations in respect of the
Term Loan shall be immediately due and payable without presentment, demand,
protest or any other action or obligation of the Agent or any Term Lender;
PROVIDED, THAT, (x) notwithstanding the foregoing, the Term Lenders may not
accelerate the maturity of the Term Loan pursuant to this SECTION 9.2A if and
for so long as the Revolving Lenders shall not be receiving distributions of
their respective allocated shares of interest on the Revolving Loans pursuant to
SECTION 2.4(B) and (y) notwithstanding any acceleration of the Postpetition
Obligations in respect of the Term Loan pursuant to this SECTION 9.2A or any
other provision of this Credit Agreement or any other Credit Document, no
amounts shall be distributed to the Term Lenders in respect of the principal of
the Term Loan if no Actionable Default has occurred and is continuing until all
Postpetition Obligations owing to the Revolving Lenders have been indefeasibly
paid in full and the Revolving Commitments have been terminated.
9.3 RIGHT OF SETOFF.
In addition to and not in limitation of all rights of offset that any
Lender may have under applicable law, upon the occurrence and during the
continuance of any Event of Default, and regardless whether any Lender has made
any demand of the Postpetition Obligations and/or Prepetition Obligations of any
Borrower have matured, each Lender shall have the right to appropriate and apply
to the payment of the Postpetition Obligations and/or Prepetition Obligations of
such Borrower all deposits and other obligations then or thereafter owing by
such Lender to such Borrower. Each Lender exercising such rights shall notify
the Agent thereof and any amount received as a result of the exercise of such
rights shall be shared by the Lenders in accordance with Section 4 of the
Prepetition Collateral Agency Agreement.
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9.4 APPLICATION OF PROCEEDS; SURPLUS; DEFICIENCIES.
The net cash proceeds resulting from the Agent's exercise of any of the
foregoing rights against any Collateral (after deducting all of the Agent's
Expenses related thereto) shall be applied by the Agent to the payment of the
Postpetition Obligations and/or Prepetition Obligations, whether due or to
become due, in the order set forth in SECTION 4.11. The Borrowers shall remain
liable to the Agent and the Lenders for any deficiencies, and the Agent and the
Lenders in turn agree to remit to the Borrowers or its successors or assigns,
any surplus resulting therefrom.
ARTICLE 10. THE AGENT.
10.1 APPOINTMENT OF AGENT.
(A) Each Lender hereby designates BTCC as Agent to act
as herein specified. Each Lender hereby irrevocably authorizes, and
each holder of any Note, by the acceptance of such Note, shall be
deemed irrevocably to authorize the Agent to take such action on its
behalf under the provisions of this Credit Agreement and the other
Credit Documents and any other instruments and agreements referred to
herein and therein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto. The Agent may perform any
of its duties hereunder by or through its agents or employees.
(B) Other than the Borrowers' rights under SECTION
10.9, the provisions of this ARTICLE 10 are for the benefit of the
Agent and the Lenders only and none of the Borrowers or any other
Persons shall have any rights as a third party beneficiary of any of
the provisions hereof. In performing its functions and duties under
this Credit Agreement and the other Credit Documents, the Agent shall
act only for the Lenders and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or trust
with or for any Lender or Borrower.
10.2 NATURE OF DUTIES OF AGENT.
The Agent has no duties or responsibilities except those expressly set
forth in the Credit Documents. Neither the Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
hereunder or in connection herewith, unless caused by its or their gross
negligence or willful misconduct. The duties of the Agent shall be mechanical
and administrative in nature; the Agent shall not have by reason of this Credit
Agreement or any of the other Credit Documents a fiduciary relationship in
respect of any Lender or any participant of any Lender; and nothing in this
Credit Agreement or any other Credit Document, expressed or implied, is intended
to or shall be
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so construed as to impose upon the Agent any obligations in respect of this
Credit Agreement or any other Credit Document, except as expressly set forth
herein or therein.
10.3 LACK OF RELIANCE ON AGENT.
(A) Independently and without reliance upon the Agent,
each Lender, to the extent it deems appropriate, has made and shall
continue to make (I) its own independent investigation of the financial
or other condition and affairs of each Borrower in connection with the
taking or not taking of any action in connection herewith and (II) its
own appraisal of the creditworthiness of each Borrower, and, except as
expressly provided in this Credit Agreement, the Agent shall have no
duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the
Loans or at any time or times thereafter.
(B) The Agent shall not be responsible to any Lender
for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing
delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, priority or
sufficiency of this Credit Agreement or any of the other Credit
Documents or the financial or other condition of any Borrower. The
Agent shall not be required to make any inquiry concerning either the
performance or observance of any other terms, provisions or conditions
of this Credit Agreement or any of the other Credit Documents, or the
financial condition of any Borrower, or the existence or possible
existence of any Default or Event of Default, unless specifically
requested to do so in writing by any Lender.
10.4 CERTAIN RIGHTS OF THE AGENT.
The Agent shall have the right to request instructions from the Lenders
by notice to each of such Lenders. If the Agent shall request instructions from
the Lenders with respect to any act or action (including the failure to act) in
connection with this Credit Agreement, the Agent shall be entitled to refrain
from such act or taking such action unless and until the Agent shall have
received instructions from such Lenders, and the Agent shall not incur liability
to any Person by reason of so refraining. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting hereunder in accordance with the
instructions of the requisite Lenders required to give such instructions
hereunder. The Agent may give any notice required under ARTICLE 9 hereof without
the consent of any of the Lenders unless otherwise directed by the Majority
Lenders in writing and will, at the direction of the Majority Lenders, give any
such notice required under ARTICLE 9.
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10.5 RELIANCE BY AGENT.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement, certificate,
telex, teletype or telecopier message, cablegram, radiogram, order or other
documentary, facsimile or telephone message believed by it to be genuine and
correct and to have been signed, sent or made by the proper person. The Agent
may consult with legal counsel (including counsel for the Borrowers with respect
to matters concerning the Borrowers), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
10.6 INDEMNIFICATION OF AGENT.
To the extent the Agent is not reimbursed and indemnified by the
Borrowers, each Lender will reimburse and indemnify the Agent, in proportion to
its voting percentage from time to time as a Lender hereunder, for and against
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in performing its duties hereunder, in any way
relating to or arising out of this Credit Agreement; PROVIDED, THAT no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct.
10.7 THE AGENT IN ITS INDIVIDUAL CAPACITY.
With respect to its obligation to lend under this Credit Agreement, the
Revolving Loans made by it and the Revolving Notes issued to it and its
participation in Letters of Credit issued hereunder, the Agent shall have the
same rights and powers hereunder as any other Revolving Lender or holder of a
Revolving Note or participation interests and may exercise the same as though it
was not performing the duties specified herein; and the terms "Revolving
Lenders," "Lenders," "Majority Lenders," "holders of Revolving Notes," or any
similar terms shall, unless the context clearly otherwise indicates, include the
Agent in its individual capacity. The Agent may accept deposits from, lend money
to, acquire equity interests in, and generally engage in any kind of banking,
trust, financial advisory or other business with any Borrower or any Affiliate
of any Borrower as if it were not performing the duties specified herein, and
may accept fees and other consideration from any Borrower for services in
connection with this Credit Agreement and otherwise without having to account
for the same to the Lenders.
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10.8 HOLDERS OF NOTES.
The Agent may deem and treat the payee of any Note as the owner thereof
for all purposes hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any request, authority or
consent of any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Note, shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
10.9 SUCCESSOR AGENT.
(a) The Agent may, upon five (5) Business Days' notice
to the Revolving Lenders and the LFC Funds Administrator, resign at any
time (effective upon the appointment of a successor Agent pursuant to
the provisions of this SECTION 10.9) by giving written notice thereof
to the Lenders and the LFC Funds Administrator. Upon any such
resignation, the Majority Lenders shall have the right, upon five (5)
days' notice and approval by the LFC Funds Administrator (which
approval shall not be unreasonably withheld or delayed), to appoint a
successor Agent. If no successor Agent shall have been so appointed by
the Majority Lenders and accepted such appointment, within thirty (30)
days after the retiring Agent's giving of notice of resignation, then,
upon five (5) days' notice and approval by the LFC Funds Administrator
(which approval shall not be unreasonably withheld or delayed), the
retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a bank or a trust company or other financial
institution which maintains an office in the United States, or a
commercial bank organized under the laws of the United States of
America or of any State thereof, or any Affiliate of such bank or trust
company or other financial institution which is engaged in the banking
business, having a combined capital and surplus of at least
$500,000,000.
(b) Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Credit Agreement
and the other Credit Documents. After any retiring Agent's resignation
hereunder as Agent, the provisions of this ARTICLE 10 shall inure to
its benefit as to any actions taken or omitted to be taken by it while
it was Agent under or in connection with this Credit Agreement.
10.10 COLLATERAL MATTERS.
(a) Each Lender hereby agrees, and each holder of any
Note by the acceptance thereof will be deemed to agree, that, except as
otherwise set forth herein or in the other Credit
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Documents, any action taken by the Majority Lenders in accordance with
the provisions of this Credit Agreement and the other Credit Documents,
and the exercise by the Majority Lenders of the powers set forth herein
or therein, in a manner consistent herewith and therewith, together
with such other powers as are reasonably incidental thereto, shall be
authorized and binding upon all of the Lenders. The Agent is hereby
authorized on behalf of all of the Lenders, without the necessity of
any notice to or further consent from any Lender to take any action
with respect to any Collateral or Collateral Documents that may be
necessary to perfect and maintain the perfection of the Liens upon the
Collateral granted pursuant to the Collateral Documents.
(B) The Lenders hereby authorize the Agent, at its
option and in its discretion, to release any Lien granted to or held by
the Agent upon any Collateral (I) upon termination of the Commitments
and payment and satisfaction of all of the Postpetition Obligations and
Prepetition Obligations at any time arising under or in respect of this
Credit Agreement or the other Credit Documents or secured by the
Collateral Documents or the transactions contemplated hereby or thereby
or (II) if approved, authorized or ratified in writing by the Majority
Lenders, unless such release is required to be approved by all of the
Lenders pursuant to SECTION 11.11. Upon request by the Agent at any
time, the Lenders will confirm in writing the Agent's authority to
release particular types or items of Collateral pursuant to this
SECTION 10.10.
(C) The Agent shall have no obligation whatsoever to
the Lenders or to any other Person to assure that the Collateral exists
or is owned by any Borrower or is cared for, protected or insured or
that the Liens granted to the Collateral Agent in or pursuant to any of
the Collateral Documents have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise or to continue exercising at all or
in any manner or under any duty of care, disclosure or fidelity any of
the rights, authorities and powers granted or available to the Agent in
this SECTION 10.10 or in any of the Collateral Documents, it being
understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it
may deem appropriate permitted by the Credit Documents, in its sole
discretion, given the Agent's own interest in the Collateral as one of
the Lenders and that the Agent shall have no duty or liability
whatsoever to the Lenders, except for its gross negligence or willful
misconduct. The Agent agrees to conduct or cause to be conducted at
least one audit of the Collateral during each year that this Credit
Agreement shall remain in effect.
10.11 ACTIONS WITH RESPECT TO DEFAULTS. In addition to the Agent's
right to take actions on its own accord as permitted under this Credit
Agreement, the Agent shall take such action with
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respect to a Default or Event of Default as shall be directed by the Majority
Lenders; PROVIDED, THAT until the Agent shall have received such directions, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable and in the best interests of the Lenders.
10.12 DELIVERY OF INFORMATION. The Agent shall not be required to
deliver to any Lender originals or copies of any documents, instruments,
notices, communications or other information received by the Agent from the LFC
Funds Administrator, any of the Borrowers, or any Subsidiary of any of the
Borrowers, the Majority Lenders, any Lender or any other Person under or in
connection with this Credit Agreement or any other Credit Document except (I) as
specifically provided in this Credit Agreement or any other Credit Document,
(II) copies of appraisals after receipt thereof by the Agent and (III) as
specifically requested from time to time in writing by any Lender with respect
to a specific document, instrument, notice or other written communication
received by and in the possession of the Agent at the time of receipt of such
request and then only in accordance with such specific request.
ARTICLE 11. MISCELLANEOUS.
11.1 GOVERNING LAW.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS CREDIT AGREEMENT
AND EACH OF THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS AND DECISIONS OF THE STATE OF NEW YORK.
11.2 SUBMISSION TO JURISDICTION.
ALL DISPUTES AMONG THE BORROWERS AND THE LENDERS (OR THE AGENT OR LFC
FUNDS ADMINISTRATOR, RESPECTIVELY, ACTING ON THEIR BEHALF), WHETHER SOUNDING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY THE UNITED STATES
BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE AND THE COURTS TO WHICH AN APPEAL
THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE AGENT AND THE COLLATERAL
AGENT, ON BEHALF OF THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, TO PROCEED AGAINST ANY BORROWER OR ITS RESPECTIVE PROPERTIES
IN ANY LOCATION REASONABLY SELECTED BY SUCH PERSON IN GOOD FAITH TO ENABLE SUCH
PERSON TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF SUCH PERSON. THE LFC FUNDS ADMINISTRATOR AND EACH OF THE
BORROWERS AGREE THAT NONE OF SUCH PERSONS WILL ASSERT ANY PERMISSIVE
COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE AGENT OR
THE COLLATERAL AGENT. THE LFC FUNDS ADMINISTRATOR AND EACH OF THE BORROWERS
WAIVE ANY OBJECTION THAT ANY OF SUCH PERSONS MAY HAVE TO THE LOCATION OF THE
COURT IN WHICH THE AGENT OR THE COLLATERAL AGENT HAS COMMENCED A PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
FORUM NON CONVENIENS.
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11.3 SERVICE OF PROCESS.
THE LFC FUNDS ADMINISTRATOR AND THE BORROWERS EACH IRREVOCABLY
DESIGNATE CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633
BROADWAY; NEW YORK, NEW YORK 10019, AS ITS AGENT TO RECEIVE FOR AND ON BEHALF OF
SUCH PERSON SERVICE OF PROCESS IN THE STATE OF NEW YORK. THE LFC FUNDS
ADMINISTRATOR AND THE BORROWERS EACH FURTHER IRREVOCABLY AGREE THAT SERVICE OF
PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS CREDIT AGREEMENT
OR ANY OTHER CREDIT DOCUMENT MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED MAIL, POSTAGE PREPAID, TO THE LFC FUNDS ADMINISTRATOR AT ITS ADDRESS
SET FORTH IN SECTION 11.7 AND AGREE THAT SUCH SERVICE, TO THE FULLEST EXTENT
PERMITTED BY LAW, (I) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON IT IN ANY SUCH LEGAL ACTION OR PROCEEDING AND (II) SHALL BE TAKEN
AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO IT. NOTHING
HEREIN CONTAINED SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
11.4 JURY TRIAL.
THE LFC FUNDS ADMINISTRATOR, THE BORROWERS, THE AGENT AND THE LENDERS
EACH HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE
RESOLVED IN A BENCH TRIAL.
11.5. LIMITATION OF LIABILITY.
NEITHER THE AGENT NOR ANY LENDER SHALL HAVE ANY LIABILITY TO ANY
BORROWER (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED
BY SUCH BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO
THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS CREDIT AGREEMENT, OR ANY
ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON THE
AGENT OR ANY SUCH LENDER, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11.6 DELAYS.
No delay or omission of the Agent or the Lenders to exercise any right
or remedy hereunder shall impair any such right or operate as a waiver thereof.
11.7 NOTICES.
Except as otherwise provided herein, all notices and correspondences
hereunder shall be in writing and sent by certified or registered mail, return
receipt requested, or by overnight delivery service, with all charges prepaid,
if to the Agent or any of the Lenders, then to BT Commercial Corporation, 233
South Wacker Drive, Chicago, Illinois 60606, Attention: Credit Department, if to
the LFC Funds Administrator or any Borrower, then to Levitz Furniture
Corporation at 6111 Broken Sound Parkway, N.W., Boca Raton, Florida 33487-2799
Attention: Edward P. Zimmer, Esq., Vice President and General Counsel, or by
facsimile transmission,
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promptly confirmed in writing sent by first class mail, if to the Agent, or any
of the Lenders, at (312) 993-8096 and if to the LFC Funds Administrator or any
Borrower at (561) 998-5615 or (407) 998- 5615. All such notices and
correspondence shall be deemed given (I) if sent by certified or registered
mail, three Business Days after being postmarked, (II) if sent by overnight
delivery service, when received at the above stated addresses or when delivery
is refused and (III) if sent by telex or facsimile transmission, when receipt of
such transmission is acknowledged.
11.8 ASSIGNMENTS AND PARTICIPATIONS.
(A) BORROWER ASSIGNMENT. Neither the LFC Funds
Administrator nor any of the Borrowers shall have any right to
assign this Credit Agreement, or any rights or obligations
hereunder, without the prior written consent of the Agent and
the Lenders.
(B) OPTIONAL REVOLVING LENDER ASSIGNMENTS. Each
Revolving Lender may assign to one or more banks or other financial
institutions all or a portion of its rights and obligations under this
Credit Agreement, the Revolving Notes and the other Credit Documents,
with the consent of the Agent; and upon execution and delivery to the
Agent, for its acceptance and recording in the Register, of an
agreement in substantially the form of EXHIBIT G-1 (a "REVOLVING
ASSIGNMENT AND ASSUMPTION AGREEMENT"), together with surrender of any
Revolving Note or Revolving Notes subject to such assignment and a
processing and recordation fee of $2,500, such assignment shall be
effective and ANNEX I hereto shall be deemed to be modified
accordingly. No such assignment shall be for less than $10,000,000 or
such lesser amount as the Agent may reasonably agree of the Revolving
Commitments unless it is to another Revolving Lender or is an
assignment of all of such Revolving Lender's rights and obligations
under this Credit Agreement. (This SECTION 11.8(B) does not apply to
branches and Affiliates of a Revolving Lender, it being understood that
a Revolving Lender may make, carry or transfer Revolving Loans at or
for the account of any of its branch offices or Affiliates without
consent of the Borrowers, the Agent or any other Revolving Lender.)
(C) TERM LENDER ASSIGNMENT. Each Term Lender may assign
to one or more Persons all or a portion of its rights and obligations
under this Credit Agreement, the Term Notes and the other Credit
Documents, with the consent of the Agent, which consent shall not be
unreasonably withheld or delayed; and upon execution and delivery to
the Agent, for its acceptance and recording in the Register, of an
agreement in substantially the form of EXHIBIT G-2 (a "TERM ASSIGNMENT
AND ASSUMPTION AGREEMENT"), together with surrender of any Term Note or
Term Notes subject to such assignment and a processing and recordation
fee of $2,500, such assignment shall be effective, the Borrowers shall
issue a replacement Term Note or Term Notes to such Person or Persons
who thereupon shall be
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a Term Lender or Term Lenders for all purposes hereunder to the extent
of the Term Note or Term Notes so issued and ANNEX II hereto shall be
deemed to be modified accordingly. No such assignment shall be for less
than $10,000,000 or such lesser amount as the Agent may reasonably
agree of the Term Commitments unless it is to another Lender or is an
assignment of all of such Term Lender's rights and obligations under
this Credit Agreement.
(D) AGENT'S REGISTER. The Agent shall maintain a
register of the names and addresses of the Lenders, their Commitments,
and the principal amount of their Loans (the "REGISTER") at the address
specified for the Agent in SECTION 11.7. The Agent shall also maintain
a copy of each Assignment and Assumption Agreement delivered to and
accepted by it, and each notice delivered to it of any assignments of
rights and obligations of a Term Lender (a "TERM NOTICE") and modify
the Register to give effect to each Assignment and Assumption
Agreement. Upon its receipt of each Assignment and Assumption Agreement
or Term Notes and surrender of the affected Note or Notes, the Agent
will give prompt notice thereof to the LFC Funds Administrator and
deliver to the LFC Funds Administrator a copy of the Assignment and
Assumption Agreement or Term Notice and the surrendered Note or Notes.
Within five Business Days after its receipt of such notice, the
Borrowers shall execute and deliver to the Agent a substitute Note or
Notes to the order of the assignee in the amount of the Commitment or
Commitments assumed by it and to the assignor in the amount of the
Commitment retained by it, if any. Such substitute Note or Notes shall
re-evidence the Indebtedness outstanding under the surrendered Note or
Notes and shall be dated as of the Closing Date. The Agent shall be
entitled to rely upon the Register exclusively for purposes of
identifying the Lenders hereunder. The Register shall be available for
inspection by the Borrowers and the Lenders (or any of them) at any
reasonable time and from time to time upon reasonable notice to the
Agent.
(E) PARTICIPATIONS. Each Lender may sell participations
(without the consent of the Agent, the Borrowers or any other Lender)
to one or more parties in or to all or a portion of its rights and
obligations under this Credit Agreement, the Notes and the other Credit
Documents. Notwithstanding a Lender's sale of a participation interest,
its obligations hereunder shall remain unchanged. The Borrower, the
Agent, and the other Lenders shall continue to deal solely and directly
with such Lender. No participant shall have rights to approve any
amendment or waiver of this Credit Agreement or any of the other Credit
Documents except to the extent such amendment or waiver would (I)
increase the participant's obligation in respect of the Commitment of
the Lender from whom the participant purchased its participation
interest; (II) reduce the principal of, or stated rate or amount of
interest on, the Loans subject to such participation, (III) postpone
any maturity date fixed for final payment of
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principal of the Loans subject to the participation interest, and (IV)
release any guarantor of the Postpetition Obligations or all or a
substantial portion of the Collateral, other than when otherwise
permitted hereunder.
11.9 CONFIDENTIALITY.
Each Lender agrees that it will use its reasonable best efforts not to
disclose without the prior consent of the Borrowers any information with respect
to any of the Borrowers or any Subsidiary of any of the Borrowers that is
furnished pursuant to this Credit Agreement and which is designated by the
respective Borrowers to the Lenders in writing as confidential, PROVIDED, THAT,
each Lender may disclose any such information (A) to its employees, auditors, or
counsel, or to another Lender if the disclosing Lender or such disclosing
Lender's holding or parent company in its sole discretion determines that any
such party should have access to such information, (B) as has become generally
available to the public, (C) as may be required or appropriate in any report,
statement or testimony submitted to any Governmental Authority having or
claiming to have jurisdiction over such Lender, (D) as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation, (E) to comply with any Requirement of Law, and (F) so long as prior
to such disclosure such prospective or actual transferee or participant has
agreed to preserve the confidentiality of such information on terms
substantially similar to those set forth in the SECTION 11.9 or on terms
otherwise satisfactory to the LFC Funds Administrator, to any such prospective
or actual transferee or participant in connection with any contemplated transfer
or participation of any of the Notes or Commitments or any interest therein by
such Lender.
11.10 INDEMNIFICATION.
The Borrowers hereby jointly and severally indemnify and agree to defend
and hold harmless the Agent and each of the Lenders and their respective
directors, officers, agents, employees and counsel from and against any and all
losses, claims, damages, liabilities, deficiencies, judgments or expenses
incurred by any of them (except to the extent that it is finally judicially
determined to have resulted from their own gross negligence or willful
misconduct) arising out of or by reason of (A) any litigations, investigations,
claims or proceedings which arise out of or are in any way related to (I) this
Credit Agreement or the transactions contemplated hereby, (II) the issuance of
the Letters of Credit, (III) the failure of the Issuing Bank to honor a drawing
under any Letter of Credit, as a result of any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto government or
Governmental Authority, (IV) any actual or proposed use by any Borrower of the
proceeds of the Loans or (V) the Agent's or the Lenders' entering into this
Credit Agreement, the other Credit Documents or any other agreements and
documents relating hereto, including, without limitation, amounts paid in
settlement, court costs and the fees and disbursements of counsel incurred in
connection with any such litigation, investigation, claim or
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proceeding or any advice rendered in connection with any of the foregoing and
(B) any remedial or other action taken by any of the Borrowers or any of the
Lenders in connection with compliance by any of the Borrowers or any Subsidiary
of any of the Borrowers, or any of their respective properties, with any
federal, state or local environmental laws, acts, rules, regulations, orders,
directions, ordinances, criteria or guidelines.
Without limiting the generality of the foregoing, the Borrowers and
their Subsidiaries shall jointly and severally protect, indemnify, and hold
harmless the Agent, and the Lenders from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including without limitation reasonable attorneys'
and consultants' fees and disbursements) imposed upon or incurred by or asserted
against the Agent or the Lenders (collectively, a "CLAIM") by reason of (A) the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Substance in, on, under, from or
affecting any property owned, leased, or occupied by any Borrower or Subsidiary
or from any third party owned site at which such Borrower or Subsidiary has
disposed or arranged for the disposal of Hazardous Substances; (B) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of such Hazardous Substance; (C) any lawsuit brought or threatened,
settlement reached, or government order arising out of such Hazardous Substance;
and (D) any violation of Environmental Law, which are based upon or in any way
related to such Hazardous Substance including, without limitation, the costs and
expenses of any remedial, removal, or response work, reasonable attorney and
consultant fees and disbursements, investigation and laboratory fees, court
costs, and litigation expenses.
11.11 AMENDMENTS AND WAIVERS.
No amendment or waiver of any provision of this Credit Agreement, any
part of SCHEDULE B, or any other Credit Document shall be effective unless in
writing and signed by the Majority Lenders (or by the Agent on their behalf),
except that:
(A) the consent of all the Lenders is required to (I)
increase the respective Revolving Commitments or Term Commitments, (II)
reduce the principal of, or interest on, any Note, any Letter of Credit
reimbursement obligations or any Fees hereunder (other than Fees that
are exclusively for the account of the Agent), (III) postpone any date
fixed for any payment in respect of principal of, or interest on, any
Note, any Letter of Credit reimbursement obligations or any Fees
hereunder, (IV) change the percentage of the Commitments, or any minimum
requirement necessary for the Lenders or the Majority Lenders to take
any action hereunder, (V) amend or waive this SECTION 11.11(a), or
change the definition of Majority Lenders or (VI) except as otherwise
expressly provided in this Credit Agreement, and other than in
connection with the financing, refinancing, sale or other disposition of
any asset
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<PAGE>
of a Borrower permitted under this Credit Agreement, release any Liens
in favor of the Collateral Agent on any of the Collateral.
(B) the consent of the Majority Term Lenders is
required, in addition to the consent of the Lenders otherwise required
by this SECTION 11.11, for any amendment or waiver (I) of this SECTION
11.11(b), (ii) with respect to any provision of any Collateral Document
or any Mortgage that permits the sale of any interest in real estate or
releases a Lien on any interest on real estate created thereby, or
allows the creation of any other Lien that is senior to or pari passu
with any Lien in favor of the Collateral Agent except in each case as
specifically permitted in this Credit Agreement as of the Closing Date,
(iii) ARTICLE 2A and SECTION 2.7, 4.1A, 4.5(b), 4.7A, 4.9(b), 4.11, 6.7,
7.14, 8.6, 8.17(c), 9.2A, 9.2(b) or 11.8(c) or (e), of this Credit
Agreement and (iv) any defined term used in any of the preceding
sections if the effect of any such amendment or waiver is to alter the
substantive rights and benefits provided to the Term Lenders by such
sections in a manner that materially and adversely affects the rights
and benefits, taken as a whole, of the Term Lenders under this Credit
Agreement with respect to the Term Loan.
(c) The consent of the Agent shall be required for any
amendment, waiver or consent affecting the rights or duties of the Agent
under any Credit Document, in addition to the consent of the Revolving
Lenders otherwise required by this SECTION 11.11.
The consent of the LFC Funds Administrator and the Borrowers shall not
be required for any amendment, modification or waiver of the provisions of
ARTICLE 10 (other than SECTION 10.9). The LFC Funds Administrator, the Borrowers
and the Revolving Lenders each hereby authorize the Agent to modify this Credit
Agreement by unilaterally amending or supplementing ANNEX I to reflect
assignments of the Revolving Commitments. Notwithstanding the foregoing, the
Borrowers may amend SCHEDULE B, PART 6.1, without the consent of the Majority
Lenders.
11.12 COUNTERPARTS AND EFFECTIVENESS.
This Credit Agreement and any waiver or amendment hereto may be executed
in any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. This
Credit Agreement shall become effective on the date on which all of the parties
hereto shall have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Agent.
11.13 SEVERABILITY.
In case any provision in or obligation under this Credit Agreement, the
Notes or the other Credit Documents shall be
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invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
11.14 MAXIMUM RATE. Notwithstanding anything to the contrary
contained elsewhere in this Credit Agreement or in any other Credit Document,
the Borrowers, the Agent, and the Lenders hereby agree that all agreements among
them under this Credit Agreement and the other Credit Documents, whether now
existing or hereafter arising and whether written or oral, are expressly limited
so that in no contingency or event whatsoever shall the amount paid, or agreed
to be paid, to the Agent or any Lender for the use, forbearance, or detention of
the money loaned to the Borrowers and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstance whatsoever,
fulfillment of any provisions of this Credit Agreement or any of the other
Credit Documents at the time performance of such provision shall be due shall
exceed the Highest Lawful Rate, then, automatically, the obligation to be
fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance any
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied pursuant to the terms hereof to the reduction of the principal amount
then outstanding hereunder or on account of any other outstanding Postpetition
Obligations or Prepetition Obligations and not to the payment of interest, or if
such excessive interest exceeds the principal unpaid balance then outstanding
hereunder and such other outstanding Postpetition Obligations or Prepetition
Obligations, such excess shall be refunded to the Borrowers. All sums paid or
agreed to be paid to the Agent or any Lender for the use, forbearance, or
detention of the Postpetition Obligations or Prepetition Obligations and other
Indebtedness of the Borrowers to the Agent or any Lender, to the extent
permitted by applicable law, shall be amortized, prorated, allocated and spread
throughout the full term of such Indebtedness, until payment in full thereof, so
that the actual rate of interest on account of all such Indebtedness does not
exceed the Highest Lawful Rate throughout the entire term of such Indebtedness.
The terms and provisions of this SECTION 11.14 shall control over every other
provision of this Credit Agreement, the other Credit Documents, and all
agreements among the Borrower, the Agent and the Lenders.
11.15 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS.
This Credit Agreement and the other Credit Documents constitute the
entire agreement among the Borrowers, the Agent and the Lenders, supersede any
prior agreements among them, and shall bind and benefit each of such Persons and
their respective successors and permitted assigns.
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<PAGE>
11.16 JOINT AND SEVERAL LIABILITY OF BORROWERS.
Each of the Borrowers shall be jointly and severally liable hereunder
and under each of the other Credit Documents with respect to all Postpetition
Obligations, regardless of which of the Borrowers actually receives the proceeds
of the Loans or the benefit of any other extensions of credit hereunder or the
manner in which the LFC Funds Administrator, the Borrowers, the Agent or the
Lenders account therefor in their respective books and records. Notwithstanding
the foregoing, (A) each Borrower's obligations and liabilities with respect to
proceeds of Loans that it receives or Letters of Credit issued for its account,
and related fees, costs and expenses, and (B) its obligations and liabilities,
arising as a result of the joint and several liability of the Borrowers
hereunder, with respect to proceeds of Loans received by, or Letters of Credit
issued for the account of, any of the other Borrowers hereunder, together with
the related fees, costs and expenses, shall be separate and distinct
obligations, both of which are primary obligations of such Borrower. Neither the
joint and several liability of, nor the Liens granted to the Collateral Agent
under the Collateral Documents by, any of the Borrowers shall be impaired or
released by any action or inaction on the Agent's or any Lender's part, or any
other event or condition with respect to any other Borrower, including any such
action or inaction or other event or condition, that might otherwise constitute
a defense available to, or a discharge of, such other Borrower, or a guarantor
or surety of or for any or all of the Postpetition Obligations or Prepetition
Obligations.
11.17 PREPETITION LENDER CONSENTS.
Each Lender, in its capacity as a Prepetition Lender, hereby consents to
LFR, LFC Midwest Realty, LFC Washington Realty, LFC Pacific Realty and JMS
Realty becoming Borrowers and incurring Postpetition Obligations under this
Credit Agreement and granting Liens under the Credit Documents.
[The remainder of this page is intentionally left blank]
88
<PAGE>
IN WITNESS WHEREOF, the respective parties hereto have caused this
Credit Agreement to be executed and delivered by their duly authorized officers
as of the date first set forth above.
LFC FUNDS ADMINISTRATOR:
LEVITZ FURNITURE CORPORATION, a Florida
corporation, in its capacity as LFC
Funds Administrator
By: /s/ Patrick J. Nolan
-------------------------------
Title: Vice President
-------------------------------
89
<PAGE>
BORROWERS:
LEVITZ FURNITURE CORPORATION, a Florida
corporation, in its individual capacity
and in its capacity as the LFC Funds
Administrator
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
LEVITZ FURNITURE INCORPORATED, a
Delaware corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
LEVITZ FURNITURE REALTY CORPORATION, a
Florida corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
LEVITZ SHOPPING SERVICE, INC., a Florida
corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
LEVITZ FURNITURE COMPANY OF THE MIDWEST,
INC., a Colorado corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
LEVITZ FURNITURE COMPANY OF THE PACIFIC,
INC., a California corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
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<PAGE>
LEVITZ FURNITURE COMPANY OF WASHINGTON,
INC., a Washington corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
LEVITZ FURNITURE COMPANY OF THE MIDWEST
REALTY, INC. a Colorado corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
LEVITZ FURNITURE COMPANY OF THE PACIFIC
REALTY, INC., a California corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
LEVITZ FURNITURE COMPANY OF WASHINGTON
REALTY, INC., a Washington corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
JOHN M. SMYTH COMPANY, an Illinois
corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
JOHN M. SMYTH REALTY COMPANY, an
Illinois corporation
By: /s/ Patrick J. Nolan
-----------------------------------
Name: Patrick J. Nolan
-----------------------------------
Title: Vice President
-----------------------------------
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<PAGE>
AGENT:
BT COMMERCIAL CORPORATION, in its
capacity as Agent
By: /s/ Wayne D. Hillock
-----------------------------------
Title: Sr. V.P.
-----------------------------------
REVOLVING LENDERS:
BT COMMERCIAL CORPORATION, a Delaware
corporation in its respective capacities
as Revolving Lender and Collateral Agent
By: /s/ Wayne D. Hillock
-----------------------------------
Name: Wayne D. Hillock
-----------------------------------
Title: Sr. V.P.
-----------------------------------
SANWA BUSINESS CREDIT CORPORATION, in
its capacity as Revolving Lender
By: /s/ Michael J. Cox
-----------------------------------
Name: Michael J. Cox
-----------------------------------
Title: Vice President
-----------------------------------
FINOVA CAPITAL CORPORATION, in its
capacity as Revolving Lender
By: /s/ Pete Martinez
-----------------------------------
Name: Pete Martinez
-----------------------------------
Title: Vice President
-----------------------------------
HELLER FINANCIAL, INC., in its capacity
as Revolving Lender
By: /s/ Dwayne L. Coker
-----------------------------------
Name: Dwayne L. Coker
-----------------------------------
Title: V.P.
-----------------------------------
LASALLE NATIONAL BANK, in its capacity
as Revolving Lender
By: /s/ Christopher B. Clifford
-----------------------------------
Name: Christopher B. Clifford
-----------------------------------
Title: Senior Vice President
-----------------------------------
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<PAGE>
CONGRESS FINANCIAL CORPORATION
(CENTRAL), in its capacity as Revolving
Lender
By: /s/ Steven Linderman
-----------------------------------
Name: Steven Linderman
-----------------------------------
Title: Vice President
-----------------------------------
TRANSAMERICA BUSINESS CREDIT
CORPORATION, in its capacity as
Revolving Lender
By: /s/ Matthew N. McAlpine
-----------------------------------
Name: Matthew N. McAlpine
-----------------------------------
Title: Vice President
-----------------------------------
SILVER OAK CAPITAL L.L.C., in its
capacity as Revolving Lender
By: /s/ Jeffrey H. Aronson
-----------------------------------
Name: Jeffery H. Aronson
-----------------------------------
Title: Authorized Signatory
-----------------------------------
TERM LENDER:
SILVER OAK CAPITAL L.L.C., in its
capacity as Term Lender
By: /s/ Jeffrey H. Aronson
-----------------------------------
Name: Jeffrey H. Aronson
-----------------------------------
Title: Authorized Signatory
-----------------------------------
93
EXHIBIT 99.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- - - - - - - - - - - - - - - - x
In re :
Chapter 11
Levitz Furniture :
Incorporated, et al., Case No. 97-1842 (JJF)
:
Jointly Administered
Debtors. :
- - - - - - - - - - - - - - - - x
INTERIM ORDER (I) AUTHORIZING SECURED POST-PETITION
FINANCING ON A SUPER PRIORITY BASIS PURSUANT TO
11 U.S.C. ss.ss. 363 and 364, (II) GRANTING OF
ADEQUATE PROTECTION PURSUANT TO 11 U.S.C. ss. 364
and (III) SCHEDULING A FINAL HEARING
PURSUANT TO BANKRUPTCY RULE 4001(C)
Upon the motion (the "Motion") dated September 5, 1997 of the
above-captioned debtors and debtors in possession (collectively, the "Debtors")
(a) seeking this Court's authorization pursuant to Sections 364(c)(1),
364(c)(2), 364(c)(3) and 364(d)(1) of Title 11 of the United States Code, 11
U.S.C. ss. 101, ET SEQ. (as amended, the "Bankruptcy Code") and Rules 2002,
4001(c) and 9014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy
Rules"), for Levitz Furniture Incorporated ("LFI"), Levitz Furniture Corporation
("LFC"), Levitz
<PAGE>
Furniture Realty Corporation ("LFC Realty"), Levitz Shopping Service, Inc.
("LSS"), Levitz Furniture Company of the Midwest, Inc. ("LFC Midwest"), Levitz
Furniture Company of the Pacific, Inc. ("LFC Pacific), Levitz Furniture Company
of Washington, Inc. ("LFC Washington"), Levitz Furniture Company of the Midwest
Realty, Inc. ("LFC Midwest Realty"), Levitz Furniture Company of the Pacific
Realty, Inc. ("LFC Pacific Realty"), Levitz Furniture Company of Washington
Realty, Inc. ("LFC Washington Realty"), John M. Smyth Company ("JMS"), and John
M. Smyth Realty Company ("JMS Realty") (collectively, the "Borrowers"), to INTER
ALIA, (i) obtain post-petition financing (the "Post-Petition Financing"), up to
an aggregate principal amount not to exceed $260,000,000 less aggregate
outstanding Pre-Petition Obligations (as defined below) (inclusive of a
$25,000,000 sublimit for the issuance of letters of credit) (the "Commitment")
from BT Commercial Corporation ("BTCC"), as agent (in its capacity as agent for
the Lenders referred to below, the "Agent"), and a syndicate of other financial
institutions arranged by BTCC (including BTCC, the "Lenders"), and for the
Borrowers to execute a Credit Agreement with respect to the Post-Petition
Financing (as amended, supplemented or otherwise
2
<PAGE>
modified from time to time, the "Credit Agreement"); and for the Borrowers to
execute revolving credit notes and term notes (the "Notes," and the Credit
Agreement, the Notes, and all ancillary documents at any time executed in
connection therewith, collectively, the "Loan Documents"); (ii) grant the
Lenders, pursuant to Bankruptcy Code ss.ss. 364(c) and 364(d), security
interests in all of the Borrowers' currently owned and after acquired property
to secure the Borrowers' obligations under the Loan Documents; and (iii) grant
the Lenders priority in payment with respect to such obligations over any and
all administrative expenses of the kinds specified in Bankruptcy Code ss.ss.
503(b) and 507(b) other than as described below; (b) seeking this Court's
authorization to provide adequate protection pursuant to Bankruptcy Code ss.ss.
361 and 364(d) to the Pre-Petition Lenders (defined below) with respect to the
priming liens and security interests to be granted pursuant hereto under
Bankruptcy Code ss. 364(d) to secure the Post-Petition Financing; (c) seeking a
preliminary hearing (the "Preliminary Hearing") on the Motion to consider entry
of an interim order pursuant to Bankruptcy Rule 4001 (this "Order") authorizing
the Borrowers to borrow from the Lenders under the Post-Petition Financing
3
<PAGE>
up to an aggregate of $40,000,000 (inclusive of Letters of Credit) over and
above the amount of the Pre-Petition Obligations on the Filing Date (as defined
below), upon the terms and conditions set forth in the Loan Documents and this
Order pending the Final Hearing referred to below; and (d) requesting that a
final hearing (the "Final Hearing") be scheduled by this Court to consider entry
of a final order (the "Final Order") authorizing on a final basis, INTER ALIA,
the Post-Petition Financing; and due and sufficient notice of the Motion under
the circumstances having been given; and the Preliminary Hearing on the Motion
having been held before this Court on September 8, 1997; and upon the entire
record made at the Preliminary Hearing, and this Court having found good and
sufficient cause appearing therefor;
IT IS HEREBY FOUND that:
A. On September 5, 1997 (the "Filing Date"), the Debtors filed
voluntary petitions for relief with this Court under Chapter 11 of the
Bankruptcy Code (the "Chapter 11 Cases"). The Debtors are continuing in
possession of their property, and operating and managing their businesses, as
debtors-in-possession pursuant to Bankruptcy Code ss.ss. 1107 and 1108.
4
<PAGE>
B. This Court has jurisdiction over the Chapter 11 Cases and the Motion
pursuant to 28 U.S.C. ss.ss. 157(b) and 1334. Consideration of the Motion
constitutes a core proceeding as defined in 28 U.S.C. ss. 157(b)(2).
C. Prior to the Filing Date, the Borrowers entered into two Credit
Agreements dated as of July 1, 1996 (as amended, supplemented or otherwise
modified prior to the Filing Date, the "Pre-Petition Credit Agreements" and,
together with collateral and ancillary documents executed in connection
therewith, the "Pre-Petition Loan Documents") with the lenders pursuant thereto
(such lenders, and any successors thereto by assignment or otherwise, the
"Pre-Petition Lenders") and BTCC as agent and collateral agent (the
"Pre-Petition Agent"), providing for loans to the Borrowers in the aggregate
principal amount of $190,000,000 (together with all interest, fees, expenses and
other amounts owing under the Pre-Petition Loan Documents, the "Pre-Petition
Obligations").
D. Without prejudice to the rights of any other party (but subject to
the limitations described in decretal paragraph 19), the Debtors admit that, in
accordance with the terms of the Pre-Petition Loan
5
<PAGE>
Documents, the Borrowers are truly and justly indebted to the Pre-Petition
Lenders, without defense, counterclaim or offset of any kind, and that as of the
Filing Date (i) the Borrowers were liable to the Pre-Petition Lenders in the
aggregate principal amount of approximately $152,912,920.30 in respect of loans
made by the Pre-Petition Lenders to the Borrowers pursuant to the Pre-Petition
Credit Agreements (together with interest accrued and unpaid thereon) and (ii)
the Borrowers were contingently liable to the Pre-Petition Lenders in the
aggregate principal amount of approximately $14,086,796 in respect of letters of
credit issued pursuant to the Pre-Petition Credit Agreements and which remained
outstanding as of the Filing Date.
E. Without prejudice to the rights of any other party (but subject to
the limitations described in decretal paragraph 19), the Debtors further admit
that the Pre-Petition Obligations are secured by valid, perfected, enforceable
and unavoidable liens and security interests granted by the applicable Borrowers
to the Pre-Petition Agent, for the ratable benefit of the Pre-Petition Lenders,
upon and in substantially all of the Borrowers' assets and property (including
the setoff rights described below, the "Pre-Petition Collateral"),
6
<PAGE>
including without limitation, equipment, inventory, accounts receivable, real
property, instruments, chattel paper, general intangibles, contracts, documents
of title, the capital stock of each Borrower that is a subsidiary of LFC, as
well as the capital stock of all subsidiaries of each Borrower (including the
capital stock of Levitz Furniture Realty Corporation, Levitz Furniture Company
of the Midwest Realty, Inc., Levitz Furniture Company of the Pacific Realty,
Inc., Levitz Furniture Company of Washington Realty, Inc., and John M. Smyth
Realty Company, which collectively hold approximately 47 of the Debtors'
leasehold interests) and all other tangible and intangible personal property and
the proceeds and products thereof (but excluding certain assets sold or pledged
to General Electric Capital Corporation ("GECC") pursuant to the Amended and
Restated Account Purchase and Credit Card Program Agreement dated as of May 2,
1994, as amended and restated by the Second Amended and Restated Account
Purchase and Credit Card Program Agreement dated as of September 5, 1997, and
all related documentation (the "GECC Accounts")), and that the value of the
Pre-Petition Collateral on a liquidation basis exceeds the aggregate amount of
the Pre-Petition Obligations. Substantially all cash of the Debtors now
7
<PAGE>
in existence or hereafter acquired constitutes the cash collateral of the
Pre-Petition Lenders within the meaning of Bankruptcy Code ss. 363(a) ("Cash
Collateral"). The Pre-Petition Lenders are entitled, pursuant to Bankruptcy Code
ss.ss. 361 and 364, to adequate protection for the priming liens and security
interests granted hereunder to secure the Post-Petition Financing. Upon the
granting of the Replacement Liens (defined below), the value of the collateral
securing the Pre-Petition Obligations on a liquidation basis is and will exceed
the aggregate amount of the Pre-Petition Obligations even after the
Post-Petition Financing is fully drawn.
F. The Debtors do not have sufficient available sources of working
capital and financing to carry on the operation of their businesses without the
Post-Petition Financing. The ability of the Debtors to pay employees, maintain
business relationships with their vendors and suppliers, to purchase new
inventory and otherwise finance their operations, is essential to the Debtors'
continued viability. In addition, the Debtors' critical need for financing is
immediate. In the absence of the Post-Petition Financing, the continued
operation of the Debtors' businesses would not be possible and serious and
irreparable harm to the Debtors and their
8
<PAGE>
estates would occur. The preservation, maintenance and enhancement of the going
concern value of the Debtors are of the utmost significance and importance to a
successful reorganization of the Debtors under Chapter 11 of the Bankruptcy
Code.
G. Given the Debtors' current financial condition and capital
structure, the Debtors are unable to sustain their operations with the use of
Cash Collateral and are unable to obtain unsecured credit allowable under
Bankruptcy Code ss. 503(b)(1) as an administrative expense. Financing on a
post-petition basis is not otherwise available without the Borrowers granting,
pursuant to Bankruptcy Code ss. 364(c)(1), claims having priority over any and
all administrative expenses of the kinds specified in Bankruptcy Code ss.ss.
503(b) and 507(b), other than as described below, and securing such indebtedness
and obligations with the security interests in and the liens upon the property
described below pursuant to Bankruptcy Code ss.ss. 364(c) and (d).
H. Notice of the Preliminary Hearing and the relief requested in the
Motion has been given to (i) the Office of the United States Trustee; (ii) the
creditors holding the 20 largest unsecured claims against the Debtors; (iii) the
Pre-Petition Lenders and the Pre-
9
<PAGE>
Petition Agent; and (iv) the respective Indenture Trustees for the 13-3/8%
Senior Notes due 1998 and the 9-5/8% Senior Subordinated Notes due 2003, each
issued by LFC. No creditors' committee has been appointed in any of the Chapter
11 Cases. Sufficient and adequate notice under the circumstances of the
Preliminary Hearing and the relief requested in the Motion has been given
pursuant to Bankruptcy Code ss.ss. 102(1), 364(c) and 364(d) and Bankruptcy
Rules 2002 and 4001(c).
I. Based on the record before this Court, it appears that the
Post-Petition Financing has been negotiated in good faith and at arms-length
between the Debtors and the Lenders, and any credit extended, letters of credit
issued and loans made to the Borrowers pursuant to the Credit Agreement shall be
deemed to have been extended, issued or made, as the case may be, in good faith
as required by, and within the meaning of, Bankruptcy Code ss. 364(e).
J. Based on the record before this Court, it appears that the terms of
the Post-Petition Financing are fair and reasonable, reflect the Debtors'
exercise of prudent business judgment consistent with their fiduciary duties,
and are supported by reasonably equivalent value and fair consideration.
10
<PAGE>
K. The Debtors have requested immediate entry of this Order pursuant to
Bankruptcy Rule 4001(c)(2). The permission granted herein to enter into the
Post-Petition Financing and obtain funds thereunder is necessary to avoid
immediate and irreparable harm to the Debtors. This Court concludes that entry
of this Order is in the best interests of the Debtors' respective estates and
creditors as its implementation will, among other things, allow for the flow of
merchandise to the Debtors necessary to sustain the operation of the Debtors'
existing businesses and enhance the Debtors' prospects for successful
reorganization.
Based upon the foregoing findings and conclusions, and upon the record
made before this Court at the Preliminary Hearing, and good and sufficient cause
appearing therefor;
IT IS HEREBY ORDERED that:
1. The Motion is granted, subject to the terms and conditions set forth
in this Order.
2. The Debtors are expressly authorized and empowered to execute and
deliver the Credit Agreement, the Notes and any other Loan Document to be
executed and delivered in connection therewith. The Debtors are authorized to
comply with and perform all of the terms
11
<PAGE>
and conditions contained therein, and the Debtors are directed to repay amounts
borrowed, with interest, to the Lenders in accordance with and subject to the
terms and conditions set forth in the Loan Documents and this Order. The Debtors
are further authorized and directed to pay all facility, commitment and other
fees and expenses, including, without limitation, all reasonable fees and
expenses of professionals engaged by the Agent or any Lender, in accordance with
the terms of the Credit Agreement. All loans made under the Credit Agreement
(the "Loans") and interest thereon, together with all reimbursement and other
obligations in respect of letters of credit issued under the Credit Agreement
("Letters of Credit"), and all fees, costs, expenses, indebtedness, obligations
and liabilities of the Borrowers to the Agent and the Lenders under or in
respect of the Loan Documents and this Order, together with any obligations of
the Debtors to BTCC in its capacity as the principal concentration bank in the
Debtors' cash management system, are hereinafter referred to as the
"Obligations."
3. The Borrowers are expressly authorized to borrow from the Lenders,
on the terms and subject to the conditions set forth in the Loan Documents and
this Order, a total of $40,000,000 of Loans (inclusive of
12
<PAGE>
Letters of Credit) over and above the aggregate amount of the Pre-Petition
Obligations on the Filing Date, pending the Final Hearing. The Debtors are
authorized to use the proceeds of the Loans and to request the issuance of
Letters of Credit, in the operation of the Debtors' businesses, PROVIDED that
the proposed Loan or Letter of Credit is consistent with the terms of the Credit
Agreement and this Order.
4. If an Event of Default (as defined in the Credit Agreement) occurs,
the Agent may, and acting at the direction of the Majority Lenders (as defined
in the Credit Agreement) shall, terminate the Post-Petition Financing (the date
of any such termination, the "Termination Date"), and the automatic stay
pursuant to Bankruptcy Code ss. 362(a) shall be deemed automatically lifted and
modified without further order of this Court (subject to the provisions of
paragraph 13 below), to permit the Agent and the Lenders to exercise any and all
of their rights and remedies under the Credit Agreement, the other Loan
Documents and this Order. Notwithstanding anything herein to the contrary, no
Loans, Letters of Credit, Cash Collateral or any portion of the Carve-Out
(as defined below) may be used to object to or contest in any manner, or raise
any defenses to, the validity,
13
<PAGE>
perfection, priority or enforceability of the Pre-Petition Obligations or the
liens securing the Pre-Petition Obligations, or to assert any claims or causes
of action against the Pre-Petition Lenders, the Pre-Petition Agent, the Lenders
or the Agent.
5. In accordance with Bankruptcy Code ss. 364(c)(1), subject to
Paragraph 7 below, the Obligations shall constitute claims (the "Super-priority
Claims") with priority in payment over any and all administrative expenses of
the kinds specified or ordered pursuant to any provision of the Bankruptcy Code,
including, but not limited to, Bankruptcy Code ss.ss. 105, 326, 328, 330, 331,
503(b), 506(c), 507(a) and 507(b) and shall at all times be senior to the rights
of the Debtors, and any successor trustee or any creditor, in the Chapter 11
Cases or any subsequent proceedings under the Bankruptcy Code. No cost or
expense of administration under Bankruptcy Code ss. 105, 364(c)(1), 503(b),
506(c), 507(b) or otherwise, shall be senior to, or PARI PASSU with, the
Super-priority Claims of the
Lenders arising out of the Obligations, subject only to the Carve-Out (as
hereinafter defined). As long as no unwaived Default or Event of Default (as
each such term is defined in the Credit Agreement) shall have occurred
14
<PAGE>
and be continuing, the Debtors shall be permitted to pay compensation and
reimbursement of expenses allowed and payable under ss.ss. 330 and 331 of the
Bankruptcy Code.
6. As security for the Obligations, and as provided in the Loan
Documents, the Agent and the Lenders shall have and are hereby granted
(effective upon the date of this Order and without the necessity of the
execution by the Borrowers of mortgages, security agreements, pledge agreements,
financing statements or otherwise), valid and perfected, security interests in,
and liens upon (the "Liens"), all present and after-acquired personal and real
property of the Debtors of any nature whatsoever, wherever located, (other than
the GECC Accounts), including, without limitation, all cash contained in any
account maintained by the Borrowers, the proceeds of all causes of action
existing as of the Filing Date, and all real property the title to which is held
by the Borrowers, or possession of which is held by the Borrowers pursuant to a
leasehold interest (collectively with all proceeds and products of any or all of
the foregoing, whether or not the underlying Liens are valid, the "Collateral"),
as follows:
(a) pursuant to Bankruptcy Code ss. 364(c)(2), a first
priority, perfected Lien upon all of the Borrowers' right, title and
15
<PAGE>
interest in, to and under all Collateral that is not otherwise
encumbered by a validly perfected lien or security interest, including
without limitation, all personal and real property (but excluding the
proceeds of all causes of action arising under the Bankruptcy Code);
(b) pursuant to Bankruptcy Code ss. 364(d)(1), a first
priority, senior, priming, perfected Lien upon all of the Borrowers'
right, title and interest in, to and under the Pre-Petition Collateral;
and
(c) pursuant to Bankruptcy Code ss. 364(c)(3), a second
priority, perfected Lien upon all of the Borrowers' right, title and
interest in, to and under all Collateral which is subject to a validly
perfected security interest or lien in existence as of the Filing Date
(other than the Pre-Petition Collateral, which is covered by clause (b)
above) junior to such validity perfected liens or security interests;
PROVIDED HOWEVER that if review of updated title searches on the
Debtors' real property (which review shall be completed prior to the
Final Hearing) reveals the existence of liens, claims or encumbrances
by third parties that the Lenders deem material, the Lenders reserve
the right to either reduce the Commitment or to condition making any
advances under the Post-Petition Financing upon provisions in the Final
Order granting the Lenders Liens upon such real property senior to
any other liens pursuant to section 364(d)(1) of the Bankruptcy Code.
7. Any provision of this Order or the Credit Agreement to the contrary
notwithstanding, the Liens and Super-priority Claims granted to the Agent and
the Lenders pursuant to the Credit Agreement and this Order shall be subject and
subordinate only to (a) following
16
<PAGE>
the occurrence and during the pendency of a Default or an Event of Default, the
payment of allowed professional fees and disbursements incurred by the
professionals retained, pursuant to Bankruptcy Code ss. 327 or 1103(a), by the
Borrowers and any statutory committees appointed in the Chapter 11 Cases, in an
aggregate amount not to exceed $2,000,000 and (b) quarterly fees required to be
paid pursuant to 28 U.S.C. ss. 1930(a)(6) and any fees payable to the Clerk of
the Bankruptcy Court and any agent thereof (collectively, the "Carve-Out");
PROVIDED, however, that the Carve-Out shall not include professional fees and
disbursements incurred in connection with asserting any claims or causes of
action against the Pre-Petition Lenders, the Pre-Petition Agent, the Lenders or
the Agent, including formal discovery proceedings in anticipation thereof,
and/or challenging any lien of the Pre-Petition Agent, the Pre-Petition Lenders,
the Lenders or the Agent. The Borrowers' availability under the Credit Agreement
shall be reduced by the Carve-Out.
8. Consistent with section 506(b) of the Bankruptcy Code, and
as a condition to the Lenders' willingness to extend the Commitment, pursuant to
the Loan Documents, the Borrowers shall pay in cash, monthly,
17
<PAGE>
and otherwise pursuant to the terms and conditions of the Pre-Petition Loan
Documents, all interest due on the Pre-Petition Obligations at the non-default
rate per annum rate set forth in the Pre-Petition Loan Documents (with such
payments to be applied to the payments of interest). To the extent not already
paid, the Debtors are authorized and directed to pay all reasonable
out-of-pocket costs and expenses incurred by the Pre-Petition Agent and the
Pre-Petition Lenders (including, without limitation, the reasonable fees and
disbursements of counsel and any financial consultants advising the Pre-Petition
Agent or the Pre-Petition Lenders) in connection with the enforcement and
protection of the rights of the Pre-Petition Lenders in the Chapter 11 Cases.
9. As adequate protection to the Pre-Petition Agent and Pre-Petition
Lenders for the priming of the Pre-Petition Agent's and Pre-Petition Lenders'
liens by the Liens in favor of the Agent and the Lenders granted in this Order
and the Loan Documents, pursuant to Bankruptcy Code ss. 364(d), the Pre-Petition
Agent and the Pre-Petition Lenders shall be and they hereby are granted
(effective upon the date of this Order and without the necessity of the
execution by the Borrowers of mortgages, security agreements, pledge agreements,
financing
18
<PAGE>
statements or otherwise) valid and perfected, security interests in,
and liens upon (the "Replacement Liens"), all of the Borrowers' right, title and
interest in, to and under the Collateral to secure all Pre-Petition Obligations,
subject only to (x) the Carve-Out, (y) the Liens granted pursuant to this Order
and the Loan Documents to the Agent and the Lenders to secure the Obligations
and (z) any validly perfected liens in existence on the Filing Date which remain
senior (after giving effect to this Order) to the Liens granted to the
Agent and the Lenders pursuant to this Order and the Loan Documents. To the
extent that, notwithstanding the Replacement Liens, the Pre-Petition Obligations
(including, without limitation, interest, fees and expenses accruing after the
Filing Date) become not fully secured, as further adequate protection, the
Pre-Petition Obligations shall be, and hereby are, granted the priority status
set forth in section 507(b) of the Bankruptcy Code, subject only to the
Carve-Out and the Obligations.
10. The Debtors shall not assert a claim under Bankruptcy Code ss.
506(c) for any costs and expenses incurred in connection with the preservation,
protection or enhancement of, or realization by the Agent, the
19
<PAGE>
Lenders, the Pre-Petition Agent or the Pre-Petition Agent or the Pre-Petition
Lenders upon the Collateral or the Pre-Petition Collateral. In no event shall
the Lenders or the Pre-Petition Lenders be subject to the equitable doctrine of
"marshaling" or any other similar doctrine with respect to any Collateral or
Pre-Petition Collateral. Neither the Agent, Pre-Petition Agent, Lenders and the
Pre-Petition Lenders shall be required to file or serve financing statements,
notices of lien or similar instruments which otherwise may be required under
federal or state law in any jurisdiction, or take any action, including taking
possession, to validate and perfect the Liens or Replacement Liens. If, however,
the Agent, any Lender, the Pre-Petition Agent or any Pre-Petition Lender, in
their sole discretion, shall determine to file any such financing statements,
notices of lien or similar instruments, or to otherwise confirm perfection of
such Liens or Replacement Liens, the Debtors are directed to cooperate with and
assist in such process, the stay imposed by Bankruptcy Code ss. 362(a) is hereby
lifted to allow the filing and recording of a certified copy of this Order or
any such financing statements, notices of lien or similar instruments, and
20
<PAGE>
all such documents shall be deemed to have been filed or recorded at the time
of and on the date of this Order.
11. The Debtors are authorized and directed to pay immediately to the
Agent all (a) Cash Collateral and (b) proceeds received from the disposition or
collection of the Pre-Petition Collateral or Collateral. All amounts so received
by the Agent shall be applied in the priorities set forth in Section 4.11 of the
Credit Agreement.
12. As long as any portion of the Obligations remains unpaid, or any
Loan Document remains in effect (not exclusive of Events of Default set forth in
the Credit Agreement) it shall constitute an Event of Default if (a) there shall
be entered any order dismissing any of the Chapter 11 Cases or (b) there shall
be entered in any of the Chapter 11 Cases or any subsequent Chapter 7 case any
order which authorizes under any section of the Bankruptcy Code, including
Bankruptcy Code ss. 105 or 364, (i) the granting of any lien or security
interest in any property of the Debtors in favor of any party other than the
Agent and the Lenders (other than with respect to the GECC Accounts), (ii) the
obtaining of credit or the incurring of indebtedness that is entitled to
super-priority administrative status equal or superior to that
21
<PAGE>
granted to the Agent and the Lenders pursuant to this Order or (iii) authorizing
the use by the Debtor of Cash Collateral, or the Debtors seek any of the
foregoing relief; unless, in connection with any transaction cited in clause
(i), (ii) or (iii) of this Paragraph 12, such order requires that the
Obligations and Pre-Petition Obligations shall first be indefeasibly paid in
full (including cash collateralization of all Letters of Credit).
13. Upon the occurrence of and during the continuance of an Event of
Default, the Agent may, or acting at the direction of the Majority Lenders
shall, exercise rights and remedies and take all or any of the following actions
without further modification of the automatic stay pursuant to Bankruptcy Code
ss. 362 (which is hereby deemed modified and vacated to the extent necessary to
permit such exercise of rights and remedies and the taking of such actions) or
further order of or application to this Court: (a) terminate the Commitment and
thereafter cease to issue Letters of Credit or make Loans to the Borrowers; (b)
declare the principal of and accrued interest, fees and other liabilities
constituting the Obligations to be due and payable; (c) set-off amounts in any
of the Debtors' accounts, maintained with
22
<PAGE>
a Lender or Pre-Petition Lender or otherwise enforce rights against any other
Collateral or Pre-Petition Collateral in the possession of the Agent, the
Lenders, the Pre-Petition Agent or Pre-Petition Lenders; and/or (d) take any
other action or exercise any other right or remedy permitted to the Lenders or
the Pre-Petition Lenders under the Loan Documents or Pre-Petition Loan
Documents, respectively, this Order or by operation of law; PROVIDED, HOWEVER,
that the Agent and the Lenders may take the actions described in clauses (c) or
(d) above only after providing four (4) business days' prior written notice to
the Debtors, the United States Trustee and any statutory committee of unsecured
creditors appointed in the Chapter 11 Cases. The Debtors waive any right to seek
relief under the Bankruptcy Code, including without limitation, under Bankruptcy
Code ss. 105, to the extent any such relief would in any way restrict or impair
the rights and remedies of the Agent, the Pre-Petition Agent, the Lenders or the
Pre-Petition Lenders, set forth in this Order and in the Loan Documents and
Pre-Petition Loan Documents.
14. The Debtors are authorized to perform all acts, and execute and
comply with the terms of such other documents, instruments and agreements in
addition to the
23
<PAGE>
Loan Documents, as the Agent or the Lenders may reasonably require, as evidence
of and for the protection of the Obligations, or which otherwise may be deemed
reasonably necessary by the Agent or the Lenders to effectuate the terms and
conditions of this Order and the Loan Documents. The Debtors, the Agent and the
Lenders are hereby authorized to implement, in accordance with the terms of the
Credit Agreement, any non-material modifications (including without limitation,
any change in the number or composition of the Lenders) of the Credit Agreement
without further order of this Court.
15. Without limiting the rights of access and information afforded the
Agent and the Lenders under the Post-Petition Loan Documents, each of the
Debtors shall be required to afford representatives, agents and/or employees of
the Agent and the Lenders access to such entity's premises and its records in
accordance with the Post-Petition Loan Documents and shall cooperate, consult
with, and provide to such persons all such non-privileged information and
information not subject to a binding confidentiality agreement, as they may
reasonably request.
16. The Borrowers shall be jointly and severally liable for all
Obligations.
24
<PAGE>
17. Having been found to be extending credit, issuing Letters of Credit
and making Loans to the Borrowers in good faith, based on the record before this
Court, the Agent and the Lenders shall be entitled to the full protection of
Bankruptcy Code ss. 364(e) with respect to the Obligations and the Liens created
or authorized by this Order in the event that this Order or any authorization
contained herein is stayed, vacated, reversed or modified on appeal. Any stay
modification, reversal or vacation of this Order shall not affect the validity
of any Obligation of the Debtors to the Agent or the Lenders incurred pursuant
to this Order. Notwithstanding any such stay, modification, reversal or
vacation, all Loans made and all Letters of Credit issued pursuant to this Order
and the Credit Agreement and all Obligations incurred by the Borrowers pursuant
hereto prior to the effective date of such stay, modification, reversal or
vacation shall be governed in all respects by the original provisions hereof and
the Agent, the Lenders, the Pre-Petition Agent and the Pre-Petition Lenders
shall be entitled to all the rights, privileges and benefits, including without
limitation, the security interests and priorities granted herein with respect to
all such Obligations.
25
<PAGE>
18. The provisions of this Order and any actions taken pursuant hereto
shall survive entry of any order which may be entered (a) confirming any plan of
reorganization in any of the Chapter 11 Cases (and, to the extent not satisfied
in full, the Obligations shall not be discharged by the entry of any such order,
or, pursuant to Bankruptcy Code ss. 1141(d)(4), the Borrowers having hereby
waived such discharge); (b) converting any of the Chapter 11 Cases to a Chapter
7 case; or (c) dismissing any of the Chapter 11 Cases, and the terms and
provisions of this Order as well as the Super-priority Claims, Liens and
Replacement Liens granted pursuant to this Order and the Loan Documents shall
continue in full force and effect notwithstanding the entry of such order, and
such Super-priority Claims, Liens and Replacement Liens shall maintain their
priority as provided by this Order until all of the Obligations and all
obligations in respect of the matters set forth in Paragraphs 8 and 9 hereof are
indefeasibly paid in full and discharged.
19. The Lenders' willingness to offer the Commitment and thus to
continue to make the loans under the Credit Agreement and this Order is
contingent upon entry of a final order approving the Post-Petition
26
<PAGE>
Financing, after the Final Hearing, which contains findings by the Court as set
forth in Paragraphs D and E hereof that are binding upon all parties in
interest, including but not limited to, any statutory committee(s) appointed in
these Chapter 11 Cases; PROVIDED, HOWEVER, that any statutory committee shall
have 60 days from its appointment to investigate the validity and protection of
the Lien, securing the Pre-Petition Collateral and any potential claim on the
estates against the Pre-Petition Lenders; failure of such final order to contain
such findings shall constitute an Event of Default and, accordingly, shall
result in the automatic occurrence of the Termination Date.
20. Entry of this Order shall be without prejudice to any and all
rights, remedies, claims and causes of action which the Pre-Petition Agent or
the Pre-Petition Lenders may have against the Debtors or third parties, and
without prejudice to the right of the Pre-Petition Agent and the Pre-Petition
Lenders to seek relief from the automatic stay in effect pursuant to Bankruptcy
Code ss. 362, or any other relief in the Chapter 11 Cases, and the rights of the
Debtors or any other party to oppose any such relief. The provisions of this
Order shall be binding upon and inure to the benefit
27
<PAGE>
of the Agent, the Pre-Petition Agent, the Lenders, the Pre-Petition Lenders, the
Debtors, and their respective successors and assigns, including any trustee or
other fiduciary hereafter appointed in the Chapter 11 Cases as a legal
representative of the Debtors or their estates.
21. Within (3) three business days of entry of this Order, the Debtors
shall mail copies of a notice of the approval of this Order, together with a
copy of this Order, to the parties having been given notice of the Preliminary
Hearing and to any other party which has filed a request for notices with this
Court and to counsel for any statutory committee of unsecured creditors
appointed pursuant to Bankruptcy Code ss. 1102. The notice of approval of this
Order shall state that any party in interest objecting to this Order as a final
order shall file written objections with the United States Bankruptcy Court
Clerk for the District of Delaware no later than 4:00 p.m. on September 30,
1997, which objections shall be served so that the same are received on or
before such date by: (a) Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York 10022, Attn: Sally McDonald Henry, (b) Skadden, Arps,
Slate, Meagher & Flom LLP, One Rodney Square, Wilmington, Delaware 19899-0636,
Attn: Greg M. Galardi; (c) Jones,
28
<PAGE>
Day, Reavis & Pogue, 77 West Wacker, Suite 3500, Chicago, Illinois 60601,
Attn: David S. Kurtz and Timothy R. Pohl, (d) Robinson Silverman Pearce Aronsohn
& Berman, 1290 Avenue of the Americas, New York, New York 10104, Attn: Thomas
Moers Mayer, (e) Kasowitz, Benson, Torres & Friedman LLP, 1301 Avenue of the
Americas, New York, New York 10019-6022, Attn: David M. Friedman, (f) Bayard,
Handelman & Murdoch, P.A., 902 Market Street, 13th Floor, P.O. Box 25130,
Wilmington, Delaware 19899, Attn: Neil B. Glassman, (g) Richards, Layton &
Finger, One Rodney Square, Wilmington, Delaware 19801, Attn:
Thomas L. Ambro and (h) the Office of the United States
Trustee.
22. A final hearing to consider the Motion will be held on October 7,
1997 at 11:00 a.m.
Dated: September 8, 1997
Wilmington, Delaware
/S/ JOSEPH J. FARNAN JR.
----------------------------
UNITED STATES DISTRICT JUDGE
29
SECOND AMENDED AND RESTATED
ACCOUNT PURCHASE AND CREDIT CARD PROGRAM AGREEMENT
by and among
LEVITZ FURNITURE CORPORATION,
LEVITZ FURNITURE COMPANY OF THE MIDWEST, INC.,
LEVITZ FURNITURE COMPANY OF THE PACIFIC, INC.,
LEVITZ FURNITURE COMPANY OF WASHINGTON, INC.,
LEVITZ SHOPPING SERVICE, INC.,
JOHN M. SMYTH COMPANY
and
GENERAL ELECTRIC CAPITAL CORPORATION
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
1. DEFINITIONS................................................................................... 2
2. PURCHASE OF ACCOUNTS.......................................................................... 14
2.1 Exclusivity of Accounts and Indebtedness............................................. 14
2.2 Payment for Indebtedness............................................................. 14
2.3 Fees................................................................................. 14
2.4 RPR Indebtedness..................................................................... 18
2.5 Promotional Service Fees............................................................. 18
3. SERVICING..................................................................................... 20
3.1 GE Capital's Responsibilities........................................................ 20
3.2 GE Capital's Liabilities............................................................. 20
3.3 Finance Charge Rates................................................................. 20
3.4 Records.............................................................................. 20
3.5 Audit................................................................................ 21
4. CONDITIONS PRECEDENT.......................................................................... 21
4.1 Conditions to Each Purchase, Establishment and/or Addition of
Indebtedness......................................................................... 21
5. SECURITY AND OTHER CREDIT TERMS............................................................... 22
5.1 Security Interest.................................................................... 22
5.2 Verification by GE Capital of Accounts............................................... 22
5.3 Receipt of Payments.................................................................. 22
5.4 Insurance............................................................................ 23
5.5 Warranties........................................................................... 23
5.6 Credits and Allowances............................................................... 23
5.7 Notice to GE Capital................................................................. 23
5.8 Further Assurances................................................................... 24
5.9 Attorney-in-Fact..................................................................... 24
5.10 Continued Liabilities................................................................ 24
5.11 GE Capital May Perform............................................................... 25
5.12 Right of Setoff...................................................................... 25
5.13 Payments............................................................................. 25
5.14 Use of Proceeds...................................................................... 25
5.15 Accounting........................................................................... 25
5.16 Access............................................................................... 26
6. LOSS RESERVE ACCOUNT.......................................................................... 26
6.1 Establishment........................................................................ 26
6.2 Credits.............................................................................. 26
6.3 Debits............................................................................... 26
6.4 Termination.......................................................................... 26
i
<PAGE>
7. REPRESENTATIONS AND WARRANTIES OF PARENT AND
OPERATING SUBSIDIARIES........................................................................ 26
7.1 Corporate Existence: Compliance with Law............................................. 26
7.2 Executive Offices.................................................................... 27
7.3 Corporate Power; Authorization; Enforceable Obligations.............................. 27
7.4 Financials........................................................................... 27
7.5 No Default........................................................................... 28
7.6 No Burdensome Restrictions........................................................... 28
7.7 Taxes................................................................................ 28
7.8 ERISA.................................................................................29
7.9 No Litigation........................................................................ 30
7.10 Brokers.............................................................................. 30
7.11 Compliance with Law.................................................................. 30
7.12 Accounts............................................................................. 31
7.13 Information Correct.................................................................. 31
7.14 Title................................................................................ 31
7.15 Treatment of Washington Residents.................................................... 31
8. REPORTS AND NOTICES........................................................................... 31
9. INDEMNIFICATION............................................................................... 33
9.1 Indemnification by Parent and Operating Subsidiaries................................. 33
9.2 Indemnification by GE Capital........................................................ 33
9.3 Defense of Claims.................................................................... 34
9.4 Payment of Indemnified Amounts....................................................... 34
10. AFFIRMATIVE COVENANTS OF PARENT AND OPERATING
SUBSIDIARIES.................................................................................. 35
10.1 Maintenance of Existence and Conduct of Business..................................... 35
10.2 GE Capital's Instructions............................................................ 35
10.3 Books and Records.................................................................... 35
10.4 Litigation........................................................................... 35
10.5 Compliance with Law.................................................................. 35
10.6 Agreements........................................................................... 35
10.7 Employee Plans....................................................................... 36
10.8 Supplemental Disclosure.............................................................. 36
10.9 Use of Proceeds...................................................................... 36
11. NEGATIVE COVENANTS OF PARENT AND OPERATING
SUBSIDIARIES.................................................................................. 36
11.1 Subsidiaries......................................................................... 36
11.2 Adverse Transactions................................................................. 36
11.3 Liens................................................................................ 37
11.4 Sales of Assets...................................................................... 37
11.5 Cancellation of Indebtedness......................................................... 37
11.6 Events of Default.................................................................... 37
11.7 New Locations........................................................................ 37
ii
<PAGE>
11.8 ERISA................................................................................ 37
12. TERM.......................................................................................... 37
12.1 Termination and Renewal.............................................................. 37
12.2 Survival of Obligations Upon Termination............................................. 37
12.3 Termination Fee...................................................................... 38
12.4 Purchase of Accounts................................................................. 38
12.5 Termination Options.................................................................. 39
12.6 Liquidation of Accounts.............................................................. 39
12.7 Purchase of Accounts in Connection with an Acquisition............................... 39
13. EVENTS OF DEFAULT; RIGHTS AND REMEDIES........................................................ 39
13.1 Events of Default.................................................................... 39
13.2 Remedies............................................................................. 41
13.3 Waivers.............................................................................. 42
14. MISCELLANEOUS................................................................................. 42
14.1 Complete Agreement; Modification of Agreement; Sale of
Interest............................................................................. 42
14.2 Fees and Expenses.................................................................... 43
14.3 Changes in Circumstances............................................................. 43
14.4 No Waiver by GE Capital.............................................................. 44
14.5 Remedies............................................................................. 44
14.6 Waiver of Jury Trial................................................................. 44
14.7 Severability......................................................................... 44
14.8 Parties.............................................................................. 45
14.9 Authorized Signature................................................................. 45
14.10 Governing Law; Consent to Jurisdiction................................................. 45
14.11 Notices................................................................................ 45
14.12 Confidentiality........................................................................ 47
14.13 Value Added Programs................................................................... 47
14.14 Payments............................................................................... 47
14.15 Furnishings Agreement.................................................................. 48
14.16 Survival............................................................................... 48
14.17 Section Titles......................................................................... 48
14.18 Counterparts........................................................................... 48
14.19 Monogram Bank Credit Card Program...................................................... 48
14.20 Reorganized Debtors.................................................................... 48
14.21 Effective Date of Agreement............................................................ 48
14.22 Certain Additional Provisions.......................................................... 48
</TABLE>
iii
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBIT A - Form of Approval Order
EXHIBIT B - Form of Certificate
EXHIBIT C - Authorized Signature
SCHEDULE 2.4 - RPR Indebtedness
SCHEDULE 7.2 - Location of Books and Records
SCHEDULE 7.7(a) - Tax Matters
SCHEDULE 7.7(b) - Tax Matters
SCHEDULE 7.8 - ERISA Matters
SCHEDULE 7.9 - Litigation
SCHEDULE 12.7 - Purchase of Accounts in the Event of an
Acquisition
SCHEDULE 14.22 - Provisions Applying During Chapter 11 Cases
iv
<PAGE>
SECOND AMENDED AND RESTATED ACCOUNT
PURCHASE AND CREDIT CARD PROGRAM AGREEMENT
SECOND AMENDED AND RESTATED ACCOUNT PURCHASE AND CREDIT CARD
PROGRAM AGREEMENT (as it may be amended, supplemented or otherwise modified
from time to time, this "Agreement"), dated as of September 5, 1997, by and
among LEVITZ FURNITURE CORPORATION, a Florida corporation with its principal
place of business and chief executive offices located at 6111 Broken Sound
Parkway NW, Boca Raton, Florida 33487, its subsidiary operating corporations,
LEVITZ FURNITURE COMPANY OF THE MIDWEST, INC., a Colorado corporation, LEVITZ
FURNITURE COMPANY OF THE PACIFIC, INC., a California corporation, LEVITZ
FURNITURE COMPANY OF WASHINGTON, INC., a Washington corporation, LEVITZ SHOPPING
SERVICE, INC., a Florida corporation, and JOHN M. SMYTH COMPANY, an Illinois
corporation, all with their principal places of business and chief executive
offices located at 6111 Broken Sound Parkway NW, Boca Raton, Florida 33487, and
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation having its
administrative office located at 260 Long Ridge Road, Stamford, Connecticut
06902.
W I T N E S S E T H :
WHEREAS, on September 5, 1997 (the "Petition Date"), Parent
and Operating Subsidiaries (both as hereinafter defined) commenced Chapter 11
Case Nos. 97-1842-1853 (JJF) (the "Chapter 11 Cases") by filing a voluntary
petition for reorganization under the Bankruptcy Code (as hereinafter defined)
with the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"); and
WHEREAS, Parent and Operating Subsidiaries continue to operate
their businesses and manage their properties as debtors and debtors in
possession pursuant to Section 1107(a) and 1108 of the Bankruptcy Code; and
WHEREAS, Parent and each Operating Subsidiary are engaged in
the business of selling Merchandise (as hereinafter defined) and financing the
credit purchase thereof by Account Debtors (as hereinafter defined) through the
creation of Accounts (as hereinafter defined); and
WHEREAS, Parent and Operating Subsidiaries and GE Capital
entered into that certain Account Purchase Agreement dated as of October 31,
1987, and Amended, Restated and Renamed as of May 2, 1994 as the Account
Purchase and Credit Program Agreement as amended from time to time (the "Prior
Agreement"), pursuant to which Parent and Operating Subsidiaries agreed to sell
and GE Capital agreed to purchase certain Accounts, as more particularly
described therein; and
1
<PAGE>
WHEREAS, GE Capital has agreed, upon the terms and subject to
the conditions hereof, (a) to purchase Accounts and Indebtedness (as hereinafter
defined) from Parent and the Operating Subsidiaries, except that, in the State
of Washington, GE Capital will establish Accounts through Lender Credit Card
Agreements (as hereinafter defined) and add Indebtedness in connection therewith
and (b) to provide certain credit-related services to Parent and the Operating
Subsidiaries, all pursuant to the terms and conditions hereinafter set forth;
and
WHEREAS, to induce GE Capital to make such purchases, offer
Lender Credit Card Agreements and perform such services, all as specified
herein, Parent and the Operating Subsidiaries have made certain undertakings,
covenants, representations, and warranties;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto agree to amend and
restate their agreement to read in its entirety as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Account" shall mean any account, account receivable, other
receivable, contract right, chose in action, general intangible, chattel paper,
instrument, document, note, and proceeds thereof, wherever located, whether now
owned or hereafter acquired by GE Capital, Parent or any Operating Subsidiary,
arising out of the sale of Merchandise by Parent or any Operating Subsidiary to
an Account Debtor pursuant to either a Credit Agreement or a Lender Credit Card
Agreement, together with, in either case, (a) all of the instruments and Account
Documentation evidencing the same, the receivables therefrom (I.E.,
Indebtedness), and the proceeds thereof, (b) all rights as to any Merchandise,
goods, or other property which is represented thereby or is security or
collateral therefor, and (c) all guarantees, claims, security interests, or
other security held by or granted to Parent, any Operating Subsidiary or GE
Capital to secure payment by any Person with respect thereto. "Accounts" shall
include Furnishings Accounts, as such term is defined in the Furnishings
Agreement and Smyth Accounts. For the puposes of the security interests granted
herein, "Accounts" shall include the Loss Reserve Account.
"Account Debtor" shall mean any Person who is or who may
become obligated pursuant to an Account.
"Account Documentation" shall mean any and all documentation
relating to an Account, including, without limitation, applications for
Accounts, Credit Agreements, Lender Credit Card Agreements, sales orders and
finance copies thereof, delivery receipts, billing statements, checks and stubs,
sales slips, and all correspondence, memoranda, magnetic tapes, disks, or
hardcopy formats, or any
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other computer-readable data transmissions or software related thereto, and all
other written material relating to an Account, and the file or other storage
containers in which such documentation is kept.
"Accrual Amount" shall have the meaning assigned to it in
section 2.3(g).
"Active Account" shall mean, for any Settlement Period, an
Account owned by GE Capital which has a positive or negative balance at any time
during such Settlement Period.
"Affiliate" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether beneficially or
as a trustee, guardian, or other fiduciary, any Stock having 15% or more of the
ordinary voting power in the election of directors of such Person, (b) each
Person that controls, is controlled by, or is under common control with, such
Person or any Affiliate of such Person, and (c) each of such Person's officers,
directors, joint venturers, and partners. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract, or otherwise.
"Aggregate Investment" shall mean, at any time during a
Settlement Period, the aggregate of all Indebtedness owned by GE Capital as of
the relevant Billing Date of such Settlement Period.
"Alternate Service Fee" shall have the meaning assigned to it
in Section 2.3(e).
"Applicable Accounts" shall have the meaning assigned to it
in Section 12.4.
"Approval Order" shall mean the order of the Bankruptcy Court
entered in the Chapter 11 Cases upon the Debtors' Emergency Motion for Order
Pursuant to Bankruptcy Code Sections 105, 363 and 365 Authorizing Debtors to
Sell Accounts and Assume Second Amended and Restated Account Purchase and Credit
Card Program Agreement, substantially in the form attached to this Agreement as
Exhibit A, together with all extensions, modifications and amendments thereto.
"Average Net Account Balance" shall mean, on any Settlement
Date, the Aggregate Investment on the relevant Billing Date during the most
recently ended Settlement Period divided by the number of Active Accounts during
such Settlement Period.
"Bad Debt Loss" shall mean the amount of Indebtedness which is
due and uncollected under a Loss Account less any recoveries collected thereon,
such recoveries to be reduced by GE Capital's out-of-pocket expenses (including,
without limitation, collection agency and attorneys' fees) incurred in
collecting such recoveries.
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"Bankruptcy Code" under Title 11 of the United States Code, 11
U.S.C. ss. 101 et seq.
"Bankruptcy Court" shall have the meaning assigned to it in
the first recital.
"Billing Date" shall mean, collectively, those dates during a
Settlement Period as of which Accounts are billed as designated by GE Capital's
Levitz Business Center. All calculations to be performed pursuant to this
Agreement on a "relevant Billing Date" shall be based upon transactions
processed on the various Billing Dates during a Settlement Period.
"Business Day" shall mean any day that is not a Saturday, a
Sunday, or a day on which banks or GE Capital are required or permitted to be
closed in the State of New York.
"Certificate" shall mean a certificate in substantially the
form as Exhibit B annexed hereto.
"Chapter 11 Cases" shall have the meaning assigned to it in
the first recital.
"Charge" shall mean any federal, state, county, city,
municipal, local, foreign, or other governmental (including, without limitation,
PBGC) tax at any time due and payable, levy, assessment, charge, lien, claim, or
encumbrance upon or relating to (a) the Accounts, (b) the Consolidated Group's
employees, payroll, income, or gross receipts, (c) the Consolidated Group's
ownership or use of any of its assets, or (d) any other aspect of the
Consolidated Group's business.
"Closing Date" shall mean October 31, 1987.
"Code" shall mean the Uniform Commercial Code (or similar
personal property security law) of the jurisdiction with respect to which such
term is used, as in effect from time to time.
"Collateral" shall have the meaning assigned to it in Section
5.1.
"Confirmation Order" shall mean the order of the Bankruptcy
Court entered in the Chapter 11 Cases which (i) confirms the Plan of
Reorganization after appropriate notice and hearing and is final and
non-appealable, (ii) finds or otherwise provides that all of the requirements of
Section 1129 of the Bankruptcy Code have been satisfied, and (iii) in the
reasonable judgment of GE Capital, does not adversely affect in any material
manner (a) the validity, enforceability or the continued effect of this
Agreement, the Obligations, the Collateral, the Accounts or the Indebtedness,
(b) the collectibility of the Accounts or the Indebtedness, or (c) any of GE
Capital's rights and remedies under, and the prospective economic benefit to GE
Capital of, this Agreement.
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"Consolidated Group" shall mean and include Parent, each
Operating Subsidiary, each ERISA Affiliate, and each Person that becomes a
Subsidiary of any of the foregoing or whose operations would be required
pursuant to GAAP to be consolidated for financial reporting purposes with any of
such named Persons or such Subsidiaries.
"CPI-U" shall mean the Consumer Price Index for all Urban
Consumers, as published by the United States Department of Labor, or, if such
index shall no longer be published, such similar index as GE Capital may
substitute.
"Credit Agreement" shall mean a revolving credit agreement
between an Account Debtor and Parent or any Operating Subsidiary (including an
agreement between an Account Debtor and Old JMS), including those sold and
assigned by them, pursuant to which an Account Debtor may be permitted to
purchase, from time to time, Merchandise from Parent and/or an Operating
Subsidiary on credit, subject to a finance charge computed from time to time and
includes, without limitation, retail installment credit agreements, revolving
budget agreements, revolving account agreements, and similar agreements.
"Debtors" shall mean the Parent and the Operating Subsidiaries
as debtors and debtors in possession in the Chapter 11 Cases.
"Default" shall mean any event the occurrence of which, with
the passage of time or the giving of notice or both, would, unless cured or
waived, become an Event of Default.
"Eligible Indebtedness" shall mean such Indebtedness as shall
be or shall have been incurred by an Account Debtor as GE Capital, in its sole
discretion, shall deem eligible: (a) for purchase pursuant to Section 2.1(a) in
the case of a Credit Agreement, or (b) for establishment and/or addition
pursuant to Section 2.1(b) in the case of a Lender Credit Card Agreement;
PROVIDED, HOWEVER, that GE Capital shall not materially change its credit
criteria with respect to GE Capital's determination as to the Eligibility of
Indebtedness, except in response to changes in economic conditions or loss
experience; and PROVIDED, FURTHER, that, with respect to all Credit Agreements
pursuant to which Eligible Indebtedness is incurred, they shall be in such form
as GE Capital shall have approved in writing, except that GE Capital's approval
shall be restricted to the form of such Credit Agreements under state and
federal law and shall not in any manner whatsoever relate to the amount or rate
of finance charges or any other financial terms, all of which shall be
established solely by Parent and/or Operating Subsidiaries. GE Capital will not
treat as Eligible Indebtedness: (a) (i) any Indebtedness if any representation
or warranty of Parent or any Operating Subsidiary contained in this Agreement
applicable to Indebtedness has been breached and such breach has a Material
Adverse Effect or (ii) specific Indebtedness if any representation or warranty
of Parent or any Operating Subsidiary contained in this Agreement applicable to
such Indebtedness has been breached; (b) specific Indebtedness if the Account
Debtor with respect to such specific Indebtedness has made a bona fide claim
disputing its liability in any material respect or has made any
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material bona fide claim with respect to any Indebtedness due from such Account
Debtor; (c) specific Indebtedness if, at the time the Account Documentation
relating to such Indebtedness is forwarded to GE Capital, the Account Debtor has
filed a petition for relief under the Bankruptcy Code, made a general assignment
for the benefit of creditors, had filed against it any petition or other
application for relief under the Bankruptcy Code, failed, suspended business
operations, become insolvent, called a meeting of its creditors for the purpose
of obtaining any financial concession or accommodation, or had or suffered a
receiver or a trustee to be appointed for all or a significant portion of its
assets or affairs; or (d) specific Indebtedness if such Indebtedness is the
subject of any claim or setoff by the Account Debtor. The determination as to
whether any Indebtedness is Eligible Indebtedness shall be made as of the date
GE Capital receives and reviews all information required to evaluate
eligibility.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any regulations promulgated pursuant
thereto.
"ERISA Affiliate" shall mean all trades or businesses, whether
or not incorporated, within the commonly controlled or affiliated service group
of Parent which, together with Parent, are treated as a single employer under
IRC ss.414(b), (c), or (m) and shall include each Operating Subsidiary.
"ERISA Event" shall mean (a) any Reportable Event other than a
Reportable Event not subject to the provisions for 30-day notice to the PBGC
under regulations issued under ERISA ss. 4043, (b) the withdrawal by Parent or
any ERISA Affiliate from a Plan during a Plan year in which such Person was a
"substantial employer" (as defined in ERISA ss. 4001(a)(2)), (c) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under ERISA ss. 4041, (d) the institution of proceedings by PBGC to
terminate a Plan, or (e) any other event or condition which might reasonably be
expected to constitute grounds for the termination of, or the appointment of a
trustee to administer, any Plan, under ERISA ss. 4042 or the imposition of any
liability under Title IV of ERISA.
"Eurodollar Business Day" shall have the meaning assigned to
it in Section 2.3(e).
"Event of Default" shall have the meaning assigned to it in
Section 13.1.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System.
"Financials" shall mean those financial statements referred
to in Section 7.4.
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"Fiscal Year" shall mean the fiscal year of Parent ending on
the 31st day of March in each calendar year or such other date as may be elected
by Parent after notice to GE Capital.
"Furnishings Agreement" shall mean the letter agreement, dated
April 26, 1991, among GE Capital, Parent and the Operating Subsidiaries
regarding the sale of accounts originated by Furnishings 2000, Inc.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"GE Capital" shall mean General Electric Capital corporation,
a New York corporation having its administrative office at 260 Long Ridge Road,
Stamford, Connecticut 06902.
"Gross Losses" shall have the meaning assigned to it in the
definition of "YTD Net Losses".
"Guarantee" shall mean, with respect to any Person, any
legally binding obligation of such Person guaranteeing any indebtedness, lease,
dividend, or other legally binding obligation (a "primary obligation") of any
other Person (the "primary obligor") in any manner, including, without
limitation, any obligation or arrangement of such Person (a) to purchase or
repurchase any such primary obligation, (b) to advance, pay, or supply funds (i)
for the purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of the primary
obligor, (c) to purchase property, securities, or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect thereof.
"Indebtedness" shall mean an obligation incurred by an Account
Debtor in respect of an Account, including, without limitation, any charges for
Merchandise and all finance charges, late charges, charges for insurance
financed pursuant to an Account, and similar charges added to an Account, as
such charges are accrued pursuant to GE Capital's accounting practices.
"Indebtedness" shall include Furnishings Indebtedness, as such term is defined
in the Furnishings Agreement, and Old Smyth Indebtedness.
"Intercreditor Agreement" shall mean that certain
Intercreditor Agreement, dated as of July 1, 1996 and reaffirmed as of September
5, 1997, by and among GE Capital, the agent under the Tranche A Credit
Agreement, the Tranche B Credit Agreement and the Prepetitition Credit
Agreement, and the Lenders, including all amendments, modifications,
supplements, exhibits and schedules thereto and shall refer to such
Intercreditor Agreement as the same may be in effect at the time such reference
becomes operative.
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"IRC" shall mean the Internal Revenue Code of 1986, as
amended.
"IRS" shall mean the Internal Revenue Service.
"JMS" shall mean John M. Smyth Company, an Illinois
corporation and doing business as John M. Smyth Homemakers.
"Lender Credit Card" shall mean a card or device under a
Lender Credit Card Agreement pursuant to which an Account Debtor residing in the
State of Washington is given the privilege of obtaining credit from GE Capital
or a subsequent assignee of the Lender Credit Card Agreement from time to time
through the Account Debtor's incurring of Indebtedness as reflected in a sales
slip memorandum evidencing the purchase or lease of Merchandise to be paid in
accordance with that agreement.
"Lender Credit Card Agreement" shall mean an agreement between
an Account Debtor and GE Capital pursuant to which the Account Debtor receives a
Lender Credit Card from GE Capital.
"Lenders" shall mean, collectively, the lenders under the
Tranche A Credit Agreement and the lenders under the Tranche B Credit Agreement.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, Charge, claim, security
interest (including, without limitation, any interest of a buyer of accounts or
chattel paper which is subject to Article 9 of the Code), easement or
encumbrance, preference, priority, or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
lease or title retention agreement, any financing lease having substantially the
same economic effect and any of the foregoing, and the filing of, or agreement
to file, any financing statement pursuant to the Code).
"Loss Account" shall mean any Account with respect to which
there is no RPR Indebtedness and (a) which the amount of any payment due thereon
in more than 120 days past due, calculated on a contractual basis, (b) as to
which an Account Debtor is deceased or legally dissolved or seeks protection
under the Bankruptcy Code, (c) as to which none of GE Capital, Parent or any
Operating Subsidiary has an accurate current address for the Account Debtor, or
(d) which is reasonably deemed by GE Capital to be uncollectible; PROVIDED,
HOWEVER, that if GE Capital determines that an Account with respect to which
there is no RPR Indebtedness is collectible despite the occurrence of an event
described in sections (a)-(c), such Account shall not be a Loss Account.
"Loss Reserve Account" shall have the meaning assigned to it
in Section 6.1.
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"Loss Reserve Balance" shall mean, at any time, the net amount
of all debits and credits to the Loss Reserve Account, as determined pursuant to
Part 6 hereof.
"Loss Reserve Charge" shall mean a portion of each Service Fee
received by GE Capital which GE Capital, in its discretion, allocates to the
Loss Reserve Account. Generally, the Loss Reserve Charge shall be set at a level
which, over the course of any consecutive twelve-month period, is estimated by
GE Capital to generate an amount equal to the estimated Bad Debt Loss for such
period less 1% of the estimated average Aggregate Investment for such period.
The amount so allocated shall be adjusted by GE Capital annually.
"Loss Supplement Fees" shall have the meaning assigned to it
in Section 2.3(f).
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, assets, operations, prospects, or financial or other
condition of Parent and the Operating Subsidiaries taken as a whole, (b) the
ability of Parent and the Operating Subsidiaries taken as a whole to pay the
Obligations in accordance with the terms thereof, (c) GE Capital's Lien in and
to the Accounts and the Indebtedness or the priority of such Lien, or (d) the
collectibility, in a timely fashion, of a substantial number of Accounts.
"Maximum Investment" shall mean $900,000,000, or such other
figure to which the parties hereto may mutually agree.
"Merchandise" shall mean those goods and services, including
accessories and delivery services sold in connection therewith, sold at retail
by Parent or any Operating Subsidiary. Merchandise shall include items that are
repossessed and subsequently offered for resale by Parent or any Operating
Subsidiary.
"Multiemployer Plan" shall mean any employee pension benefit
plan, as defined in ERISA ss. 3(2), that is covered by Title IV of ERISA and is
maintained pursuant to a collective bargaining agreement or any other
arrangement pursuant to which more than one employer makes contributions and to
which Parent or any ERISA Affiliate is then making, or accruing an obligation to
make, contributions or to which Parent or any ERISA Affiliate has contributed
within the five immediately preceding Plan years.
"Net Billing Credits" shall mean, for any Settlement Period,
the amount, if any, by which net late charges and net finance charges credited
to Parent and the Operating Subsidiaries for such Settlement Period pursuant to
the first sentence of Section 2.3(c) exceeds the amount, if any, payable to GE
Capital by Parent and the Operating Subsidiaries for such Settlement Period
pursuant to Sections 2.3(a) and (b) or Section 2.3(e), as the case may be.
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"Net Loss Percentages" shall have the meaning assigned to it
in Section 2.3(f).
"New Smyth Indebtedness" shall mean any obligation incurred by
an Account Debtor in respect of a Smyth Account after the Smyth Closing Date.
"Obligations" shall mean all loans, advances, debts,
liabilities, obligations, covenants, and duties owing by Parent or any Operating
Subsidiary to GE Capital, of any kind or nature, present or future, whether or
not evidenced by any note, agreement, or other instrument, arising pursuant to
this Agreement, whether or not for the payment of money, whether arising by
reason of an extension of credit, loan, Guarantee, opening of a letter of
credit, indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising, and however acquired. The term
includes, without limitation, all interest, fees, charges, expenses, attorney's
fees, and any other sum chargeable to Parent or any Operating Subsidiary
pursuant to this Agreement.
"Old JMS" shall mean John M. Smyth Company, an Illinois
corporation doing business an John M. Smyth Homemakers prior to the Smyth
Closing Date.
"Old Smyth Indebtedness" shall mean any obligation incurred by
an Account Debtor in respect of a Smyth Account prior to the Smyth Closing Date.
"Operating Subsidiary" shall mean and shall include any and
all of the following subsidiary operating corporations of Parent: (a) Levitz
Furniture Company of the Midwest, Inc., a Colorado corporation, (b) Levitz
Furniture Company of the Pacific, Inc., a California corporation, (c) Levitz
Furniture Company of Washington, Inc., a Washington corporation, (d) Levitz
Shopping Services, Inc., a Florida corporation, and (e) JMS.
"Option Settlement Period" shall have the meaning assigned to
it in Section 2.3(e).
"Parent" shall mean Levitz Furniture Corporation, a Florida
corporation with its principal place of business and chief executive office
located at 6111 Broken Sound Parkway NW, Boca Raton, Florida 33487.
"Parent Balance Sheet" shall have the meaning assigned to it
in Section 7.4(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any Person succeeding to any or all of the functions thereof under ERISA.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution,
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public benefit corporation, entity, or government (whether federal, state,
county, city, municipal, or otherwise, including, without limitation, any
instrumentality, division, agency, body, or department thereof).
"Petition Date" shall have the meaning assigned to it in the
first recital.
"Plan" shall mean any employee pension benefit plan, as
defined in ERISA ss. 3(2) (other than a Multiemployer Plan), maintained by
Parent or any ERISA Affiliate which Plan is covered by Title IV of ERISA or
subject to the minimum funding standards of IRC ss. 412.
"Plan of Reorganization" shall mean a plan of reorganization
in the Chapter 11 Cases which, in the reasonable judgment of GE Capital, (i)
does not adversely affect in any material manner (a) the validity,
enforceability or the continued effect of this Agreement, the Obligations, the
Collateral, the Accounts or the Indebtedness, (b) the collectibility of the
Accounts or the Indebtedness, or (c) any of GE Capital's rights and remedies
under, and the prospective economic benefit to GE Capital of, this Agreement,
(ii) includes a satisfactory business plan, including without limitation the
projected Aggregate Investment, and (iii) provides for adequate capitalization
and management.
"Postpetition Credit Agreement" means the Postpetition Credit
Agreement dated as of September 5, 1997 among Levitz Furniture Incorporated and
each of its direct and indirect subsidiaries parties thereto (including Parent
and each of the Operating Subsidiaries), BT Commercial Corporation, in its
capacity as agent, and the lenders parties thereto from time to time, including
all amendments, modifications, supplements, exhibits and schedules thereto and
shall refer to such Postpetition Credit Agreement as the same may be in effect
at the time such reference becomes operative.
"Prior Agreement" shall have the meaning assigned to it in
the fourth recital.
"Prior Indebtedness" shall have the meaning assigned to it
in Section 12.4.
"Prime Rate" shall mean the highest rate most recently
reported in THE WALL STREET JOURNAL as the "Prime Rate" under "Money Rates" or
in such other similar publication as GE Capital may, from time to time, specify,
whether or not banks shall at times lend to borrowers at lower rates of
interest; PROVIDED, HOWEVER, that if, at any time, THE WALL STREET JOURNAL (or
such other similar publication) shall publish more than one rate as the "Prime
Rate," Prime Rate during such period shall mean the average of the prime rates
or other similar rates most recently announced by Citibank, N.A., The Chase
Manhattan Bank, and Bankers Trust Company.
"Promotion" shall have the meaning assigned to it in Section
2.5(a).
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"Promotional Service Fee" shall have the meaning assigned to
it in Section 2.5(a).
"Purchase Price" shall have the meaning assigned to it in
Section 12.4.
"Reportable Event" shall have the meaning assigned to it in
Section 4043 of ERISA.
"Reorganized Debtors" shall mean the Parent and Operating
Subsidiaries on and after the effective date of a Plan of Reorganization.
"RPR Indebtedness" shall mean any Indebtedness (a) as to which
GE Capital determines, in its reasonable discretion, that the Account Debtor has
made a bona fide claim of (i) a breach of a representation or warranty (either
express or implied) by Parent or an Operating Subsidiary, (ii) a violation of a
local, state, or federal law or regulation by Parent or an Operating Subsidiary,
or (iii) failure by Parent or an Operating Subsidiary to provide Merchandise
required to be provided to an Account Debtor, (b) as to which Parent or an
Operating Subsidiary has accepted a return of Merchandise from an Account Debtor
for a reason other than the failure or anticipated failure of the Account Debtor
to make a payment on the Account or has granted a partial credit with respect to
Merchandise purchased pursuant thereto, (c) with respect to which the Account
Documentation has not been forwarded to GE Capital in accordance with Section
5.8, (d) as to which a representation or warranty of Parent or an Operating
Subsidiary contained herein shall have been breached, or (e) which did not
represent Eligible Indebtedness at the time it was purchased by GE Capital.
"Second Accrual Period" has the meaning assigned to that term
in Section 2.3(g).
"Service Fee" shall have the meaning assigned to it in
Section 2.3(a).
"Settlement Date" shall mean a Business Day no later than the
fifteenth day following the last Billing Date of a Settlement Period.
"Settlement Period" shall mean a calendar month.
"Smyth Account" shall mean any Account arising pursuant to a
Credit Agreement between an Account Debtor and JMS, whether entered into before
or after the Smyth Closing Date, all of which such Accounts shall be deemed
Accounts under this Agreement.
"Smyth Closing Date" shall mean the date on which Levitz
Merger Corporation merged with and into Old JMS and JMS, and JMS became
obligated to GE Capital as an Operating Subsidiary under the Prior Agreement.
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"Smyth Indebtedness" shall mean Old Smyth Indebtedness and New
Smyth Indebtedness.
"Solvent" shall mean, when used with respect to any Person,
that (a) the present fair salable value of such Person's assets is in excess of
the total amount of such Person's liabilities; (b) such Person is able to pay
its debts as they become due; and (c) such Person does not have unreasonably
small capital to carry on its business as theretofore operated and all
businesses in which such Person is out to engage. The phrase "present fair
salable value" of Person's assets is intended to mean that value which can be
obtained if the assets are sold within a reasonable time in arm's-length
transactions in an existing and not theoretical market.
"Stock" shall mean all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity, whether voting or nonvoting, including,
without limitation, common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Subsidiary" shall mean, with respect to any Person, any
corporation of which an aggregate of 50% or more of the outstanding Stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, Stock of any other class of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is, at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person.
"Tax Returns" shall mean, with respect to any Person, any
federal, state, local, or foreign tax returns, reports, and statements required
to be filed with or supplied to any taxing authority by such Person.
"Taxes" shall mean, with respect to any Person, all taxes,
fees, registration fees, revenue permit fees, levies, or other charges or
assessments, including, without limitation, income, gross receipts, excise,
property, sales, transfer, license, payroll, and franchise taxes relating to the
assets or operations of such Person imposed by the United States or any state,
local, or foreign jurisdiction, or any subdivision or agency thereof, and
including any interest, penalty, or addition to tax relating thereto.
"Termination Date" shall mean the last Billing Date of the
Settlement Period during which the financing arrangement contemplated hereby
terminates as provided in Section 12.1.
"Termination Event" shall have the meaning assigned to it in
Section 12.5.
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"Tranche A Credit Agreement" shall mean that certain Credit
Agreement dated as of July 1, 1996 in the amount of $150,000,000 among Parent,
Levitz Furniture Company of the Midwest, Levitz Furniture Company of the
Pacific, Levitz Furniture Company of Washington, JMS, BT Commercial Corporation,
in its capacity agent and lender, and the Lenders, including all amendments,
modifications, supplements, exhibits and schedules thereto and shall refer to
such Tranche A Credit Agreement as the same may be in effect at the time such
reference becomes operative.
"Tranche B Credit Agreement" shall mean that certain Credit
Agreement dated as of July 1, 1996 in the amount of $40,000,000 among Parent,
Levitz Furniture Company of the Midwest, Levitz Furniture Company of the
Pacific, Levitz Furniture Company of Washington, JMS, BT Commercial Corporation,
in its capacity agent and lender, and the Lenders, including all amendments,
modifications, supplements, exhibits and schedules thereto and shall refer to
such Tranche B Credit Agreement as the same may be in effect at the time such
reference becomes operative.
"Unfunded Vested Liability" shall mean, with respect to any
Plan at any time, the excess, if any, of (a) the present value of all
nonforfeitable accrued benefits pursuant to such Plan (utilizing the actuarial
assumptions utilized by the PBGC) upon termination of a Plan over (b) the fair
market value of all Plan assets allocable to such benefits.
"YTD Average Net Receivables" shall mean, for any Settlement
Period, the average month end Aggregate Investment for each month for the
calendar year during which such Settlement Period occurs.
"YTD Net Losses" shall mean, for any Settlement Period, the
aggregate Indebtedness written off by GE Capital for the calendar year during
which such Settlement Period occurs ("Gross Losses") less the sum of: (a) the
aggregate uncollected finance charges included in Gross Losses; (b) the
aggregate uncollected late charge included in Gross Losses; and (c) the amount
of recoveries on Indebtedness previously written off received by GE Capital for
the calendar year during which such Settlement Period occurs, such recoveries to
be reduced by GE Capital's out-of-pocket expenses (including, without
limitation, collection agency and attorneys' fees) incurred in collecting such
recoveries.
Any accounting term used herein shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP, and all financial ratios and other computations pursuant
hereto shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. Where defined terms herein are used in computations, such
computations shall be made in accordance with GAAP notwithstanding the broader
definition of such terms herein. All other undefined terms contained herein
shall, unless the context indicates
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otherwise, have the meanings provided for by the Code in the State of New York
to the extent the same are used or defined therein. The words "herein,"
"hereof," "hereto," "hereunder," and other words of similar import refer to this
Agreement as a whole, including the Exhibits and Schedules hereto, as the same
may from time to time be amended or supplemented, and not to any particular
section, subsection, or clause contained in this Agreement. "Includes" and
"including" are not limiting, and "or" is not exclusive. References to any
particular section, subsection, or clause shall be to sections, subsections, or
clauses in this Agreement unless otherwise indicated.
Wherever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine, or neuter gender shall
include the masculine, the feminine, and the neuter.
2. PURCHASE OF ACCOUNTS
2.1 EXCLUSIVITY OF ACCOUNTS AND INDEBTEDNESS. During the term of this
Agreement:
(a) Other than with respect to persons residing in the State
of Washington, Parent and each Operating Subsidiary agree to offer to sell,
assign, and transfer all Accounts and all Eligible Indebtedness originated from
time to time thereon to GE Capital and GE Capital agrees to purchase and acquire
from Parent and each Operating Subsidiary all Accounts and all Eligible
Indebtedness that are approved by GE Capital as set forth in Section 3.1.
(b) With respect to persons residing in the State of
Washington, Parent and each Operating Subsidiary agree to allow only GE Capital
to establish a credit facility using the names or trademarks under which Parent
and each Operating Subsidiary conduct business and GE Capital agrees it will
provide Lender Credit Card Agreements and establish and/or add Indebtedness
thereunder to the extent approved by GE Capital as set forth in Section 3.1.
(c) Notwithstanding anything otherwise provided herein, GE
Capital shall not be obligated to purchase any Accounts or Indebtedness from
Parent or any Operating Subsidiary or establish and/or add Accounts or
Indebtedness under a Lender Credit Card Agreement at any time during which the
Aggregate Investment exceeds the Maximum Investment.
2.2 PAYMENT FOR INDEBTEDNESS. GE Capital shall pay Parent the face
amount of Indebtedness, exclusive of the state documentary stamp tax, for all
Indebtedness purchased, established and/or added to an Account pursuant to
Section 2.1 hereof. GE Capital shall pay such amount by deposit of funds into an
account with a depository institution specified by Parent to GE Capital from
time to time. Parent shall allocate such amount among itself and the Operating
Subsidiaries in accordance with their interests.
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2.3 FEES. In consideration of GE Capital's purchase, establishment
and/or addition and servicing of Accounts and Indebtedness, Parent and each
Operating Subsidiary jointly and severally agree to pay GE Capital the following
fees, each of which shall be payable in arrears on the Settlement Date following
the Settlement Period during which it is incurred:
(a) For each Settlement Period, Parent or the applicable
Operating Subsidiary shall be charged a fee (the "Service Fee") of $12.075 (and
after January 31, 1998, $12.475, subject to the reduction on the conditions set
forth in Section 2.3(g)) for each Account that is an Active Account during such
Settlement Period, subject to Section 2.3(g) and subject to the following
adjustments: (i) on each Settlement Date, the Service Fee shall be increased or
decreased, respectively, by adding thereto or subtracting therefrom an amount
equal to 1.38 cents ($0.0138) for each dollar by which the Average Net Account
Balance on the relevant Billing Date during the immediately preceding Settlement
Period exceeds or is less than $650; (ii) on each Settlement Date immediately
following each annual anniversary of the Closing Date, the Service Fee shall be
increased or decreased by a percentage equal to 23% of the percentage increase
or decrease, respectively, in the CPI-U above or below the level of such index
in effect on the immediately preceding anniversary of the Closing Date;
PROVIDED, HOWEVER, that such increase or decrease shall not be imposed with
respect to that portion of any increase or decrease in the CPI-U that is 10% or
less since the immediately preceding anniversary of the Closing Date; (iii) on
each Settlement Date that the United States First Class Postage Rate exceeds the
United States First Class Postage Rate in effect on the Closing Date, the
Service Fee shall be increased by an amount equal to the sum of the amount of
such excess and one-half of one cent ($0.005). Upon receipt of each Service Fee,
GE Capital shall allocate a portion of such Service Fee to a Loss Reserve Charge
and allocate the amount of such Loss Reserve Charge to the Loss Reserve Account.
The Service Fee shall be payable on each Settlement Date.
(b) For each Settlement Period, Parent or the applicable
Operating Subsidiary shall pay to GE Capital an amount equal to (i) the excess,
if any, of the Prime Rate in effect on the last Business Day of such Settlement
Period over 12% MULTIPLIED BY (ii) 75% MULTIPLIED BY (iii) the balance of the
Aggregate Investment as of the relevant Billing Date during such Settlement
Period MULTIPLIED BY (iv) the number of days during such Settlement Period
DIVIDED BY (v) 365. For each Settlement Period, GE Capital shall pay to Parent
or the applicable Operating Subsidiary an amount equal to (i) the amount, if
any, by which the Prime Rate in effect on the last Business Day of such
Settlement Period is less than 12% MULTIPLIED BY (ii) 75% MULTIPLIED BY (iii)
the Aggregate Investment as of the relevant Billing Date during such Settlement
Period MULTIPLIED BY (iv) the number of days during such Settlement Period
DIVIDED BY (v) 365; PROVIDED, HOWEVER, that there shall be no such payment to
the extent that the Prime Rate is less than 7%.
(c) On each Settlement Date, GE Capital shall credit to Parent
or the applicable Operating Subsidiary the amount of all net late charges and
all net finance charges accrued with respect to all Indebtedness serviced by GE
Capital
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during such Settlement Period, in accordance with GE Capital's accounting
practices as in effect from time to time; PROVIDED THAT, subject to the
requirements of Section 2.5, on each Settlement Date, Parent and Operating
Subsidiaries shall pay to GE Capital (or, at GE Capital's election, GE Capital
may reduce from the applicable settlement payment) an amount equal to all
finance charges previously paid or credited to Parent and Operating Subsidiaries
pursuant to this Section 2.3(c) and which have been reversed. The amounts so
credited shall be deducted from the fees due to GE Capital for such Settlement
Period pursuant to this Section 2.3; to the extent such finance charges exceed
such fees, such excess shall be paid by GE Capital as Parent or the applicable
Operating Subsidiary shall direct.
(d) The fees charged pursuant to this Section 2.3 shall be
payable on each Settlement Date or, at GE Capital's option, be deducted from
amounts payable by GE Capital pursuant to Section 2.2. The fees charged pursuant
to this Section 2.3 shall be calculated and charged by GE Capital during each
Settlement Period based upon transactions processed as of various Billing Dates
during such Settlement Period.
(e) Notwithstanding subsections (a) and (b) of this Section
2.3, Parent may, on behalf of itself and each Operating Subsidiary, not more
than ten days prior to the end of any calendar quarter, notify GE Capital that
it is exercising its option to adopt the pricing set forth in this Section
2.3(e) for each Settlement Period ending during the following calendar quarter
(each an "Option Settlement Period") in lieu of the pricing set forth in
subsections (a) and (b) above. For each Option Settlement Period, the following
pricing shall be in effect: For each Option Settlement Period, Parent and each
Operating Subsidiary shall jointly and severally be charged a fee (the
"Alternate Service Fee") of $6.800 for each Account that is an Active Account
during such Option Settlement Period, subject to the following adjustments: (i)
on each Settlement Date, the Alternate Service Fee shall be increased or
decreased, respectively, by adding thereto or subtracting therefrom an amount
equal to 0.63 cents ($0.0063) for each dollar by which the Average Net Account
Balance on the relevant Billing Date during the immediately preceding Settlement
Period exceeds or is less than $650; (ii) on each Settlement Date immediately
following each annual anniversary of the Closing Date, the Alternate Service Fee
shall be increased or decreased by a percentage equal to 23% of the percentage
increase or decrease, respectively, in the CPI-U above or below, the level of
such index in effect on the immediately preceding anniversary of the Closing
Date; PROVIDED, HOWEVER, that such increase or decrease shall not be imposed
with respect to that portion of any increase or decrease in the CPI-U that is
10% or less since the immediately preceding anniversary of the Closing Date;
(iii) on each Settlement Date that the United States First Class Postage Rate
exceeds the United States First Class Postage Rate in effect on the Closing
Date, the Alternate Service Fee shall be increased by an amount equal to the sum
of the amount of such excess and one-half of one cent ($0.005). Upon receipt of
each Alternate Service Fee, GE Capital shall allocate a portion of such
Alternate Service Fee to a Loss Reserve Charge and allocate the amount of such
Loss Reserve Charge to the Loss Reserve Account. The Alternate Service Fee shall
be payable on each Settlement Date. For each Option Settlement Period, Parent
and
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each Operating Subsidiary shall jointly and severally be liable to GE Capital in
an amount equal to (i) the LIBOR Rate (as hereinafter defined) in effect on the
last Eurodollar Business Day (as hereinafter defined) preceding the calendar
quarter for which the option set forth in this subsection (e) is in effect
MULTIPLIED BY (ii) 88% MULTIPLIED BY (iii) the balance of the Aggregate
Investment as of the relevant Billing Date during such Option Settlement Period
MULTIPLIED BY (iv) the number of days during such Option Settlement Period
DIVIDED BY (v) 365. For purposes of this Section 2.3, "LIBOR Rate", for any
Eurodollar Business Day, shall mean the average of the four rates, reported from
time to time by Telerate News Service (or such other number or rates as such
service may from time to time report), at which foreign branches of major United
States banks offer United States dollar deposits to other banks for a 90-day
period in the London interbank market at approximately 11:00 a.m., London time,
on such Eurodollar Business Day. If such interest rates shall cease to be
available from Telerate News Service, the LIBOR Rate shall be determined from
such financial reporting service or other information as shall be mutually
acceptable to GE Capital and Parent. For purposes of this Section 2.3,
"Eurodollar Business Day" shall mean a Business Day on which banks in the city
of London are generally open for interbank or foreign exchange transactions.
Notwithstanding the above, the amount payable to GE Capital under this
subsection (e) for any Option Settlement Period shall not exceed or be less than
the fees that would have been payable to GE Capital pursuant to subsections (a)
and (b) above for such Settlement Period by more than $100,000.
(f) For each Settlement Period, Parent and each of the
Operating Subsidiaries shall be jointly and severally obligated to pay to GE
Capital a fee (the "Loss Supplement Fee") of $125,000, subject to the following
adjustments: (i) for each Settlement Period, the Loss Supplement Fee shall be
increased or decreased, as the case may be, by $2,000 for each one hundredth of
one percent (0.01%) by which the Net Loss Percentage (as defined below) for such
Settlement Period exceeds or is less than 7.85%, as the case may be, PROVIDED,
that no such adjustment for any Settlement Period shall increase or decrease the
Loss Supplement Fee by more than $125,000; and (ii) the Loss Supplement Fee
shall not be payable for any Settlement Period for which the Net Billing Credit
(less net amounts advanced by Parent and Operating Subsidiaries during the
Settlement Period pursuant to Section 2.5) is less than $300,000. For purposes
of this Section 2.3(f), "Net Loss Percentage" shall mean, for any Settlement
Period, YTD Net Losses for such Settlement Period divided by YTD Average Net
Receivables for such Settlement Period, MULTIPLIED BY a fraction the numerator
of which is 12 and the denominator of which is the number of months which have
elapsed in the calendar year in which such Settlement Period occurs up to and
including such calendar month. The Loss Supplement Fee shall be payable on each
Settlement Date.
(g) A portion of the Service Fee for each Account that is an
Active Account shall come due but not be payable, and shall accrue (the "Accrual
Amount"), from the date of this Agreement through and including February 28,
1998. From the date of this Agreement through and including January 31, 1998,
the Accrual Amount for each such Account shall be $0.40. From February 1, 1998
through and including
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February 28, 1998 (the "Second Accrual Period"), the Accrual Amount shall be
$0.80. On March 1, 1998, the aggregate of the Accrual Amounts for all such
Accounts shall be amortized in equal installments and paid by Parent or the
applicable Operating Subsidiary over the immediately following six Settlement
Periods; PROVIDED, that if Parent, Operating Subsidiaries and GE Capital shall
have agreed upon the substantive terms and conditions of a credit card program
agreement with Monogram Credit Card Bank of Georgia as referred to in Section
14.19 by March 1, 1998, subject only to GE Capital internal approval, the
Accrual Amount for the Second Accrual Period shall be $0.40 and the Service Fee,
prior to any other adjustments set forth in Section 2.3(a) shall be $12.075. All
amounts under this Section 2.3(g) shall become due and payable upon a
termination of this Agreement, including a termination in connection with an
acquisition of the type referred to in Section 12.7.
2.4 RPR INDEBTEDNESS. When GE Capital determines that any Indebtedness
is RPR Indebtedness, Parent or the applicable Operating Subsidiary shall
purchase such RPR Indebtedness from GE Capital for the amount then outstanding
pursuant to such RPR Indebtedness. The purchase price for such RPR Indebtedness
shall be forwarded by Parent or such Operating Subsidiary to GE Capital within
ten days following receipt of notice that such amount is due. The procedure for
handling and processing RPR Indebtedness shall be governed by Schedule 2.4
annexed hereto, as such Schedule may be amended by Parent upon 30 days' notice
to, and with the reasonable consent of, GE Capital. Upon such purchase, GE
Capital shall assign Parent or the applicable Operating Subsidiary all of its
right, title, and interest in and to such RPR Indebtedness, free and clear of
any and all Liens created or granted by GE Capital, subject to the Lien reserved
by GE Capital pursuant to Section 5.1(b). Parent and each Operating Subsidiary
hereby agree that they shall be jointly and severally liable for the purchase
price of all RPR Indebtedness hereunder.
2.5 PROMOTIONAL SERVICE FEES.
(a) In connection with any credit promotion from and after
July 11, 1997 pursuant to which finance charges may be subject to future
reversals based on cardholder payments or other actions (a "Promotion"), GE
Capital shall be entitled to a service fee (the "Promotional Service Fee") for
all Indebtedness it purchases pursuant to this Agreement that is subject to the
terms of the Promotion. This Promotional Service Fee shall be paid to GE Capital
by reducing the purchase price paid to Parent for all Indebtedness subject to
the terms of the Promotion by an amount determined as follows:
Length of Promotional Term Promotional Service Fee
13 months 14.40%
12 months 12.60%
11 months 11.50%
10 months 10.40%
9 months 9.30%
8 months 8.10%
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7 months 5.80%
6 months 3.50%
5 months 3.50%
4 months .80%
3 months .80%
2 months .80%
1 month 0%
(b) This Promotional Service Fee shall be solely for the
account of GE Capital, shall not be required to be held in reserve by GE Capital
for the benefit of Parent, any Operating Subsidiary, any of their Affiliates or
any other party, and shall not be deemed a payment or prepayment by Parent,
Operating Subsidiary or any of their Affiliates of any amounts such parties owe
or may owe to GE Capital.
(c) Following the end of each quarter commencing with the
quarter ending August 31, 1997, GE Capital will project the aggregate dollar
amount of future finance charge reversals on Accounts. On a cumulative basis, if
(x) the Promotional Service Fees collected less finance charge reversals are
less than (y) the projected finance charge reversals, the "short-fall" amount
shall be paid by Parent and Operating Subsidiaries on the next Settlement Date
(or at GE Capital's election, GE Capital may reduce the applicable settlement
payment). On a cumulative basis, if (x) the Promotional Service Fees collected
less finance charge reversals are greater than (y) the projected finance charge
reversals, the excess amount shall be paid by GE Capital to Parent and Operating
Subsidiaries on the next Settlement Date.
(d) The Promotional Service Fee shall be a charge to Parent in
addition to any other fees, charges or amounts otherwise owed or payable to GE
Capital pursuant to this Agreement.
(e) Notwithstanding the foregoing, if GE Capital reasonably
believes that the terms of a Promotion require a different Promotional Service
Fee schedule, GE Capital shall so notify Parent and such schedule shall be
applicable to such Promotion.
3. SERVICING
3.1 GE CAPITAL'S RESPONSIBILITIES. In connection with its purchase,
establishment and/or addition and continued ownership of Accounts and
Indebtedness, GE Capital shall provide Parent and Operating Subsidiaries with
customized credit services, including, without limitation, the following: (a)
supplying Parent and each Operating Subsidiary with credit applications, Credit
Agreements and Lender Credit Card Agreements for use in the State of Washington
and reviewing all applications for credit by or on behalf of prospective Account
Debtors; (b) in its sole discretion, determining the creditworthiness of such
prospective Account Debtors and approving those applicants deemed creditworthy
pursuant to standards solely within the discretion of GE Capital; (c) in its
sole discretion, establishing and revising credit limits for particular Account
Debtors; (d) providing access to GE Capital's
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authorization system for the approval of Accounts and Indebtedness and making
determinations with regard to whether particular credit extensions would
constitute Eligible Indebtedness, including the "Instant Credit" program; (e)
issuing customized credit cards to Account Debtors; (f) preparing and mailing
periodic billing statements to Account Debtors; (g) responding to billing
inquiries from Account Debtors; and (h) collecting delinquent Indebtedness from
Account Debtors.
3.2 GE CAPITAL'S LIABILITIES. Except as specifically provided herein,
the rejection for credit of any applicant, or any number of applicants, shall
not give rise to any claim, liability, demand, offset, defense, or counterclaim
by Parent or any Operating Subsidiary against GE Capital. GE Capital may furnish
credit and other information concerning any Account Debtor or prospective
Account Debtor to any credit bureau, credit interchange, or any other Person to
whom such information may lawfully be sent for its own use, sale, or such
purpose as it may deem appropriate or necessary.
3.3 FINANCE CHARGE RATES.
(a) Parent and Operating Subsidiaries shall bear the sole
responsibility for determining the rates for finance charges and other terms on
Accounts and Indebtedness arising from Credit Agreements and for informing GE
Capital to notify Account Debtors of changes, if any, in such rates and terms;
GE Capital shall have no rights or responsibilities whatsoever with respect to
such matters.
(b) Parent and Operating Subsidiaries shall give GE Capital
written notice of any revisions to the finance charge rates and other terms it
is imposing on Account Debtors at least 60 days prior to the date that notices
of such changes in terms are required to be mailed to Account Debtors.
(c) GE Capital shall, upon the request of Parent or any
Operating Subsidiary, advise Parent and Operating Subsidiaries of the maximum
permissible rates of finance charges and other terms that may be imposed on
Account Debtors in various jurisdictions and of the legal requirements for
lawfully revising such rates and terms.
3.4 RECORDS. Parent and each Operating Subsidiary agree that, as part
of GE Capital's servicing activities, GE Capital may store Account Documentation
forwarded to GE Capital on microfilm or other media and that GE Capital may, in
the normal course of its business, destroy Account Documentation in the form
forwarded to GE Capital once such Account Documentation has been microfilmed or
otherwise recorded.
3.5 AUDIT. Subject to Section 14.12, Parent, by its officers, employees
or other professionals who agree to be bound by the provisions of Section 14.12,
shall have the right, at its own expense, to conduct reasonable audits of GE
Capital's calculation of the fees and charges payable by Parent and the
Operating Subsidiaries hereunder, such audit to be conducted in a manner which
will minimize interference
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with GE Capital's normal business operations; PROVIDED, HOWEVER, that GE Capital
shall in no event be required to disclose to Parent or any of its
representatives any information regarding customers of GE Capital other than
Parent and the Operating Subsidiaries.
4. CONDITIONS PRECEDENT
4.1 CONDITIONS TO EACH PURCHASE, ESTABLISHMENT AND/OR ADDITION OF
INDEBTEDNESS. Notwithstanding anything to the contrary herein, GE Capital shall
not be obligated to purchase Accounts or to establish new or additional
Indebtedness unless the following are true and correct in all respects:
(a) The Bankruptcy Court shall have entered the Approval
Order, and if an appeal has been filed, no stay of such Approval Order pending
appeal has been granted.
(b) The Bankruptcy Court shall have entered an interim order,
or if there is no interim order or the interim order is no longer effective, a
final order, with respect to the Postpetition Credit Agreement or any other
debtor in possession financing credit agreement in form and substance reasonably
satisfactory to GE Capital in all material respects, and if an appeal has been
filed, no stay of such interim or final order, as the case may be, has been
granted.
(c) All of the representations and warranties contained herein
shall be true and correct in all material respects on and as of such date as
though made on and as of such date.
(d) No event shall have occurred and be continuing, or would
result from the purchase, establishment and/or addition of such Indebtedness,
that constitutes a Default or an Event of Default.
(e) No Liens shall have been filed or recorded or otherwise
exist against any of the Accounts or Indebtedness other than the Liens arising
pursuant to this Agreement and neither Parent nor any Operating Subsidiary has
any notice of an intention by any potential lienor to file or record any such
Liens against any of the Accounts or Indebtedness.
The acceptance by Parent and each Operating Subsidiary of the
proceeds of each purchase of Indebtedness shall be deemed to constitute a
representation and warranty by Parent and each Operating Subsidiary that the
conditions in this Section 4.1 have been satisfied.
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5. SECURITY AND OTHER CREDIT TERMS
5.1 SECURITY INTEREST.
(a) The parties hereto (i) intend that the transactions
contemplated by Section 2.1(a) shall be treated as a purchase and sale of
Accounts and Indebtedness for all purposes and that the transactions
contemplated by Section 2.1(b) shall be treated as a program for the extension
of credit by GE Capital to Account Debtors who wish to obtain financing from GE
Capital to purchase Merchandise, not as lending transactions and (ii) shall file
and/or have filed UCC-1 or comparable statements in order to perfect the
interests created thereby. To secure payment of all Obligations and, against the
possibility that those transactions contemplated hereby as a purchase and sale
of Accounts and Indebtedness or as extensions of credit to Account Debtors are
not so considered despite the intentions of the parties, Parent and each
Operating Subsidiary hereby grant, to the extent of their interests therein, to
GE Capital a continuing first priority Lien in and to all Accounts and
Indebtedness sold, assigned or otherwise transferred to GE Capital, established
and/or added by GE Capital, or as to which GE Capital has otherwise provided
consideration under this Agreement, including, without limitation, a first
priority Lien, to the extent of Parent's or its Operating Subsidiary's interest
therein, in and to all Merchandise purchased by Account Debtors pursuant to such
Accounts. Such Lien is in addition to the Liens specified in Sections 5.1(b),
5.4 and 6.1. All such property shall be collectively referred to as the
"Collateral".
(b) In addition to the Lien granted pursuant to Section
5.1(a), to secure payment of all Obligations, Parent and each Operating
Subsidiary hereby grant GE Capital a continuing first priority Lien in and to
(a) all Accounts and Indebtedness at anytime owned by any such Person, including
without limitation, Accounts and Indebtedness purchased by Parent or an
Operating Subsidiary pursuant to Section 2.4 and (b) all Accounts and
Indebtedness established and/or added by GE Capital that are purchased by Parent
or an Operating Subsidiary pursuant to Section 2.4.
5.2 VERIFICATION BY GE CAPITAL OF ACCOUNTS. Any of GE Capital's
officers, employees, or agents shall have the right, at any time hereafter, in
GE Capital's name or in the name of a nominee of GE Capital, to verify the
validity or amount of any Account or any other matter relating to any Account or
Indebtedness by mail, telephone, telegraph, or otherwise.
5.3 RECEIPT OF PAYMENTS. The primary and exclusive right to effect
collection of Indebtedness owned by GE Capital shall be vested in GE Capital and
GE Capital may, at any time, in its sole discretion, notify Account Debtors to
make payments directly to it in accordance with its instructions. GE Capital's
collection procedures shall be consistent with the collection procedures it
generally utilizes in connection with consumer receivables. Checks, money
orders, or other forms of payment received by Parent or any Operating Subsidiary
from Account Debtors in respect of Indebtedness shall be held in trust for the
benefit of GE Capital and shall be forwarded to GE Capital within one Business
Day of receipt along with a statement as to when such checks, money orders, or
forms of payment were received. GE
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Capital shall have the right, at any time and from time to time, in its
discretion, without notice thereof to Parent or any Operating Subsidiary (i) to
collect, by legal proceedings or otherwise, the Accounts and Indebtedness owned
by GE Capital in the name of GE Capital; and (ii) to take control, in any
manner, of any item of payment for, or proceeds of, the Accounts and
Indebtedness owned by GE Capital.
5.4 INSURANCE. Parent and each Operating Subsidiary shall list GE
Capital as the loss payee under any insurance policy sold in connection with
Accounts. To secure payment of all Obligations under this Agreement, Parent and
each Operating Subsidiary hereby grant GE Capital a first priority Lien in and
to any and all proceeds of such insurance policies. GE Capital may, in its
reasonable discretion, disapprove any insurance carrier with which Parent or any
Operating Subsidiary enters an agreement whereby insurance will be sold to
Account Debtors where the premiums of such insurance will constitute part of
Indebtedness on an Account.
5.5 WARRANTIES. Parent and each Operating Subsidiary shall comply with
all of its warranties and other obligations with respect to Merchandise, the
sale of which has resulted in an Account.
5.6 CREDITS AND ALLOWANCES. Neither Parent nor any Operating Subsidiary
shall settle or adjust any dispute or claim, grant any discount, credit, or
allowance, or accept any return of Merchandise purchased pursuant to an Account,
except in the ordinary course of business. Parent and each Operating Subsidiary
shall notify GE Capital, as soon as practicable, of all returns of Merchandise
purchased pursuant to Accounts and of all credits granted to Account Debtors by
Parent or any Operating Subsidiary with respect to such Merchandise or with
respect to any finance or other charges due in respect of Accounts. Each such
notification shall be accompanied by a statement describing the Merchandise with
respect to which such credit was granted and indicating the Account to which
such credit relates and the amount of credit granted to the Account Debtor. GE
Capital may deduct the amount of all such credits from payments due to Parent
and the Operating Subsidiaries pursuant to Section 2.1 or, at GE Capital's
option, may require Parent or an Operating Subsidiary to pay such amounts within
two Business Days after notification by GE Capital. When Parent or any Operating
Subsidiary receives property of any kind in respect of an Account by reason of a
transaction with an Account Debtor, it shall hold such property in trust for the
benefit of GE Capital, subject to GE Capital's Lien, as property forming part of
the Account, until GE Capital receives payment with respect to the Account
pursuant to which such Merchandise was purchased. GE Capital may, at any time,
settle or adjust disputes or claims directly with Account Debtors for amounts
and upon terms which it considers advisable.
5.7 NOTICE TO GE CAPITAL. Parent and each Operating Subsidiary shall
each promptly: (a) upon learning thereof, inform GE Capital in writing of any
material delay in its performance of any of its obligations to Account Debtors
where such delay might have a Material Adverse Effect and (b) upon receipt or
learning thereof, furnish to and inform GE Capital of all material information
relating to an adverse change in the financial condition of any Account Debtor,
including, without
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limitation, information regarding changes of address of Account Debtors and
notices of filings under the Bankruptcy Code with respect to Account Debtors.
5.8 FURTHER ASSURANCES. In addition to the undertakings specifically
provided for in this Agreement, Parent and each Operating Subsidiary shall each
do all other things and sign and deliver all other documents and instruments
requested by GE Capital to perfect, protect, maintain, and enforce the Liens of
GE Capital and the first priority of such Liens, and all other rights granted
pursuant hereto or pursuant to any other present or future agreement between
Parent or any Operating Subsidiary and GE Capital. Such acts shall include,
without limitation, indicating on the books and records of Parent and each
Operating Subsidiary (including, without limitation, originals and copies of
Credit Agreements, Lender Credit Card Agreements, sales slips, and computer
tapes where such items are in the possession of such Person) that Accounts and
Indebtedness have been sold and assigned to, or established and/or added by GE
Capital and are subject to a Lien pursuant hereto, providing GE Capital copies
of any Account Documentation, the filing of financing statements, amendments,
and termination statements under the Code, and the delivery of any document,
including computer tapes or disks, the physical possession of which is necessary
for GE Capital in connection with its ownership of Accounts and Indebtedness. In
addition, upon GE Capital's request, Parent and each Operating Subsidiary shall
make or cause to be made a conspicuous notation, satisfactory to GE Capital in
form and content, on the original and store copy of each Credit Agreement, and
on the original, store, and finance copy of each sales order which evidences any
Account or Indebtedness, indicating that such Account or Indebtedness is owned
by GE Capital. Parent and each Operating Subsidiary irrevocably authorize GE
Capital to execute alone any financing statement or any other document or
instrument which may be required to perfect, protect, or enforce any right or
Lien granted to GE Capital pursuant to this Agreement and authorize GE Capital
to sign such Person's name on the same.
5.9 ATTORNEY-IN-FACT. Parent and each Operating Subsidiary each hereby
appoints GE Capital or GE Capital's designee as its attorney-in-fact (a) to
endorse such Person's name on any check, note, acceptance, money order, draft,
or other form of payment of or security for any Account or Indebtedness that may
come into GE Capital's possession; (b) to sign such Person's name on drafts
against Account Debtors relating to any Account or Indebtedness, schedules and
assignments of any Account or Indebtedness, notices of assignment or other
public records, verifications, and notices to any Account Debtor; and (c) to do
all things necessary to carry out or enforce the obligations of Account Debtors
and to preserve GE Capital's Lien in and to Accounts and Indebtedness pursuant
hereto. Parent and each Operating Subsidiary each ratifies and approves all acts
of GE Capital as attorney-in-fact. GE Capital as attorney-in-fact will not be
liable for any act, omission, error of judgment, or mistake of fact or law,
except where such liability arises from GE Capital's negligence. This power,
being coupled with an interest, is irrevocable until there shall no longer be
any Indebtedness outstanding and all Obligations shall have been fully
satisfied.
5.10 CONTINUED LIABILITIES. Anything herein to the contrary
notwithstanding, (a) Parent and each Operating Subsidiary shall each remain
liable pursuant to any and
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all contracts and agreements with any Account Debtor included in any Account
(including, for the avoidance of doubt, any and all contracts and agreements
entered into by Old JMS with any Account Debtor) to the extent set forth therein
to perform all of its duties and obligations pursuant thereto to the same extent
as if this Agreement had not been executed; (b) the exercise by GE Capital of
any rights pursuant to this Agreement shall not release Parent or any Operating
Subsidiary from any of such Person's duties or obligations pursuant to the
contracts and agreements relating to any Account; and (c) except to the extent
specifically set forth herein, GE Capital shall not have any obligation or
liability with respect to any Account by reason of this Agreement or be
obligated to perform any of the obligations or duties of Parent or any Operating
Subsidiary pursuant to this Agreement or to take any action to collect or
enforce any claim for payment assigned pursuant hereto or thereto.
5.11 GE CAPITAL MAY PERFORM. If Parent or any Operating Subsidiary
fails to perform any of its duties or obligations contained herein, GE Capital
may itself perform, or cause performance of, such duties or obligations or
enforce, or cause enforcement of, such rights, and the expenses of GE Capital
incurred in connection therewith shall be jointly and severally payable by
Parent and each Operating Subsidiary on demand.
5.12 RIGHT OF SETOFF. In addition to any other rights granted to GE
Capital herein, GE Capital shall, upon the occurrence and during the continuance
of any Default or Event of Default, have the right to appropriate and apply to
the payment of Obligations any and all money or property of Parent or any
Operating Subsidiary then held by GE Capital; PROVIDED, that during the pendency
of the Chapter 11 Cases, GE Capital shall provide the Debtors with four Business
Days written notice of its intent to take such actions. GE Capital may also
withhold any amount due from Parent or any Operating Subsidiary pursuant to this
Agreement from amounts payable to Parent and Operating Subsidiaries pursuant to
Section 2.2.
5.13 PAYMENTS. Parent and each Operating Subsidiary shall take any and
all actions requested by GE Capital to insure that all payments by Account
Debtors in respect of Accounts will be directed to such address as GE Capital
may specify.
5.14 USE OF PROCEEDS. Parent and each Operating Subsidiary each agrees
that it will utilize all amounts received under Section 2.2 only for its working
capital needs, for distributions made (after giving effect thereto) in
compliance with law or for other valid and lawful corporate purposes.
5.15 ACCOUNTING. GE Capital will provide a monthly accounting of the
Indebtedness and all fees and charges pursuant to this Agreement. Each and every
such accounting shall be deemed final, binding, and conclusive upon Parent and
each Operating Subsidiary in all respects as to all matters reflected therein,
unless Parent or any Operating Subsidiary, within 60 days after the date any
such accounting is rendered, shall notify GE Capital of any objection which such
Person may have to any such accounting, describing the basis for such objection
with specificity. In that event, only those items expressly objected to in such
notice shall be deemed to be disputed.
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5.16 ACCESS. GE Capital (by any of its officers, employees, and/or
agents) shall, upon reasonable notice during normal business hours, have the
right to examine, inspect, audit, and make extracts from all of the records,
files, and books of account of Parent and each Operating Subsidiary, insofar as
such records, files, and books of account relate to Accounts or Indebtedness.
Parent and each Operating Subsidiary shall each use its best efforts to
facilitate GE Capital's exercise of such right, including, without limitation,
the assignment of such personnel for the assistance of GE Capital as GE Capital
shall request. Upon GE Capital's request, Parent and each Operating Subsidiary
shall supply GE Capital with originals and/or copies of any of the foregoing
within three Business Days of such request.
6. LOSS RESERVE ACCOUNT
6.1 ESTABLISHMENT. GE Capital shall create, on its books, for the
benefit of and in the name of Parent and each Operating Subsidiary, a record
known as the "Loss Reserve Account." To secure payment of all Obligations,
Parent and each Operating Subsidiary hereby grant, to the extent of their
interests therein, to GE Capital a first priority security interest in and to
the Loss Reserve Account. Neither Parent nor any Operating Subsidiary shall be
entitled to any interest or similar charge on the Loss Reserve Balance.
6.2 CREDITS. GE Capital shall credit the Loss Reserve Balance with the
amounts required to be so credited pursuant to Section 2.3(a) or 2.3(e).
6.3 DEBITS. GE Capital shall decrease the Loss Reserve Balance by the
amount of all Bad Debt Loss; PROVIDED, HOWEVER, that the Loss Reserve Balance
shall never be decreased below zero.
6.4 TERMINATION. Notwithstanding anything to the contrary herein, upon
any termination of the arrangement contemplated by this Agreement, on the first
Settlement Date on which GE Capital owns no Accounts or Indebtedness and the
Obligations have been satisfied in full, GE Capital shall forward to Parent an
amount equal to the Loss Reserve Balance on such date.
7. REPRESENTATIONS AND WARRANTIES
OF PARENT AND OPERATING SUBSIDIARIES
To induce GE Capital to purchase, establish and/or add
Accounts and Indebtedness, Parent and each Operating Subsidiary make the
following representations and warranties to GE Capital each and all of which
shall survive the execution and delivery of this Agreement, and each and all of
which shall be deemed to be restated and remade on each day on which
Indebtedness is purchased, established and/or added by GE Capital:
7.1 CORPORATE EXISTENCE: COMPLIANCE WITH LAW. Parent and each
Operating Subsidiary each (a) is a corporation duly organized, validly existing,
and in
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good standing under the laws of the state in which it is incorporated; (b) is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification; (c) subject to the requirements of the
Bankruptcy Code, has the requisite corporate power and authority and the legal
right to own, pledge, mortgage, or otherwise encumber and operate its
properties, to lease the properties it operates under lease, and to conduct its
business as now, and hereafter contemplated to be, conducted; (d) has all
material licenses, permits, consents, or approvals from or by, has made all
necessary filings with, and has given all necessary notices to, all governmental
authorities having jurisdiction, to the extent required for such ownership,
operation, and conduct; and (e) is in compliance with its certificate of
incorporation and bylaws. Parent owns all of the outstanding Stock of each
Operating Subsidiary.
7.2 EXECUTIVE OFFICES. The chief executive office and principal place
of business of Parent and each Operating Subsidiary is at 6111 Broken Sound
Parkway NW, Boca Raton, Florida 33487; all records relating to Accounts and
Indebtedness are and shall be maintained there or at such locations as are set
forth on Schedule 7.2 annexed hereto, as such Schedule may be amended by Parent
from time to time upon 30 days' prior written notice to GE Capital. Schedule 7.2
contains a complete and correct listing of the address of all stores of Parent
and each Operating Subsidiary.
7.3 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Subject to
the entry of the Approval Order, the execution, delivery, and performance of
this Agreement and all instruments and documents to be delivered by Parent and
Operating Subsidiaries pursuant to this Agreement, and the creation of all Liens
provided for herein and therein: (a) are within the corporate power of such
Person; (b) have been duly authorized by all necessary or proper corporate
action, including the consent of shareholders where required; (c) are not in
contravention of any provision of the certificate of incorporation or bylaws of
such Person; (d) will not violate any law or regulation or any order or decree
of any court or governmental instrumentality; (e) will not conflict with or
result in the breach or termination of, constitute a default pursuant to, or
accelerate any performance required by, any indenture, mortgage, deed of trust,
lease, agreement, or other instrument to which such Person is a party or by
which such Person or any of its property is bound; and (f) do not require the
consent or approval of any governmental body, agency, authority, or any other
Person which has not been made or obtained previously. Subject to the entry of
the Approval Order, this Agreement has been duly executed and delivered by
Parent and each Operating Subsidiary and constitutes the legal, valid, and
binding obligation of each such Person, enforceable against each such Person in
accordance with its terms.
7.4 FINANCIALS.
(a) The consolidated balance sheet of Parent as at June 30,
1987 (the "Parent Balance Sheet"), and the related statements of earnings and
retained earnings and changes in financial position for the fiscal period then
ended, has been prepared in accordance with GAAP applied on a consistent basis
and presents fairly
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the financial condition of Parent as at such date and the result of its
operations and changes in financial position for the period then ended.
(b) Parent, as at the date of the Parent Balance Sheet, had no
liabilities or obligations whatsoever, whether absolute, accrued, contingent, or
otherwise, or liabilities for Charges, long-term leases, or unusual forward or
long-- term commitments, which are not reflected and fully reserved in the
Parent Balance Sheet or disclosed in the Notes thereto and which would have a
Material Adverse Effect.
(c) From the date of the Parent Balance Sheet through the
Closing Date, (i) there has been no material adverse change in the business,
operations, prospects, assets, or financial or other condition of Parent and
(ii) no dividends or other distributions have been declared, paid, or made upon
any shares of Stock of Parent, nor have any shares of Stock of Parent been
redeemed, retired, purchased, or otherwise acquired for value by Parent.
7.5 NO DEFAULT. Neither Parent nor any Operating Subsidiary is in
default pursuant to or in respect of any contract, agreement, lease, or other
instrument to which such Person is a party nor has any such Person received any
notice of default pursuant to any such contract, agreement, lease, or other
instrument where such default would have a Material Adverse Effect; PROVIDED,
HOWEVER, that neither Parent nor any Operating Subsidiary shall be deemed to
have breached the representation and warranty in this Section 7.5 with respect
to any default with respect to any contract, agreement, lease, or other
instrument with any Person other than GE Capital unless such default has not
been cured within 30 days of its occurrence.
7.6 NO BURDENSOME RESTRICTIONS. No contract, lease, agreement, or other
instrument to which Parent or any Operating Subsidiary is a party or by which
Parent's or any Operating Subsidiary's property is bound, and no provision of
law or governmental regulation relating to or otherwise affecting Parent or any
Operating Subsidiary, will result in a Material Adverse Effect.
7.7 TAXES. All of Parent's and each Operating Subsidiary's Tax Returns
have been filed with or supplied to the appropriate governmental agencies, and
all Taxes shown thereon to be due and payable or otherwise due and payable have
been paid prior to the time when due and payable or will be timely paid with
adequate provision therefor being included in the books of such Person in
accordance with GAAP. All such Tax Returns are or will be, as the case may be,
true, complete, and accurate in all material respects. Except as provided in
Schedule 7.7(a) annexed hereto, none of the property owned by Parent or any
Operating Subsidiary is property which such Person is required to treat as being
owned by any other Person pursuant to the provisions of IRC ss. 168(f)(8) or is
"tax-exempt use property" within the meaning of IRC ss. 168(j)(3). Proper and
accurate amounts have been withheld by Parent and each Operating Subsidiary from
its employees for all periods in compliance in all material respects with the
income tax, social security, and unemployment withholdings provisions of
federal, state, local, and foreign law and such withholdings have been timely
paid to the respective governmental agencies or
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adequate provision therefor is included on the books of such Person in
accordance with GAAP. Except as provided on Schedule 7.7(b) hereto, neither
Parent nor any Operating Subsidiary has executed or filed with the IRS or any
other governmental authority any agreement or other document extending, or
having the effect of extending, the period for assessment or collection of any
Taxes. Neither Parent nor any Operating Subsidiary has filed a consent pursuant
to IRC ss. 341(f) or agreed to have IRC ss. 341(f)(2) apply to any dispositions
of subsection (f) assets (as such term is defined in IRC ss. 341(f)(4)). Except
as shown on Schedule 7.7(b), since 1984, neither Parent nor any Operating
Subsidiary has agreed or been requested to make any adjustment under IRC ss.
481(a) by reason of a change in accounting method or otherwise. Neither Parent
nor any Operating Subsidiary has any obligation pursuant to any written
tax-sharing agreement. GE Capital has not provided Parent or any Operating
Subsidiary with any advice with respect to the financial, legal, tax, or other
consequences of any transactions, including the transactions contemplated by
this Agreement, and Parent and Operating Subsidiaries have retained or employed
their own professionals to render such financial, legal, tax, or other advice
where they believe such advice is necessary. Anything to the contrary herein
notwithstanding, the representations and warranties made in this Section 7.7
shall not be deemed to be breached where such breach does not have a Material
Adverse Effect.
7.8 ERISA. Each Plan is in compliance, in all material respects, with
ERISA, the IRC, and all federal and state laws and all regulations promulgated
thereunder. With respect to each Plan, all reports required under ERISA or under
any other law or regulation to be filed by Parent or any ERISA Affiliate with
the relevant governmental authority have been duly filed and all such reports
are true and correct in all material respects as of the date given. Neither
Parent nor any ERISA Affiliate nor any other "party-in-interest" or
"disqualified person" has engaged in a "prohibited transaction," as such terms
are defined in IRC ss. 4975 and Title I of ERISA, in connection with any Plan
maintained by Parent or any ERISA Affiliate which would subject a
party-in-interest or disqualified person (after giving effect to any exemption)
to the tax on prohibited transactions imposed by IRC ss. 4975 or any other
liability where the "amount involved" under such section exceeds $1,000,000.
Except as set forth on Schedule 7.8 annexed hereto, no Plan has been terminated,
nor has any accumulated funding deficiency (as defined in IRC ss. 412(a)) been
incurred without regard to any waiver granted under IRC ss. 412. No funding
waiver from the IRS has been received or requested with respect to any Plan or
Multiemployer Plan. Neither Parent nor any ERISA Affiliate has failed to make
any contributions or to pay any amounts due and owing as required by terms of
any Plan or Multiemployer Plan. There has been no Reportable Event or event
requiring disclosure under ERISA ss.ss. 4041(c)(3)(C), 4062(f), or 4063(a) with
respect to any Plan or any related trust since the effective date of ERISA. As
of the end of the immediately preceding plan year, the value of the assets of
each Plan equalled or exceeded the present value of the accrued benefits of such
Plan utilizing Plan actuarial assumptions as in effect for such plan year. Other
than routine claims for benefits in the ordinary course of business, there are
no actions, claims, or lawsuits asserted or instituted against, and neither
Parent nor any ERISA Affiliate has any knowledge of any threatened actions,
claims, or lawsuits against, (a) the assets of any Plan or any fiduciary of a
Plan with respect to the operation of such Plan or (b) the assets of any
employee welfare benefit
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plan (as defined in ERISA ss. 3(l)) or any fiduciary thereof with respect to the
operation of such Plan, to the extent any such action, claim, or lawsuit, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect. Any bond required pursuant to ERISA with respect to any Plan has been
obtained and is in full force and effect. Neither Parent nor any ERISA Affiliate
has incurred, or reasonably expects to incur, (i) any liability, other than
premiums due under ERISA ss. 4007 to the PBGC, (ii) any withdrawal liability
(and no event has occurred which, with the giving of notice, would result in
such liability) under ERISA ss. 4201 as a result of a complete or partial
withdrawal (within the meaning of ERISA ss. 4203 or 4205) from a Multiemployer
Plan, or (iii) any liability under ERISA ss. 4062 to the PBGC, to a trust
established under ERISA ss. 4041 or 4042, or to a trustee appointed under ERISA
ss. 4042. Neither Parent nor any ERISA Affiliate nor any organization to which
Parent or any such ERISA Affiliate is a successor or parent corporation (within
the meaning of ERISA ss. 4069(b)) has engaged in a transaction within the
meaning of ERISA ss. 4069. Except for the provision of group health care
benefits to officers and certain key executives of Parent, and except for
premiums paid for retiree Medicare supplemental coverage, as of the Closing
Date, neither Parent nor any ERISA Affiliate maintains or has established any
welfare benefit plan (within the meaning of ERISA ss. 3(l)) which provides for
continuing benefits or coverage for any participant or any beneficiary of a
participant after such participant's termination of employment, except as may be
required by the Consolidated Omnibus Reconciliation Act of 1985, as amended, and
at the expense of the participant or the beneficiary of the participant.
7.9 NO LITIGATION. Except as set forth on Schedule 7.9 annexed hereto
(as such Schedule may be amended by Parent from time to time), no action, claim,
or proceeding is now pending or, to the knowledge of Parent or any Operating
Subsidiary, overtly threatened against Parent or any Operating Subsidiary, at
law, in equity, or otherwise, before any court, board, commission, agency, or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of arbitrators which
individually or in the aggregate, if adversely determined, could have a Material
Adverse Effect nor, to the knowledge of such Person, does a state of facts exist
which would form the basis for any such proceedings. None of such matters set
forth on Schedule 7.9 questions the validity of this Agreement or any action
taken or to be taken pursuant hereto.
7.10 BROKERS. No broker or finder brought about the obtaining, making,
or closing of the transactions contemplated by this Agreement and neither Parent
nor any Operating Subsidiary has any obligation to any Person in respect of any
finder's or brokerage fees in connection with the transactions contemplated by
this Agreement.
7.11 COMPLIANCE WITH LAW. With respect to each Account and
Indebtedness, (a) every action taken by Parent, and each Operating Subsidiary,
(b) every agreement with an Account Debtor, form, letter, notice, statement, or
other material used by Parent, and each Operating Subsidiary in connection with
the performance of its duties and obligations in connection with such Account
and Indebtedness, (c) every action taken by Parent, and each Operating
Subsidiary in connection with each sale of Merchandise resulting in an Account
and/or
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Indebtedness, and (d) all Account Documentation, complies, in all material
respects (except where non-compliance results from an act of GE Capital or
failure to act where GE Capital had a duty to act), with all federal, state, and
local statutes, regulations, ordinances, or administrative rulings, including,
without limitation, laws and regulations relating to unfair, deceptive, or
unconscionable acts or practices.
7.12 ACCOUNTS. Each item of Indebtedness on an Account owned by GE
Capital (and, to the extent applicable, each Account pursuant to which such
Indebtedness is incurred), at the time of purchase, establishment and/or
addition, (a) is owned by Parent, Old JMS or an Operating Subsidiary in the case
of a Credit Agreement; (b) is in all events free and clear of all Liens in favor
of any Person other than GE Capital; (c) arises in connection with a bona fide
final sale and delivery of Merchandise by Parent or an Operating Subsidiary in
the ordinary course of its business to an Account Debtor for personal, family,
or household use; (d) is for a liquidated amount as stated in the Account
Documentation relating thereto; (e) is enforceable against the Account Debtor in
accordance with its terms; (f) is not subject to any defense, deduction, offset,
or counterclaim; (g) bears a signature of an Account Debtor which is genuine and
not forged or unauthorized; and (h) is Eligible Indebtedness.
7.13 INFORMATION CORRECT. All information furnished by Parent or any
Operating Subsidiary to GE Capital for purposes of or in connection with this
Agreement or any transaction contemplated in connection with this Agreement, and
all information hereafter furnished by Parent or any Operating Subsidiary to GE
Capital, is true and correct in all material respects and no such information
omits to state a material fact necessary to make the information so furnished
not misleading.
7.14 TITLE. Upon the purchase of Accounts and Indebtedness by GE
Capital from Parent or any Operating Subsidiary, GE Capital will have good and
marketable title to such Accounts and Indebtedness.
7.15 TREATMENT OF WASHINGTON RESIDENTS. Parent and the Operating
Subsidiaries shall use Lender Credit Card Agreements in connection with the
establishment of Accounts for residents of the State of Washington and shall not
use Credit Agreements to create Accounts for residents of the State of
Washington.
For purposes of this Part 7, all references to "materiality"
with respect to Parent and/or Operating Subsidiaries shall be construed to refer
to a material effect with respect to Parent and Operating Subsidiaries on a
consolidated basis.
8. REPORTS AND NOTICES
As long as this Agreement remains in effect, Parent and, where
applicable, each Operating Subsidiary, shall deliver to GE Capital:
(a) Within 30 days after the end of each fiscal month, a copy
of the unaudited balance sheet of Parent as of the close of such fiscal month
and the related
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statements of income, cash flow and changes in financial position for such
fiscal month, all prepared in accordance with GAAP (except for the omission of
immaterial footnotes, the substance of which is contained in the audited
financial statements for the immediately preceding fiscal year) applied on a
consistent basis and in accordance with the accounting principles applied during
previous periods and accompanied by the certification of the chief executive or
chief financial officer of Parent that such financial statement presents fairly
the financial position of Parent, subject to normal year-end adjustments, as of
the end of such fiscal month and that there is no Default or Event of Default
and a Certificate executed by such chief executive or chief financial officer,
to the extent such monthly reports are required to be delivered to any lender of
Parent and Operating Subsidiaries.
(b) Within 60 days after the end of each fiscal quarter of
Parent, other than the last fiscal quarter of any Fiscal Year, a copy of the
unaudited balance sheet of Parent as of the close of such quarter and the
related statements of income and changes in financial position for such quarter,
all prepared in accordance with GAAP (except for the omission of immaterial
footnotes, the substance of which is contained in the audited financial
statements for the immediately preceding fiscal year) applied on a consistent
basis and in accordance with the accounting principles applied during previous
periods and accompanied by the certification of the chief executive or chief
financial officer of Parent that such financial statement presents fairly the
financial position of Parent, subject to normal year-end adjustments, as of the
end of such quarter and that there is no Default or Event of Default and a
Certificate executed by such chief executive or chief financial officer.
(c) Within 100 days after the close of each Fiscal Year, a
copy of the annual financial statement of Parent, consisting of a balance sheet
and related statements of income and changes in financial position, all prepared
in accordance with GAAP applied on a consistent basis and in accordance with the
accounting principles applied during previous periods (except for changes
required by GAAP), certified, as to Reorganized Debtors (or Parent or any
Operating Subsidiary if it has not filed a Chapter 11 Case), by the independent
certified public accountants regularly retained by Parent and reasonably
acceptable to GE Capital, and accompanied by a certificate from such accountants
to the effect that during the course of their examination they have not become
aware of any Default or Event of Default. After the effective date of the Plan
of Reorganization, the certification of the financial statements shall be
without qualification.
(d) As soon as practicable, but in any event within three
Business Days after Parent or any Operating Subsidiary becomes aware of the
existence of any Default, any Event of Default, or any development or other
information which would have a Material Adverse Effect, telephonic or
telegraphic notice specifying the nature of such Default, Event of Default,
event, development, or information, including the anticipated effect thereof,
which notice shall be confirmed in writing within five days.
(e) As soon as practicable, but in any event (i) within 30
days after Parent or any ERISA Affiliate knows or has reason to know that any
ERISA Event described in clause (a) of the definition of such term has occurred
and (ii) within ten
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days after Parent or any ERISA Affiliate knows or has reason to know that any
other ERISA Event has occurred or of any request for a minimum funding waiver
under IRC ss. 412 with respect to any Plan or Multiemployer Plan, a statement of
Parent's principal financial officer describing such ERISA Event and any action
Parent proposes to take with respect thereto.
(f) As soon an practicable, but in any event within two
Business Days following receipt thereof, copies of any notices received by
Parent or any ERISA Affiliate from PBGC of PBGC's intent to terminate any Plan
or to have a trustee appointed for the administration of any Plan.
(g) As soon as practicable, but in any event within two
Business Days after Parent or any ERISA Affiliate knows or has reason to know
that Parent or any such ERISA Affiliate has filed, or intends to file, a notice
of intent to terminate any Plan under a distress termination (within the meaning
of IRC ss. 4041(c)).
(h) As soon as practicable, but in any event within five
Business Days following receipt thereof, copies of any notices or correspondence
received by Parent or any ERISA Affiliate from any Multiemployer Plan sponsor
concerning the imposition of any withdrawal liability pursuant to ERISA ss.
4202.
(i) Promptly after the commencement thereof, notice of any
action suit, or proceeding before any court or governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
which may have a Material Adverse Effect on Parent, any ERISA Affiliate, or any
Plan.
(j) As soon as available, copies of all pleadings, including
motions and applications and complaints, and other documents filed by or on
behalf of the Debtors in the Chapter 11 Cases, and copies of all documents and
other information distributed by or on behalf of the Debtors to an official
committee of creditors or any other official committee appointed in the Chapter
11 Cases (except to the extent such information is subject to a confidentiality
agreement between the Debtors and such committee).
(k) Such other information respecting the Accounts, the
Indebtedness, or the business or financial condition or prospects of Parent or
any Operating Subsidiary as GE Capital may, from time to time, reasonably
request.
9. INDEMNIFICATION
9.1 INDEMNIFICATION BY PARENT AND OPERATING SUBSIDIARIES. Parent and
each Operating Subsidiary agree, jointly and severally, to protect, indemnify,
and hold harmless GE Capital and its Affiliates, and the employees, officers,
and directors thereof, against any and all liabilities, costs, and expenses
(including attorneys' fees and expenses), judgments, damages, claims, demands,
offsets, defenses, counterclaims, actions, or proceedings, by whomsoever
asserted, including, without limitation, any governmental or regulatory
authority, Account Debtors with respect to
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Accounts, any Person who prosecutes or defends any action or proceeding, whether
as representative of or on behalf of a class or interested group or otherwise,
arising out of, connected with, or resulting from: (a) any breach of warranty by
Parent or any Operating Subsidiary with respect to any sale of Merchandise
resulting in an Account or Indebtedness; (b) any transaction, contract,
understanding, promise, representation, or any other relationship, actual,
asserted, or alleged, between Parent or any Operating Subsidiary and any Account
Debtor relating to an Account; (c) any breach by Parent or any Operating
Subsidiary of any of the terms, covenants, representations, warranties,
conditions precedent, or other provisions contained in this Agreement or any
other instrument or document delivered to GE Capital in connection herewith or
therewith; (d) any breach by Old JMS of any terms, covenants, representations,
warranties, conditions precedent or other provision contained in the Account
Financing Agreement between GE Capital an Old JMS and any amendments or
supplements thereto; (e) any claim, demand, allegation, offset, defense, or
counterclaim which, if true or proven, would constitute a breach pursuant to (a)
or (c) of this Section 9.1; (f) any other act by Parent, any Operating
Subsidiary, or the employees or agents of such Person or omission by any such
Person where any of them had a duty to act; or (g) the use by any Person of any
Merchandise the purchase of which was financed by an Account. Such obligation to
indemnify shall survive any payment of amounts owing pursuant to any Account and
the termination of this Agreement.
9.2 INDEMNIFICATION BY GE CAPITAL. GE Capital agrees to protect,
indemnify, and hold harmless Parent, each Operating Subsidiary, and their
Affiliates, and the employees, officers, and directors thereof, against any and
all liabilities, costs, and expenses (including attorneys' fees and expenses),
judgments, damages, claims, demands, offsets, defenses, counterclaims, actions,
or proceedings, by whomsoever asserted, including, without limitation, any
governmental or regulatory authority, Account Debtors with respect to Accounts,
any Person who prosecutes or defends any action or proceeding, whether as
representative of or on behalf of a class or interested group or otherwise,
arising out of, connected with, or resulting from (a) any act by GE Capital, its
employees, or agents or omission by any such Person where any of them had a duty
to act or (b) any action taken by GE Capital pursuant to this Agreement which
fails to comply with law; PROVIDED, HOWEVER, that GE Capital shall not be
required to make any indemnification pursuant to this Section 9.2 with respect
to any form, Credit Agreement or Lender Credit Card Agreement which was supplied
by GE Capital to Parent or any Operating Subsidiary where such form, Credit
Agreement or Lender Credit Card Agreement was not used by such Person in
conformance with GE Capital's written instructions.
9.3 DEFENSE OF CLAIMS. In the event that any legal proceeding shall be
instituted or that any claim or demand shall be asserted by any Person in
respect of which payment may be sought by one party hereto from another pursuant
to this Part 9, the party seeking indemnification shall promptly cause written
notice of the assertion of any claim of which it has knowledge which is covered
by this indemnity to be forwarded to the other party which shall have the right,
to the extent of its indemnification, at its option and at its own expense, to
be represented by counsel of its choice and to defend against, negotiate,
settle, or otherwise deal with any
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proceeding, claim, or demand which is related to any loss, liability, damage, or
deficiency indemnified against pursuant hereto. The parties hereto agree to
cooperate fully with the defense, negotiation, or settlement of any such legal
proceeding, claim, or demand.
9.4 PAYMENT OF INDEMNIFIED AMOUNTS. After any final judgment or award
shall have been rendered by a court, arbitration board, or administrative agency
of competent jurisdiction, or a settlement shall have been consummated, the
party seeking indemnification shall forward to the other party notice of any
sums due and owing by it with respect to such matter and such party shall be
required to pay all of the sums so owing to the party seeking indemnification
within 30 days after the date of such notice.
10. AFFIRMATIVE COVENANTS OF PARENT AND OPERATING
SUBSIDIARIES
Parent and each Operating Subsidiary covenant and agree that, without
GE Capital's prior written consent, which GE Capital shall not be under any
express or implied obligation to grant, from and after the date hereof until all
Obligations shall have been paid in full and GE Capital shall own no
Indebtedness:
10.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Subject to the
requirements of the Bankruptcy Code, Parent and each Operating Subsidiary shall
(a) do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, except that neither Parent nor any
Operating Subsidiary shall have to qualify to do business in any jurisdiction
where the failure so to qualify will not have a Material Adverse Effect and (b)
transact business and invoice all Accounts in such name as shall clearly
indicate that all the Accounts belong solely to GE Capital. Notwithstanding the
provisions of subsection (a) of this Section 10.1, Parent or any Operating
Subsidiary may, upon 30 days' prior notice to GE Capital, cause itself to be
merged into or with any Operating Subsidiary or any company which is, as of the
Closing Date, an Affiliate or Subsidiary of Parent.
10.2 GE CAPITAL'S INSTRUCTIONS. Parent and each Operating Subsidiary
shall use forms and contracts supplied by GE Capital only in such manner and for
such purposes as GE Capital shall specify.
10.3 BOOKS AND RECORDS. Parent shall keep complete and correct records
and books of account with respect to its business activities, in which proper
entries, reflecting all of its financial transactions, are made in accordance
with GAAP consistently applied through the periods involved. Parent and each
Operating Subsidiary and their designees shall keep complete and correct records
and books of account with respect to all Indebtedness originated by Parent and
each Operating Subsidiary.
10.4 LITIGATION. Parent and each Operating Subsidiary shall notify GE
Capital in writing, promptly upon learning thereof, of any litigation involving
claims
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(exclusive of claims for punitive damages) against it or its assets in an amount
in excess of $500,000 for a single claim or $1,000,000 in the aggregate for
related claims and of the institution of any suit or administrative proceeding
against any Person that, if adversely determined, would have a Material Adverse
Effect. This Section 10.4 shall not apply to claims which are covered by
insurance where the carrier has not contested responsibility.
10.5 COMPLIANCE WITH LAW. In the performance of all of its obligations
pursuant hereto, Parent and each Operating Subsidiary shall comply, in all
material respects, with all federal, state, and local laws and regulations.
10.6 AGREEMENTS. Subject to the restrictions of the Bankruptcy Code,
Parent and each Operating Subsidiary shall perform all of its obligations and
enforce all of its rights pursuant to each agreement to which it is a party.
10.7 EMPLOYEE PLANS. For each Plan adopted by Parent or an Operating
Subsidiary, such Person shall, to the extent required by ERISA, (a) use its best
efforts to seek and receive determination letters from the IRS to the effect
that such Plan is qualified within the meaning of IRC ss. 401(a); (b) from and
after the adoption of any Plan, use its best efforts to cause such Plan to be
qualified within the meaning of IRC ss. 401(a) and to be administered in all
material respects in accordance with the requirements of ERISA and IRC ss.
401(a); and (c) not take any action which would cause such Plan not to be
qualified within the meaning of IRC ss. 401(a) or not to be administered in all
material respects in accordance with the requirements of ERISA and IRC ss.
401(a).
10.8 SUPPLEMENTAL DISCLOSURE. From time to time as may be necessary,
Parent and Operating Subsidiaries shall each promptly supplement or amend each
Schedule hereto with respect to any matter hereafter arising which, if existing
or occurring at the Closing Date, would have been required to be set forth or
described in such Schedule or which is necessary to correct any information in
such Schedule which has been rendered inaccurate thereby; PROVIDED, HOWEVER,
that no such supplement or amendment shall constitute a waiver by GE Capital of
any of its rights pursuant to this Agreement.
10.9 USE OF PROCEEDS. All funds paid by GE Capital to Parent and each
Operating Subsidiary pursuant to the Operating Agreement shall be used by each
such Person only for its working capital needs, for distributions made (after
giving effect thereto) in compliance with law or for other valid and lawful
corporate purposes.
11. NEGATIVE COVENANTS OF PARENT AND OPERATING
SUBSIDIARIES
Parent and each Operating Subsidiary covenant and agree that,
without GE Capital's prior written consent, which GE Capital shall not be under
any express or implied obligation to grant, from and after the date hereof until
all Obligations shall have been paid in full and GE Capital shall own no
Indebtedness:
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11.1 SUBSIDIARIES. Neither Parent nor any Operating Subsidiary shall
acquire the Stock of any Person that was not a Subsidiary as of the Closing
Date, except upon 30 days' prior written notice to GE Capital. In the event that
Parent shall form or acquire additional Subsidiaries principally engaged in the
same business as Operating Subsidiaries, the parties shall, by amendment to this
Agreement, and upon the reasonable satisfaction of GE Capital that there will be
no Material Adverse Effect, include such Subsidiaries as parties to this
Agreement.
11.2 ADVERSE TRANSACTIONS. Neither Parent nor any Operating Subsidiary
shall enter into any transaction, or permit or agree to any extension,
compromise, or settlement, or make any change or modification of any kind or
nature with respect to any Account, including any of the terms relating thereto,
which would have a Material Adverse Effect.
11.3 LIENS. Neither Parent nor any Operating Subsidiary shall create or
permit any Lien in and to the Accounts or Indebtedness except presently existing
or hereafter created Liens in favor of GE Capital.
11.4 SALES OF ASSETS. Neither Parent nor any Operating Subsidiary shall
sell, transfer, convey, or otherwise dispose of any Accounts or Indebtedness
except as contemplated by this Agreement.
11.5 CANCELLATION OF INDEBTEDNESS. Neither Parent nor any Operating
Subsidiary shall cancel any claim or debt it owns, except for adequate
consideration and in the ordinary course of business.
11.6 EVENTS OF DEFAULT. Neither Parent nor any Operating Subsidiary
shall take or omit to take any action, which act or omission would constitute a
Default or Event of Default.
11.7 NEW LOCATIONS. Neither Parent nor any Operating Subsidiary shall
conduct any of its business at a location other than those set forth on Schedule
7.2 annexed hereto nor shall any such Person maintain records at a location
other than those set forth on Schedule 7.2 without 30 days, prior written notice
to GE Capital. Parent shall not permit any Affiliate, other than Operating
Subsidiaries, to enter into credit agreements with customers for the financing
of the purchase of retail goods from any Affiliate of Parent.
11.8 ERISA. Parent shall not: (a) terminate, directly or indirectly, or
permit any ERISA Affiliate to terminate, directly or indirectly, any Plan
subject to Title IV of ERISA where such termination could reasonably be expected
to have a Material Adverse Effect, (b) permit the occurrence or continuance of
any ERISA Event which could reasonably be expected to have a Material Adverse
Effect, or (c) make, or permit any ERISA Affiliate to make, any complete or
partial withdrawal (within the meaning of ERISA ss. 4201) from any Multiemployer
Plan where such withdrawal could reasonably be expected to have a Material
Adverse Effect.
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12. TERM
12.1 TERMINATION AND RENEWAL. Subject to the provisions of Part 13
hereof, the arrangements contemplated hereby shall be in effect until October
31, 1999.
12.2 SURVIVAL OF OBLIGATIONS UPON TERMINATION. Except as otherwise
expressly provided for herein, no termination or cancellation (regardless of
cause or procedure) of this Agreement shall in any way affect or impair the
powers, obligations, duties, rights, and liabilities of Parent or any Operating
Subsidiary or the rights of GE Capital relating to any transaction or event
occurring prior to such termination. All undertakings, agreements, covenants,
indemnities, warranties, and representations contained herein shall survive such
termination or cancellation, except as specifically provided herein to the
contrary. Without in any manner limiting the generality of the foregoing, upon
such termination, GE Capital shall continue to own Accounts and Indebtedness and
Parent and each Operating Subsidiary shall continue to be jointly and severally
liable for the fees set forth herein and for RPR Indebtedness to the extent
specified in Section 2.4 until such time as the Aggregate Investment shall be
reduced to zero or Parent purchases Accounts and Indebtedness from GE Capital
pursuant to Section 12.4, whichever shall occur earlier.
12.3 TERMINATION FEE. Except as otherwise specified herein, upon any
termination hereof, Parent and each Operating Subsidiary shall be jointly and
severally liable to GE Capital for a termination fee equal to $3,500,000.
12.4 PURCHASE OF ACCOUNTS. Except as provided in the following
sentence, upon any termination hereof, Parent shall purchase all Accounts and
Indebtedness owned by GE Capital for an amount equal to the "Purchase Price" as
defined below. Notwithstanding the foregoing, upon any termination of this
Agreement under Section 12.1, Parent shall, if (and only if) requested in
writing by GE Capital, purchase all Accounts and Indebtedness owned by GE
Capital (other than Indebtedness incurred prior to January 1, 1997) for an
amount equal to the Purchase Price, provided that GE Capital may not require
Parent to consummate the purchase of such Accounts prior to the last Billing
Date in October 1999, and provided further that GE Capital may not request
Parent to purchase the Accounts and Indebtedness after the last Billing Date in
October 2000. In order to determine the amount of Indebtedness incurred prior to
January 1, 1997 (the "Prior Indebtedness") that remains outstanding at any point
in time for the purposes of calculating the amount of Indebtedness that GE
Capital does not have the right to require Parent to purchase pursuant to the
preceding sentence (and for no other purpose): (a) the amount of the Prior
Indebtedness as of December 31, 1996 was $750,991,264; (b) the number of
Accounts as of December 31, 1996 related to the Prior Indebtedness was 631,917
(the "Applicable Accounts"); and (c) all payments and write-offs with respect to
the Applicable Accounts shall be applied first to the Prior Indebtedness,
notwithstanding that (x) the Applicable Accounts may also have Indebtedness
incurred on or after January 1, 1997 and (b) the Account Debtor may have
directed that payments be otherwise applied. The obligation of Parent and each
Operating Subsidiary to pay the fees set forth in Section 2.3 and GE Capital's
obligation to perform the servicing activities specified in Section 3 shall be
terminated as of the date of any such
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purchase. For purposes of this Section 12.4, the "Purchase Price" shall be equal
to (a) 100% of the aggregate balance of all Indebtedness then owned by GE
Capital LESS (b) the sum of (i) GE Capital's net loss-to-collection ratio for
the immediately preceding three-year period (based on GE Capital's net losses
over the immediately preceding 3-year period calculated at 1% of the average
Aggregate Investment) MULTIPLIED BY 100% of the Aggregate Investment PLUS 5% of
such amount PLUS (ii) the sum of (A) 10% of the balance of all Accounts then
owned by GE Capital as to which any payment is between four and six months past
due PLUS (B) 25% of the balance of all Accounts then owned by GE Capital as to
which any payment is between seven and nine months past due PLUS (C) 50% of the
balance of all Accounts then owned by GE Capital as to which any payment in
between ten and twelve months past due PLUS (D) 100% of the balance of all
Accounts then owned by GE Capital as to which any payment is more than twelve
months past due. GE Capital hereby represents to Parent and each Operating
Subsidiary that the calculations described in (b) above represent the manner in
which GE Capital's Retailer Financial Services Operation calculates its
"three-year rolling reserves" and "formula reserve" as of the Closing Date.
12.5 TERMINATION OPTIONS. Upon the occurrence of any Termination Event,
Parent and each Operating Subsidiary may, upon 90 days' notice thereof to GE
Capital, terminate this Agreement. Upon any such termination, neither Parent nor
the Operating Subsidiaries shall be required to pay the termination fee set
forth in Section 12.3 if, and only if, the provisions of Section 12.4 are
complied with by Parent. For purposes hereof, a Termination Event shall occur if
Parent shall demonstrate to GE Capital that the Maximum Investment is
insufficient to accommodate all Eligible Indebtedness generated or reasonably
expected to be generated in connection with the businesses of Parent and
Operating Subsidiaries and Parent shall request GE Capital to increase the
Maximum Investment and GE Capital shall unreasonably refuse to comply with such
request within 100 days after the receipt of such request; PROVIDED, HOWEVER,
that such refusal by GE Capital shall not be deemed to be unreasonable if it is
based upon GE Capital's reasonable belief that the business, operations, or
financial condition of Parent and Operating Subsidiaries, taken as a whole, do
not merit such increase; and PROVIDED, FURTHER, that during the 100-day period
that GE Capital is considering such request, GE Capital shall continue to
purchase, establish and/or add Accounts and Indebtedness until such time as the
Aggregate Investment exceeds the Maximum Investment by 10%. Such termination
rights shall be in effect for twelve months following the occurrence of such
Termination Event.
12.6 LIQUIDATION OF ACCOUNTS. Upon any termination of this Agreement,
if Parent fails to purchase all of the Accounts and Indebtedness from GE Capital
under circumstances in which Parent is obligated to purchase such Accounts and
Indebtedness pursuant to this Agreement, GE Capital shall have the right, in
addition to and retaining all other rights it may have under the terms of this
Agreement or applicable law, (i) to liquidate such Accounts and Indebtedness in
any such lawful manner which may be expeditious or economically advantageous to
GE Capital, (ii) to issue a replacement or substitute credit card, or (iii) to
sell such Accounts and Indebtedness to any Person not a party to this Agreement.
Parent and each Operating Subsidiary expressly agree to cooperate with GE
Capital and take any action
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reasonably necessary to effectuate any such liquidation or replacement or
substitute credit card issuance in an orderly manner, including, without
limitation, accepting any substitute credit cards following the effective date
of termination and/or taking any other action as may reasonably require to
encourage use and acceptance of such replacement or substitute credit cards.
12.7 PURCHASE OF ACCOUNTS IN CONNECTION WITH AN ACQUISITION. In the
event Parent and Operating Subsidiaries are merged into a Person which has an
existing in-house private label credit card program or a Person acquires a
controlling interest in the Parent which Person has an existing in-house private
label credit card program, Parent or such Person may purchase the Accounts and
Indebtedness then owned by GE Capital at the price set forth in Schedule 12.7.
13. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
13.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default":
(a) Parent or any Operating Subsidiary shall fail to make any
payment of any amount owing pursuant to this Agreement when due and payable or
declared due and payable and such failure shall have remained unremedied for a
period of ten days after Parent has received notice of such failure from GE
Capital.
(b) Parent or any Operating Subsidiary shall fail or neglect
to perform, keep, or observe any term, provision, condition, or covenant
contained in this Agreement and such failure or neglect shall have a Material
Adverse Effect.
(c) Any representation, warranty, written statement, report,
financial statement, or certificate made or delivered by Parent or any Operating
Subsidiary, or any of their respective officers, employees, or agents, to GE
Capital shall not be true and correct in any material respect as of the date
when made or reaffirmed and the failure of such representation, warranty,
written statement, report, financial statement, or certificate to be true shall
have a Material Adverse Effect.
(d) Following the Petition Date (i) any of the Accounts or
Indebtedness or any of the other assets of Parent or any Operating Subsidiary
(where such assets shall have a present fair salable value of $1,000,000 or more
in the aggregate) shall be attached, seized, levied upon, or subjected to a writ
or distress warrant, or come within the possession of any receiver, trustee,
custodian, or assignee for the benefit of creditors and such writ or distress
warrant shall not have been vacated, discharged, stayed or bonded within 30
days; (ii) Parent or any Operating Subsidiary shall have concealed, removed, or
permitted to be concealed or removed, any part of its property, with intent to
hinder, delay, or defraud its creditors or any of them or made or suffered a
transfer of any of its property or the incurring of an obligation which may, in
the reasonable judgment of GE Capital, be fraudulent under any bankruptcy,
fraudulent conveyance, or other similar law; or (iii) Parent or any
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Operating Subsidiary shall have made any transfer of its property to or for the
benefit of a creditor at a time when other creditors similarly situated have not
been paid when such payments became due.
(e) A decree or order by a court having competent jurisdiction
(i) for relief in respect of Parent or any Operating Subsidiary pursuant to the
Bankruptcy Code or any other state or foreign bankruptcy or similar law, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee, or sequestrator
(or similar official) of Parent or such Operating Subsidiary or of any
substantial part of its properties, or (iii) ordering the winding-up or
liquidation of the affairs of Parent or any Operating Subsidiary shall be
entered and shall not be vacated, discharged, stayed, or bonded within 30 days
from the date of entry thereof.
(f) Parent or any Operating Subsidiary shall (i) file a
petition seeking relief under the Bankruptcy Code or any other state or foreign
bankruptcy or similar law, (ii) consent to the institution of proceedings
thereunder or to the filing of any such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee, or
sequestrator (or similar official) of such Person or of any substantial part of
its properties, (iii) fail generally to pay its debts as such debts become due,
or (iv) take any corporate action in furtherance of any such action.
(g) Final judgment for the payment of money in excess of
$1,000,000 in the aggregate shall be rendered against Parent or any Operating
Subsidiary and (i)(A) the same shall not be fully covered by insurance or (B)
the insurer shall not have accepted liability therefor or (ii) the same shall
not be vacated, stayed, bonded, paid, or discharged prior to expiration of the
applicable appeal period, but in no event more than 30 days; PROVIDED, that
during the pendency of the Chapter 11 Cases, this Event of Default shall apply
only to any such judgment that is granted the priority of an administrative
expense under the Bankruptcy Code.
(h) With respect to any Plan: (i) Parent and/or any ERISA
Affiliate or any other party-in-interest or disqualified person engages in any
transactions which in the aggregate would reasonably result in an "amount
involved," within the meaning of IRC ss. 4975, that exceeds $1,000,000 and would
result in a direct or indirect material liability pursuant to ERISA ss. 409 or
502; (ii) Parent and/or any ERISA Affiliate incurs any accumulated funding
deficiency (as defined in IRC ss. 412) that is not waived, in the aggregate in
excess of $1,000,000, or requests a funding waiver from the IRS for
contributions in the aggregate in excess of $1,000,000; or (iii) a liability of
Parent or an ERISA Affiliate which could accrue in the aggregate pursuant to
ERISA ss. 4062, 4063, 4064, 4219, or 4243 with respect to all such Plans,
computed by the actuary of the Plan taking into account any applicable rules and
regulations of the PBGC at such time, computed based upon the actuarial
assumptions used by such Plan, would result in liability of Parent or any ERISA
Affiliate to the PBGC in an amount in excess of $1,000,000; PROVIDED, that
during the pendency of the Chapter 11 Cases, this Event of Default shall apply
only to any such liability that is granted the priority of an administrative
expense under the Bankruptcy Code.
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(i) Parent or any ERISA Affiliate as employer pursuant to a
Multiemployer Plan shall have made a complete or partial withdrawal from such
Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have
notified such withdrawing employer that such employer has incurred a withdrawal
liability and such employer fails to pay such liability when legally required to
be paid; PROVIDED, that during the pendency of the Chapter 11 Cases, this Event
of Default shall apply only to any such withdrawal liability that is granted the
priority of an administrative expense under the Bankruptcy Code.
(j) Following the Petition Date, a default shall occur
pursuant to any other agreement, document, or instrument to which Parent or any
of its Affiliates is a party or by which any such Person or any such Person's
property is bound, and such default (i) has a Material Adverse Effect and (ii)
is not remedied or waived within the time period, if any, provided for therein;
PROVIDED, HOWEVER, that a default pursuant to the Tranche A Credit Agreement and
Tranche B Credit Agreement shall not be considered an Event of Default unless
and until the indebtedness owed to the Lenders pursuant thereto is accelerated,
except that, notwithstanding the above, for purposes of exercising the remedy
set forth in Section 13.2(a)(i), GE Capital may consider a default pursuant to
the Tranche A Credit Agreement and Tranche B Credit Agreement to be an Event of
Default.
13.2 REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) GE Capital, in its discretion may, upon written notice,
(i) terminate this Agreement with respect to further purchases, establishments
and/or additions of Accounts and Indebtedness and/or (ii) declare all
Obligations to be forthwith due and payable, whereupon all Obligations shall
become and be immediately due and payable, without further presentment, demand,
protest, or further notice of any kind, all of which are expressly waived by
Parent and each Operating Subsidiary.
(b) GE Capital, in its discretion, may exercise any one or
more of the rights and remedies accruing to a secured party under the Code of
the relevant state and any other law upon default by a debtor upon four Business
Days written notice to Parent and Operating Subsidiaries.
(c) Notwithstanding the foregoing, upon the occurrence of the
Event of Default specified in Sections 13.1(e) and 13.1(f), the purchasing of
Accounts shall automatically terminate without notice and all Obligations of
Reorganized Debtors (or Parent or any Operating Subsidiary if it has not filed a
Chapter 11 Case) to GE Capital under this Agreement shall be immediately due and
payable without further presentment, demand, protest, or further notice of any
kind, all of which are expressly waived by Parent and each Operating Subsidiary.
(d) GE Capital may, if GE Capital deems it reasonable,
postpone or adjourn any sale of the Accounts or Indebtedness, or any part
thereof, from time to time, by an announcement at the time and place of sale or
by announcement at the
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time and place of such postponed or adjourned sale, without being required to
give a new notice of sale. Parent and each Operating Subsidiary agree that GE
Capital has no obligation to preserve rights against prior parties to the
Collateral.
13.3 WAIVERS. Except as otherwise provided for in this Agreement,
Parent and each Operating Subsidiary waive (a) presentment, demand, and protest
and notice of presentment, dishonor, protest, default, nonpayment, maturity,
release, compromise, settlement, extension, or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper, and
guarantees at any time held by GE Capital on which Parent or any Operating
Subsidiary may in any way be liable and hereby ratifies and confirms whatever GE
Capital may do in this regard, (b) all rights to notice and a hearing prior to
GE Capital's taking possession or control of, or to GE Capital's replevy,
attachment, or levy upon, the Accounts or to any bond or security which might be
required by any court prior to allowing GE Capital to exercise any of GE
Capital's remedies, and (c) the benefit of all valuation, appraisal, and
exemption laws. Parent and each Operating Subsidiary acknowledge that it has
been advised by counsel of its choice with respect to this Agreement, and the
transactions evidenced by this Agreement.
14. MISCELLANEOUS
14.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT; SALE OF INTEREST.
This Agreement constitutes the complete agreement between the parties with
respect to the subject matter hereof and may not be modified, altered, or
amended except (a) by an agreement in writing signed by the parties hereto or
(b) as expressly provided for herein. Neither Parent nor any Operating
Subsidiary may sell, assign, or transfer any of its rights, titles, interests,
remedies, powers, or duties pursuant hereto. Parent and each Operating
Subsidiary hereby consent to GE Capital's sale of participations, assignment,
transfer, or other disposition, at any time, of any of its rights, titles,
interests, remedies, powers, or duties pursuant hereto; PROVIDED, HOWEVER, that
no such party shall be obligated to any such assignee or transferee until it
receives notice of the assignment or transfer; and PROVIDED, FURTHER, that such
transfer or assignment shall not increase any of the Obligations.
14.2 FEES AND EXPENSES. Parent and each Operating Subsidiary shall pay,
jointly and severally, all reasonable out-of-pocket expenses of GE Capital
including, without limitation, the fees and expenses of its external counsel, in
connection with the preparation and negotiation of this Agreement and the
transactions described herein. If, at any time, regardless of the existence of
an Event of Default, GE Capital shall employ external counsel for advice or
other representation or shall incur legal or other costs and expenses in
connection with:
(a) any amendment, modification, waiver, or consent with
respect to this Agreement or any sale or attempted sale of any interest herein
to any Person;
(b) any litigation, contest, dispute, suit, proceeding, or
action (whether instituted by GE Capital or any other Person) in any way
relating to this
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Agreement, or any other agreement to be executed or delivered in connection
herewith or therewith or in connection with the affairs of Parent or any
Operating Subsidiary (except where GE Capital is required to pay such costs and
expenses pursuant to Part 9 hereof or where Parent or any Operating Subsidiary
is the prevailing party in a suit with GE Capital);
(c) any attempt to enforce any rights of GE Capital against
Parent or any Operating Subsidiary or any other Person (other than an Account
Debtor) that may be obligated to GE Capital by virtue of this Agreement; or
(d) monitoring the Chapter 11 Cases, including the review of
pleadings and other documents filed in the Chapter 11 Cases and negotiations
with parties in interest in the Chapter 11 Cases, as such monitoring may relate
to or affect this Agreement, the Obligations, GE Capital's rights and remedies
hereunder, or the Accounts, Indebtedness, Merchandise purchased by Account
Debtors or reserves established hereunder;
then, and in any such event, the reasonable attorneys' fees arising from such
services and all reasonably incurred expenses, costs, charges, and other fees of
such counsel or of GE Capital in any way or respect arising in connection with
or relating to any of the events or actions described in this Section 14.2 shall
be jointly and severally payable, on demand, by Parent and each Operating
Subsidiary to GE Capital and shall be additional Obligations secured pursuant to
this Agreement.
14.3 CHANGES IN CIRCUMSTANCES. The parties acknowledge that the fees
and charges set forth herein have been determined based upon the assumption that
the Aggregate Investment will be equal to or exceed $300,000,000. If, for
whatever reason, the Aggregate Investment shall be less than $250,000,000 during
any consecutive 12-month period, GE Capital, upon three months' prior notice to
Parent, may increase the fees and charges set forth in Section 2.3 in order to
maintain the same economic return on its investment as if such Aggregate
Investment had been $300,000,000 or more; PROVIDED HOWEVER, that if the
Aggregate Investment is less than $300,000,000 during any such consecutive
12-month period due to store closings which result in a reduction of the number
of stores owned and operated by the Operating Subsidiaries from the total in
existence as of the Closing Date, the $300,000,000 set forth above shall be
reduced in the same proportion that Indebtedness initially arising from sales at
such closed stores bears to the total Indebtedness arising from sales at all
stores on the first Settlement Date after the Closing Date. In the event such
fees and charges are increased, Parent and the Operating Subsidiaries may
terminate this Agreement upon 12 months' notice to GE Capital. Anything
contained herein to the contrary notwithstanding, (i) Parent and the Operating
Subsidiaries shall continue their heretofore existing practices with respect to
the percentage of Accounts forwarded to GE Capital and (ii) GE Capital shall not
materially change its heretofore existing credit criteria and procedures,
including, without limitation, its administration of the "Instant Credit"
program, except in response to changes in economic conditions or loss
experience.
45
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14.4 NO WAIVER BY GE CAPITAL. GE Capital's failure, at any time or
times, to require strict performance by Parent or any Operating Subsidiary of
any provision of this Agreement shall not waive, affect, or diminish any right
of GE Capital thereafter to demand strict compliance and performance therewith.
Any suspension or waiver by GE Capital of an Event of Default shall not suspend,
waive, or affect any other Event of Default, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants, and representations of Parent
or any Operating Subsidiary contained in this Agreement and no Event of Default
pursuant to this Agreement shall be deemed to have been suspended or waived by
GE Capital, unless such suspension or waiver is by an instrument in writing
signed by an officer of GE Capital and directed to Parent specifying such
suspension or waiver.
14.5 REMEDIES. GE Capital's rights and remedies pursuant to this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which GE Capital may have pursuant to any other agreement, by operation of law,
or otherwise.
14.6 WAIVER OF JURY TRIAL. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights pursuant
hereto.
14.7 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
14.8 PARTIES. This Agreement shall be binding upon, and inure to the
benefit of, the successors of each party hereto, the assigns of GE Capital, and,
subject to Section 14.1, this Agreement and all Liens created hereby shall be
binding upon Parent and each Operating Subsidiary, the estate of Parent and each
Operating Subsidiary and any trustee or successor in interest of Parent or any
Operating Subsidiary in its Chapter 11 Case or any subsequent case commenced
under Chapter 7 of the Bankruptcy Code. The Liens created by this Agreement
shall be and remain valid and perfected in the event of the substantive
consolidation or conversion of any Chapter 11 Case or any other bankruptcy case
of any Debtor to a case under Chapter 7 of the Bankruptcy Code or in the event
of dismissal of any Chapter 11 Case or the release of any Collateral from any
Debtor's estate or the jurisdiction of the Bankruptcy Court for any reason,
without the necessity that GE Capital file financing statements or otherwise
perfect Liens under applicable law.
14.9 AUTHORIZED SIGNATURE. Until GE Capital shall be notified to the
contrary, the signature upon any document or instrument delivered pursuant
hereto of an officer of Parent or any Operating Subsidiary listed in Exhibit C
annexed hereto shall bind such Person and be deemed to be the act of such Person
affixed pursuant to and in accordance with resolutions duly adopted by the board
of directors of such Person.
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14.10 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement and the
Obligations arising pursuant hereto shall, in all respects, including all
matters of construction, validity, and performance, be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and performed in such state and any applicable laws of the United
States of America. Parent and each Operating Subsidiary agree to submit to
personal jurisdiction and to waive any objection as to jurisdiction or venue,
and agrees not to assert any defense based on lack of jurisdiction or venue of
the Bankruptcy Court. Service of process on Parent and each Operating Subsidiary
in any action arising out of or relating to this Agreement shall be effective if
mailed to such Person at the address listed in Section 14.11. Nothing herein
shall preclude GE Capital from bringing suit or taking other legal action in any
other jurisdiction.
14.11 NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval,
declaration, or other communication shall or may be given to or served upon any
of the parties by the other, or whenever any of the parties desires to give or
serve upon the other communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration, or other communication
shall be in writing and either shall be delivered in person with receipt
acknowledged or registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to GE Capital, at
General Electric Capital Corporation
2855 University Drive
Suite #510
Coral Springs, Florida 33065
Attention: Mr. R. H. Mills
With a copy to:
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06902
Attention: Vice President and General Manager,
Retailer Financial Services, N.A.
With a copy to:
Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, CA 94111
Attention: N. Dwight Cary
and to:
Fried, Frank, Harris, Shriver & Jacobson
47
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One New York Plaza
New York, NY 10004-1980
Attention: David N. Shine, Esq.
Gerald C. Bender, Esq.
(b) If to Parent or any Operating Subsidiary, at
Levitz Furniture Corporation
6111 Broken Sound Parkway NW
Boca Raton, Florida 33487
Attention: Mr. Patrick J. Nolan
With a copy to:
Levitz Furniture Corporation
6111 Broken Sound Parkway NW
Boca Raton, Florida 33487
Attention: Legal Department
and to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022-3897
Attention: Sally MacDonald Henry, Esq.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required pursuant hereto may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, or other communication pursuant hereto
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three days after the same
shall have been deposited in the United States mail. Failure or delay in
delivering copies of any notice, demand, request, consent, approval,
declaration, or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration, or other communication.
14.12 CONFIDENTIALITY. Each party hereto shall hold in confidence any
proprietary information obtained from any other party hereto in connection with
this Agreement and shall not disclose the same to any third party except (a) as
required by law or by judicial or administrative process or to appropriate
regulatory authorities, (b) as such information is or becomes public knowledge,
(c) to the extent that the other party discloses such information to agents or
professionals it retains to recover amounts owing pursuant hereto from another
party hereto, and (d) with the prior written consent of the other party pursuant
to an agreement between the Person to whom the information is being disclosed
and the nondisclosing party satisfactory in form and content to such
nondisclosing party as to the confidentiality of such
48
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proprietary information; PROVIDED, HOWEVER, that prior to disclosing any
proprietary information of another party hereto to any Person, the party making
such disclosure shall notify the appropriate party of the nature of such
disclosure and of the fact that such disclosure will be made. Parent and each
Operating Subsidiary agree that the text of this Agreement, as well as the
financial and other terms of all such documents, are considered proprietary to
GE Capital and will not be disclosed to any Person, including, without
limitation, any creditor of such Person, except as set forth in this Section
14.12.
14.13 VALUE ADDED PROGRAMS. Notwithstanding Section 14.12, GE Capital
and its Affiliates may, with the written consent of Parent, contact Account
Debtors for the purpose of soliciting purchases by Account Debtors of goods
and/or services which do not compete with goods and/or services sold by Parent
and the Operating Subsidiaries.
14.14 PAYMENTS. All payments by Parent and each Operating Subsidiary to
be made pursuant hereto shall be made in lawful money of the United States in
immediately available funds to an account designated by GE Capital. Except an
expressly provided herein, if any amount due pursuant hereto is not paid when
due and owing, Parent and each Operating Subsidiary jointly and severally agree
to pay, on demand, a charge equal to 2% per annum above the Prime Rate on such
amount, until such amount is paid in full.
14.15 FURNISHINGS AGREEMENT. The parties hereto agree that, from and
after the date hereof, the Furnishings Agreement shall no longer be in effect.
14.16 SURVIVAL. The representations and warranties of Parent and each
Operating Subsidiary in this Agreement shall survive the execution, delivery,
and acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto.
14.17 SECTION TITLES. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
14.18 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
14.19 MONOGRAM BANK CREDIT CARD PROGRAM. Parent, Operating Subsidiaries
and GE Capital acknowledge that they have been negotiating a new private label
credit card program to be entered into by Parent, Operating Subsidiaries and
Monogram Credit Card Bank of Georgia, a wholly owned subsidiary of GE Capital,
the terms of which are substantially set forth in a memorandum of understanding
dated June 9, 1997. Parent, Operating Subsidiaries and GE Capital acknowledge
that the new credit card program will be beneficial to all parties and agree to
continue to negotiate such new credit card program in good faith; PROVIDED that
no Event of Default has occurred or is continuing.
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14.20 REORGANIZED DEBTORS. Notwithstanding any provision of this
Agreement to the contrary, the provisions of this Agreement that pertain to the
Reorganized Debtors shall not be operative until after the effective date of the
Plan of Reorganization.
14.21 EFFECTIVE DATE OF AGREEMENT. This Agreement shall not be
effective until entry of the Approval Order.
14.22 CERTAIN ADDITIONAL PROVISIONS. Schedule 14.22 sets forth certain
additional provisions that shall be applicable to this Agreement during the
pendency of the Chapter 11 Cases.
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IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year first above written.
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ James C. Ungari
--------------------------
Title: Duly Authorized Signatory
-----------------------
LEVITZ FURNITURE CORPORATION
By: /s/ Patrick J. Nolan
--------------------------
Title: Senior Vice President Finance
-----------------------
LEVITZ FURNITURE COMPANY OF THE
MIDWEST, INC.
By: /s/ Patrick J. Nolan
--------------------------
Title: Vice President Finance
-----------------------
LEVITZ FURNITURE COMPANY OF THE
PACIFIC, INC.
By: /s/ Patrick J. Nolan
--------------------------
Title: Vice President Finance
-----------------------
LEVITZ FURNITURE COMPANY OF
WASHINGTON, INC.
By: /s/ Patrick J. Nolan
--------------------------
Title: Vice President Finance
-----------------------
JOHN M. SMYTH COMPANY
By: /s/ Patrick J. Nolan
--------------------------
Title: Vice President Finance
-----------------------
51
<PAGE>
LEVITZ SHOPPING SERVICE, INC.
By: /s/ Patrick J. Nolan
--------------------------
Title: Vice President Finance
-----------------------
52
EXHIBIT 99.4
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re )
) Chapter 11
Levitz Furniture )
Incorporated, et al., ) Case Nos. 97-1842(JJF)
)
Debtors. ) Jointly Administered
ORDER PURSUANT TO BANKRUPTCY CODE
SECTIONS 105, 363 AND 365 AUTHORIZING THE DEBTORS TO
SELL ACCOUNTS AND ASSUME SECOND AMENDED AND RESTATED
ACCOUNT PURCHASE AND CREDIT CARD PROGRAM AGREEMENT
This matter coming before the Court on the Emergency Motion
for an Order Pursuant to Sections 105, 363 and 365 of the Bankruptcy Code
Authorizing the Debtors to Sell Accounts and Assume Second Amended and Restated
Account Purchase and Credit Card Program Agreement (the "Motion") filed by the
above-captioned debtors and debtors in possession; due notice of the Motion
having been given to the Office of the United States Trustee for the District of
Delaware, counsel to the lenders under the debtor in possession credit agreement
(the "DIP Credit Agreement"), and each creditor on the List of 20 Largest
Creditors filed pursuant to Rule 1007(d), the Court having reviewed the Motion
and having heard the statements of counsel in support of the relief requested in
the Motion at the hearing before the Court (the "Hearing");
<PAGE>
IT IS HEREBY FOUND THAT:
1. The Court has jurisdiction over this matter pursuant to 28 U.S.C.
157 and 1334, and this is a core proceeding pursuant to 28 U.S.C. 157(b)(2).
2. Notice of the Motion was sufficient under the circumstances.
3. The legal and factual bases set forth in the Motion and at the
Hearing establish just cause for the relief granted herein.
4. General Electric Capital Corporation ("GE Capital") and Levitz
Furniture Corporation, Levitz Furniture Company of the Midwest, Inc., Levitz
Furniture Company of the Pacific, Inc., Levitz Furniture Company of Washington,
Inc., Levitz Shopping Service, Inc., and John M. Smyth Company (collectively,
the "Debtors") previously entered into that certain Account Purchase Agreement
dated as of October 31, 1987, which was amended, restated and renamed as of May
2, 1994 as the Account Purchase and Credit Program Agreement as amended from
time to time, pursuant to which the Debtors agreed to sell and GE Capital agreed
to purchase certain customer credit accounts of the Debtors, as more
particularly described therein.
5. This credit program (the "Program") provided by GE Capital is
critical to the Debtors' operations.
6. GE Capital has agreed to (a) purchase Accounts and Indebtedness (as
hereinafter defined) from the Debtors and (b) provide certain credit-related
services to the Debtors, all pursuant to the terms and conditions set forth in
and subject to (i) the Second Amended and Restated Account Purchase and Credit
Card Program Agreement dated as of September 5, 1997 between GE Capital and the
Debtors (the "Program Agreement"), and (ii) the consent letter dated as of
September 5, 1997
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<PAGE>
between GE Capital and the Debtors (the "Consent Letter"). All accounts covered
under the Program Agreement shall be referred to as the "Accounts" and all
indebtedness and amounts owing by account debtors with respect to the Accounts
shall be referred to as the "Indebtedness."
7. Except as otherwise provided in the Program Agreement, none of the
Debtors have a property interest in (a) the Accounts owned by GE Capital; (b)
any Indebtedness owned by GE Capital; and (c) any account or reserve established
in connection with the Program Agreement.
8. Under certain circumstances and pursuant to the Program Agreement
the Debtors have granted GE Capital a first priority security interest in the
Accounts, the Indebtedness, certain related collateral such as merchandise
purchased by the account debtors and certain reserve accounts, all as more fully
described in the Program Agreement (the "Collateral"), subject only to
perfected, valid, enforceable, unavoidable security interests existing as of the
petition date that are not subject to Section 552(a) of the Bankruptcy Code. The
Collateral secures all of the obligations of the Debtors under the Program
Agreement, which obligations include the payment of certain service fees and the
purchasing of some or all of the applicable Accounts under certain circumstances
(the "Obligations").
9. It appears that the terms and conditions of the Program Agreement
have been negotiated in good faith and at arm's-length by each of the parties
thereto.
10. The sale of the Accounts and the other transactions conducted
pursuant to the Program Agreement shall be deemed to have been conducted in good
faith, as that term is used in Section 363(m) of the Bankruptcy Code.
IT IS HEREBY ORDERED THAT:
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<PAGE>
1. The relief requested in the Motion be, and is hereby,
granted.
2. The Program Agreement and the Consent Letter, each in the
form attached to the Motion as Exhibits A and B, respectively, are approved.
3. Each of the Debtors shall be, and is hereby, authorized
pursuant to Section 365 of the Bankruptcy Code to assume and perform all of its
obligations under the Program Agreement. The Program Agreement is hereby deemed
assumed by and binding upon the Debtors pursuant to Section 365 of the
Bankruptcy Code.
4. Each of the Debtors shall be, and is hereby, authorized
pursuant to Section 363 of the Bankruptcy Code to sell the Accounts to GE
Capital under the terms and conditions of the Program Agreement.
5. The terms and conditions of the Program Agreement are
hereby approved and authorized, incorporated as part of this Order, and deemed
binding on and enforceable against each of the Debtors, each of the Debtors'
estates and any successors or assigns thereof.
6. Notwithstanding any other provisions of this Order, neither
the proceeds of the Program, nor the Collateral shall be used by representatives
of any of the Debtors' estates to investigate, prosecute or otherwise pursue any
prepetition or postpetition claims or causes of action against GE Capital or any
of their subsidiaries.
7. Each of the Debtors on behalf of itself and its estate is
hereby deemed to: (i) release and discharge GE Capital, together with its
agents, attorneys, employees, heirs, executors, administrators, officers,
directors, successors, and assigns from any and all claims and causes of action
arising out of, based upon or related to the Program Agreement, the Obligations
or Collateral prior to the entry of this Order; and (ii) waive any and all
defenses (including, without limitation, offsets
4
<PAGE>
and counterclaims of any nature or kind) as to the validity, perfection,
priority, enforceability, and nonavoidability (under the Bankruptcy Code or
otherwise) of the Obligations and the security interests in and liens upon the
Collateral. The releases and waivers set forth in this paragraph are deemed
effective upon the date of entry of this Order, subject to the parties' rights
to object on the terms and conditions set forth in Paragraph 8 hereof.
8. The statutory committee of unsecured creditors appointed in
the case shall have 60 calendar days from the date such committee is appointed
by the Office of the United States Trustee for the District of Delaware within
which to file and to serve upon counsel for GE Capital objections or complaints
respecting the (i) claims, causes of action and defenses released by the Debtors
pursuant to Paragraph 7 hereof, or (ii) validity, extent, priority, avoidability
or enforceability of the Obligations or the security interests in and liens upon
the Collateral. If no objections or complaints are filed with this Court and
served upon counsel of record for GE Capital within the time period set forth
above, the provisions of Paragraph 7 hereof shall become final and binding on
all such parties.
9. As adequate assurance of future performance, each of the
Debtors is hereby authorized to grant to GE Capital, and GE Capital is hereby
granted, valid, perfected and enforceable security interests in and liens upon
the Collateral relating to the Program Agreement.
10. GE Capital's security interests in and liens upon the
Collateral shall be senior in rank and priority to all other liens and security
interests subject only to security interests in or liens upon the Collateral
that were valid, perfected, unavoidable, enforceable and in existence on the
petition date and not subject to
5
<PAGE>
Section 552(a) of the Bankruptcy Code. The security interests and liens granted
to GE Capital hereunder, shall at all times be senior to the rights of any
successor trustee or estate representative in any of the Chapter 11 case or in
any subsequent case or proceeding under the Bankruptcy Code.
11. Except as otherwise provided in the Program Agreement and
subject to paragraph 8 hereof, the Indebtedness or any proceeds thereof, whether
incurred before or after the effectiveness of the Program Agreement are and
shall be free and clear of any security interest, lien, encumbrance, claim or
other interest other than in favor of GE Capital and shall not be subject to
recovery, offset or avoidance. Except as otherwise provided in the Program
Agreement and subject to paragraph 8 hereof, upon receipt by GE Capital, the
amounts paid or to be paid by any of the Debtors as a result of deductions,
offset or otherwise under the Program Agreement or any proceeds thereof, whether
such amounts are paid or received prior to or after the petition date, are free
and clear of any security interest, lien, encumbrances, claim or other interest
whether arising prepetition or postpetition and shall not be subject to
recovery, offset or avoidance.
12. The automatic stay of Section 362 of the Bankruptcy Code
is hereby modified solely to the extent necessary to permit GE Capital to
perform in accordance with, and exercise its rights and remedies pursuant to,
the Program Agreement without further application or motion to, or order from,
the Bankruptcy Court, including, without limitation, (a) enforcing rights and
remedies with respect to the Accounts, the Indebtedness and the other Collateral
upon four business days notice to the Debtors, and (b) deducting amounts due to
it from amounts owing to any of the Debtors. The Debtors waive any right to seek
relief under the Bankruptcy Code,
6
<PAGE>
including without limitation, under Bankruptcy Code ss. 105, to the extent any
such relief would in any way restrict or impair the rights and remedies of GE
Capital set forth in this Order or in the Program Agreement.
13. The security interests and liens granted to GE Capital
pursuant to this Order and the Program Agreement shall be, and are hereby,
perfected by operation of law upon execution of this Order by the Court. GE
Capital shall not be required to file or record any financing statements,
mortgages or other documents in any jurisdiction or to take any other action in
order to validate or perfect the sale of Accounts and the security interests and
liens granted hereunder. This Order shall be deemed sufficient and conclusive
evidence of the security interests and liens granted hereunder. If GE Capital
shall choose to file financing statements or record mortgages or other
documents, or otherwise confirm perfection of such security interests and liens,
GE Capital is hereby authorized and granted relief from the automatic stay of
Section 362 of the Bankruptcy Code to effect such filings and recordations, and
all such financing statements, mortgages, or similar documents shall be deemed
to have been filed, recorded or made on the date hereof.
14. The Obligations arising under the Program Agreement shall
have the priority of an administrative expense under Section 503(b) of the
Bankruptcy Code.
15. The sale of the Accounts and Indebtedness and payments to
purchase Indebtedness on the terms and conditions set forth in the Program
Agreement are subject to the protections contained in Section 363(m) of the
Bankruptcy Code.
7
<PAGE>
16. The Debtors shall, within three (3) business days of the
date hereof, serve by either personal service, overnight delivery service,
courier service or facsimile service copies of a notice, the Motion, and a copy
of this Order to (i) counsel for any statutory committee, if any, (ii) each
creditor on the List of 20 Largest Creditors filed pursuant to Bankruptcy Rule
1007(d), (iii) the Office of the United States Trustee for the District of
Delaware, (iv) counsel to the lenders under the DIP Credit Agreement and (v) any
other party which has filed a request for special notice with the Court and
served such request on the Debtors' counsel. The notice shall state that any
party in interest objecting to all or any portion of the relief granted in this
Order shall file a written objection with the Court no later than September 30,
1997, which objection shall be served so that it is received on or before 4:00
p.m. (Eastern Standard Time) of such date by the Office of the United States
Trustee for the District of Delaware and the following counsel:
8
<PAGE>
Counsel to the Debtors:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attn: Sally M. Henry, Esq.
Tel: (212) 735-3000
Fax: (212) 735-2000
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899-0636
Attn: Gregg M. Galardi, Esq.
Tel: (302) 651-3000
Fax: (302) 651-3001
Counsel to GE Capital:
Murphy, Weir & Butler
A Professional Corporation
101 California Street
39th Floor
San Francisco, CA 94111
Attn: N. Dwight Cary, Esq.
Tel: (415) 398-4700
Fax: (415) 421-7879
and
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Attention: Gerald C. Bender, Esq.
David N. Shine, Esq.
Tel: (212) 859-8000
Fax: (212) 859-8583
17. If no written objections have been timely filed with the
Court, and served upon and received by all parties entitled to notice thereof,
this Order shall remain in full force and effect and constitute final authority
for the transactions contemplated by the Program Agreement and this Order, and
any objection by any
9
<PAGE>
party in interest to the terms of this Order and the relief requested in the
Motion shall be deemed forever waived.
18. If a timely objection is filed, served and received, (a) a
written reply thereto shall not be required but may be filed and served so that
it is received no later than September 30, 1997 on or before 11:00 a.m. (Eastern
Standard Time) and (b) a hearing shall be held on October 7, 1997 at 11:00 a.m.
At such hearing, the Court shall consider said objections and reconsider all or
any portion of the relief granted herein; PROVIDED, HOWEVER, that regardless of
the outcome of any such hearing or the reversal or modification of this order on
appeal, (i) any Accounts or Indebtedness purchased by GE Capital after the date
hereof and not repurchased by the Debtors, shall constitute the sole and
exclusive property of GE Capital and none of the Debtors' estates shall have an
interest therein whatsoever, (ii) any obligations already incurred by any of the
Debtors to GE Capital arising under the Program
10
<PAGE>
Agreement after the date hereof shall constitute administrative obligations of
such Debtor's estate, and (iii) any actions taken by GE Capital pursuant to the
terms of the Program Agreement and this Order shall have had the protections set
forth herein.
Dated: Wilmington, Delaware
September 8, 1997
/S/ JOSEPH J. FARNAN, JR.
UNITED STATES DISTRICT JUDGE
PRESENTED BY:
By:_________________________________
Counsel for Debtors and Debtors
in Possession
APPROVED AS TO FORM AND CONTENT:
By:________________________________
Counsel for General Electric
Capital Corporation
11
EXHIBIT 99.5
LEVITZ TO REORGANIZE UNDER CHAPTER 11
BOCA PATON, FLORIDA - September 5, 1997 - Levitz Furniture Incorporated
(NYSE:LFI) today announced it had filed a voluntary petition for reorganization
under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy
Court in the District of Delaware, Case No. 97-1842.
The Company also indicated that it had secured a debtor-in- possession (DIP)
financing commitment of $260 million from a group of lenders led by B.T.
Commercial Corporation. The Company said it expects to meet its day to day
operating needs, including prompt payment of post petition invoices and to pay
current employees wages and benefits in an ongoing manner.
Michael Bozic, Chairman and CEO said, "Over the past six months we have examined
a number of alternatives to this difficult decision. Operating under Chapter 11
protection will enable the Company to continue the turnaround and repositioning
efforts begun last year. It also affords us the opportunity to restructure the
heavy debt load which has been consuming our cash flow, and to reorganize and
strengthen our business operations."
"As part of our planned reorganization, we will discontinue operations in the
following under-performing markets: Atlanta - Cincinnati - Jacksonville - Reno -
Salt Lake City - Fort Myers, and Houston and close one smaller satellite store
in Potomac, VA and one in East Ft. Lauderdale. The main Ft. Lauderdale store was
recently remodeled and remains a major contributor in the South Florida market."
"In spite of these difficult times, we are very optimistic about our Company's
future. Chapter 11 reorganization will allow us to concentrate our efforts on
building an even greater presence in our major markets as America's Leading
Furniture Superstore. In addition, we will continue efforts to upgrade our
furniture assortments with fashionable merchandise from quality worldwide
suppliers."
"In the meantime, we expect hundreds of truckloads of furniture will leave
factories over the next few days to fill customer orders and replenish
inventories. We fully expect to fill all new as well as previously sold customer
orders as soon as shipments arrive."
Levitz is a leading specialty retailer of furniture in the United States with a
chain of warehouses, showrooms and satellite stores located in major
metropolitan areas. More information about Levitz is available via the World
Wide Web at http://www.levitz.com.
<PAGE>
This press release contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the financial condition, results of operations and business of Levitz. These
forward-looking statements involve certain risks and uncertainties. No assurance
can be given that any such matters will be realized. Factors that may cause
actual results to differ materially from those contemplated by such
forward-looking statements include, among others, the following possibilities:
(I) competitive conditions in the industry in which Levitz operates, and (II)
general economic conditions that are less favorable than expected.
Contact: Patrick J. Nolan
Sr. Vice President Finance
561-994-5151
