<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: February 2, 1998
APS HOLDING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-22318 76-0306940
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
15710 JOHN F. KENNEDY BLVD., SUITE 700
HOUSTON, TEXAS 77032-2347
(Address of Principal Executive Offices)
(713) 507-1100
(Registrant's telephone number, including area code)
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ITEM 3. BANKRUPTCY OR RECEIVERSHIP
On February 2, 1998, APS Holding Corporation and its direct and indirect
subsidiaries ("the Company") filed a voluntary petition under Chapter 11 of the
United States Bankruptcy Code in the United States District Court for the
District of Delaware. The bankruptcy case of the Company is assigned to the
Honorable Peter J. Walsh and designated as Case No. 98-197.
On February 2, 1998, the United States Bankruptcy Court ("Bankruptcy Court")
for the District of Delaware approved a number of motions filed on February 2,
1998, including approval on an interim basis of a $100 million debtor in
possession (DIP) financing with a syndicate of bank lenders led by The Chase
Manhattan Bank. The Bankruptcy Court has authorized the Company to borrow up to
$45 million immediately under the $100 million DIP facility. A final hearing
to consider approval of the DIP Facility is scheduled for February 20, l998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) EXHIBITS
99.1 Press Release issued by the Company on February 2, 1998.
99.2 Press Release issued by the Company on February 3, 1998.
99.3 Interim Order (I) authorizing secured postpetition financing on a
superpriority basis pursuant to 11 U.S.C. Section 364, (II) authorizing
use of cash collateral pursuant to 11 U.S.C. Section 363, (III)
granting adequate protection pursuant to 11 U.S.C. Sections 363 and
364, and (IV) scheduling a final hearing pursuant to bankruptcy rule
4001(C).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APS HOLDING CORPORATION
Date: February 13, 1998 By: /s/ Bettina M. Whyte
----------------------------
Bettina M. Whyte, President
and Chief Executive Officer
Date: February 13, 1998 By: /s/ John L. Hendrix
----------------------------
John L. Hendrix, Senior Vice
President and Chief
Financial Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
99.1 Press release issued by the Company on February 2, 1998
99.2 Press release issued by the Company on February 3, 1998
99.3 Interim Order (I) authorizing secured postpetition financing
on a superpriority basis pursuant to 11 U.S.C. Section 364, (II)
authorizing use of cash collateral pursuant to 11 U.S.C.
Section 363, (III) granting adequate protection pursuant to
11 U.S.C. Sections 363 and 364, and (IV) scheduling a final
hearing pursuant to bankruptcy rule 4001(C).
</TABLE>
<PAGE> 1
[APS LETTERHEAD]
FOR IMMEDIATE RELEASE Media Contact:
Robert Mead (212) 445-8208
Dan Cahill (212) 445-8216
Investor Contacts:
Mark Valenta (212) 445-8263
Dan Cahill (212) 445-8216
APS HOLDING CORPORATION SEEKS TO REORGANIZE UNDER CHAPTER 11
COMPANY TO PURSUE FINANCIAL RESTRUCTURING
SEEKS COURT APPROVAL FOR $100 MILLION DIP FINANCING
Houston, TX (February 2, 1998) - APS Holding Corporation (NASDAQ - APSI)
announced today that the company had filed a voluntary petition under Chapter
11 of the U.S. Bankruptcy Code in the District of Delaware.
APS said that its performance has weakened due to competitive pressures in the
industry and the effects of an aggressive growth strategy that have left the
Company highly leveraged. APS said that protection under Chapter 11 would allow
the Company to restructure its operations and develop a plan of reorganization
to reduce its debt burden.
APS expects to operate in the normal course of business during the
reorganization proceeding and has received a commitment, subject to court
approval, for a $100 million in debtor-in-possession (DIP) financing from a
consortium of lenders led by The Chase Manhattan Bank. Such financing will be
used to fund normal business operations and other cash needs.
APS also announced that, subject to court approval, it has hired turnaround
consultants Jay Alix & Associates and that Bettina M. Whyte, a Principal with
the firm, would lead the Company's financial and operational turnaround effort.
Ms. Whyte is expected to be appointed Chief Executive Officer of APS by the
Board of Directors following the filing.
"Today's Chapter 11 filing is a prudent step that allows APS time to improve
operating performance and develop a plan to restructure our debt," said Whyte.
"The filing enhances our ability to access the financing necessary to operate
our business in the ordinary course. This is particularly important to our
suppliers, employees and customers, whose ongoing support is key to the success
of the Company," she said.
<PAGE> 2
APS Holding Corporation is a national distributor of Big A(R) brand and
manufacturer, branded automotive replacement parts, as well as tools,
equipment, supplies and accessories. It sells to more than 1,650 associated
auto parts stores through 27 distribution centers and operates approximately
270 company-owned Big A(R) stores and 210 Installer Service Warehouse units.
The Company has annual sales in excess of $800 million.
This news release contains forward-looking statements that involve risks and
uncertainties. Actual results, events and performance could differ materially
from those contemplated by these forward-looking statements. Among the factors
that could cause actual results, events and performance to differ materially
are risks and uncertainties discussed in this news release and those detailed
from time to time in the Company's filings with the Securities and Exchange
Commission, including the Company's annual report on Form 10-K for the
fiscal-year ended January 25, 1997 and the Company's quarterly report on Form
10-Q for the quarterly periods ended April 25, July 25 and October 25, 1997,
and in the Company's other public reports and statements.
###
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[APS LETTERHEAD]
FOR IMMEDIATE RELEASE Media Contact:
Robert Mead (212) 445-8208
Dan Cahill (212) 445-8216
Investor Contacts:
Mark Valenta (212) 445-8263
Dan Cahill (212) 445-8216
APS HOLDING CORPORATION RECEIVES APPROVAL OF FIRST DAY ORDERS
BOARD OF DIRECTORS WILL APPOINT BETTINA M. WHYTE CEO
COMPANY GAINS ACCESS TO $100 MILLION DIP FINANCING
Houston, TX (February 3, 1998) - APS Holding Corporation (NASDAQ - APSI)
announced that the U.S. Bankruptcy Court in the District of Delaware has
approved a number of First Day Orders which will enable the Company to continue
normal business operations while it undertakes a reorganization. These rulings
follow the Company's filing of a voluntary petition under Chapter 11 of the
U.S. Bankruptcy Code on February 2, 1998.
The court's orders, among other things, gave interim approval to the $100
million debtor-in-possession (DIP) financing the Company has arranged with The
Chase Manhattan Bank, as agent, and a consortium of lenders. According to the
court's ruling, APS has immediate access for up to $45 million under the $100
million DIP facility. A final hearing on the DIP approval is scheduled for
February 20, 1998.
The Company also said it received the court's approval to continue, among other
things:
o The payment of normal employee salaries, wages and benefits without
interruption;
o Customer access to their APS open credit lines; and
o The acceptance of customers' product returns, core returns, warranty
claims and other items in the normal course of business.
The Company also announced that its Board of Directors will appoint Bettina M.
Whyte, a Principal with the national corporate turnaround firm of Jay Alix &
Associates, as Chief Executive Officer of APS. Ms. Whyte, previously the
National Director of Business Turnaround Services for Price Waterhouse LLP, has
extensive experience in restructuring situations, as well as experience in the
automotive aftermarket industry. She will replace Interim CEO Hubbard Howe and
will report to the APS Board of Directors, of which Mr. Howe will remain
Chairman.
<PAGE> 2
"The 100 million in additional financing not only represents the continued
support of our lenders, but also provides the funds necessary for APS to
operate its business as usual while it navigates through the reorganization
process," said Bettina M. Whyte. "With the approval of our DIP financing and
other First Day Orders, APS can continue to provide our jobbers and customers
with the same high level of service they've come to expect from APS," she said.
The company has retained the services of Willkie Farr & Gallagher of New York
City to act as bankruptcy counsel. APS Holding Corporation's Chapter 11 case is
being heard before Judge Peter Walsh in the District of Delaware (Case #98-197;
ref: APS Holding Corporation).
APS Holding Corporation is a national distributor of Big A(R) brand and
manufacturer branded automotive replacement parts, as well as tools, equipment,
supplies and accessories. It sells to more than 1,650 associated auto parts
stores through 27 distribution centers and operates approximately 270
company-owned Big A(R) stores and 210 Installers' Service Warehouse units. The
Company has annual sales in excess of $800 million. As of December 25, 1997,
the Company's total assets and liabilities (book value), on an unaudited
consolidated basis were approximately $560 million and $471 million,
respectively.
This news release contains forward-looking statements that involve risks and
uncertainties. Actual results, events and performance could differ materially
from those contemplated by these forward-looking statements. Among the factors
that could cause actual results, events and performance to differ materially
are risks and uncertainties discussed in this news release and those detailed
from time to time in the Company's filings with the Securities and Exchange
Commission, including the Company's annual report on Form 10-K for the
fiscal-year ended January 25, 1997 and the Company's quarterly report on Form
10-Q for the quarterly periods ended April 25, July 25 and October 25, 1997,
and in the Company's other public reports and statements.
###
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UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re ) Chapter 11 Cases
)
APS HOLDING CORPORATION, et al., ) Case No. 98-197 (PJW)
)
) Jointly Administered
Debtors. )
INTERIM ORDER (I) AUTHORIZING SECURED POSTPETITION
FINANCING ON A SUPERPRIORITY BASIS PURSUANT TO
11 U.S.C. SECTION 364, (II) AUTHORIZING USE OF CASH COLLATERAL
PURSUANT TO 11 U.S.C. SECTION 363, (III) GRANTING ADEQUATE
PROTECTION PURSUANT TO 11 U.S.C. SECTIONS 363 AND 364, AND
(IV) SCHEDULING A FINAL HEARING PURSUANT
TO BANKRUPTCY RULE 4001(C)
--------------------------------------------------------------
Upon the motion (the "Motion") dated February 2, 1998 of A.P.S., Inc. (the
"Company"), APS Holding Corporation (the "Parent") and the following direct
and indirect subsidiaries of the Company (together with the Parent, the
"Guarantors"): American Parts Systems, Inc.; A.P.S. Management Services, Inc.;
Autoparts Finance Company, Inc.; Parts, Inc.; Installers' Service Warehouse,
Inc.; Big A Auto Parts, Inc.; APS Supply, Inc. and Presatt, Inc.; debtors and
debtors in possession (collectively, the "Debtors"), (a) seeking this Court's
authorization pursuant to Sections 363(c), 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. Sections 101, et seq,
(as amended, the "Bankruptcy Code") and Rules 2002, 4001(c) and 9014 of the
Federal Rules of Bankruptcy Procedure (as amended, the "Bankruptcy Rules"), for
the Company, inter alia, (i) to obtain secured postpetition financing (the
"Postpetition Financing") up to an aggregate principal amount not to exceed
$328,000,000 allocated into a $100,000,000 revolving credit loan and letter of
credit facility (the "Tranche A Commitments") and a term loan facility not to
exceed $228,000,000 (the "Tranche B Commitments" and,
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2
collectively with the Tranche A Commitments, the "Commitments") from The
Chase Manhattan Bank ("Chase"), as agent (in its capacity as agent for the
Lenders referred to below, the "Agent"), and a syndicate of other financial
institutions arranged by Chase and Chase Securities, Inc. (including Chase, the
"Lenders"), and for the Company and the Guarantors to execute a Revolving
Credit, Term Loan and Guarantee Agreement with respect to the Postpetition
Financing (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"); and for the Company to execute revolving credit and term
notes (the "Notes"); and for each Guarantor to guarantee the Notes and all
obligations of the Company and each other Guarantor under the Credit Agreement
(the Credit Agreement, the Notes, and all ancillary documents at any time
executed in connection therewith, collectively, the "Loan Documents");(ii) to
grant the Lenders, pursuant to Bankruptcy Code Sections 364(c) and 364(d),
security interests in all of the Debtors' presently owned and after-acquired
property to secure the Debtors' obligations under the Loan Documents and (iii)
to grant the Lenders priority in payment with respect to such obligations over
any and all administrative expenses of the kinds specified in Bankruptcy Code
Sections 503(b) and 507(b), other than as described below;(b) seeking this
Court's authorization, pursuant to Bankruptcy Code Section 363(c), to use Cash
Collateral (as defined below) and to provide adequate protection, pursuant to
Bankruptcy Code Sections 361,363(e) and 364(d) to the secured lenders (the
"Prepetition Lenders") to the Company pursuant to the Amended and Restated
Credit Agreement dated as of January 25, 1996(as amended, supplemented or
otherwise modified prior to the commencement of these Chapter 11 cases, the
"Prepetition Credit Agreement"), among the Company, the Prepetition Lenders and
The Chase Manhattan Bank (formerly known as Chemical Bank), as agent(in such
capacity, the "Prepetition Agent") for the Prepetition Lenders, on account of
their prepetition debt (the "Prepetition Obligations") under the Prepetition
Credit Agreement and all collateral and ancillary documents executed in
connection therewith (the "Prepetition Loan
<PAGE> 3
3
Documents") with respect to any diminution in the value of the Prepetition
Lenders' interests in the Prepetition Collateral (as defined below) resulting
from (x) the priming liens and security interests to be granted herein pursuant
to Bankruptcy Code Section 364(d) to secure the Postpetition Financing and (y)
the use, sale or lease of the Prepetition Collateral or the imposition of the
automatic stay pursuant to Bankruptcy Code Section 362; (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 Company, inter alia, to utilize the Tranche A Commitments for up to an
aggregate of $40,000,000 of loans and up to an aggregate face amount of
$5,000,000 of letters of credit and to utilize the Tranche B Commitments for
Tranche B Loans equal to the amount of Cash Collateral used to repay the
Prepetition Obligations, all 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, and
that notice procedures in respect of the Final Hearing be established, by this
Court to consider entry of a final order (the "Final Order") authorizing on a
final basis, inter alia, the Postpetition Financing; and due and sufficient
notice of the Motion and the Preliminary Hearing under the circumstances having
been given; and the Preliminary Hearing on the Motion having been held before
this Court on February __, 1998; 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 February 2, 1998, (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 Sections 1107 and 1108.
<PAGE> 4
4
B. This Court has jurisdiction over the Chapter 11 Cases and the
Motion pursuant to 28 U.S.C. Sections 157(b) and 1334. Consideration of the
Motion constitutes a core proceeding as defined in 28 U.S.C. Section 157(b)(2).
C. Without prejudice to the rights of any other party (but subject to
the limitations thereon described below in decretal paragraph 17), the Debtors
admit that, in accordance with the terms of the Prepetition Loan Documents, the
Debtors are truly and justly indebted to the Prepetition Lenders, without
defense, counterclaim or offset of any kind, and that as of the Filing Date (i)
the Company was liable to the Prepetition Lenders in the aggregate principal
amount of approximately $227,600,000 in respect of loans made by the
Prepetition Lenders to the Company pursuant to the Prepetition Credit Agreement,
(ii) the Company was contingently liable to the Prepetition Lenders in the
aggregate principal amount of approximately $3,500,000 in respect of letters of
credit issued pursuant to the Prepetition Credit Agreement and which remained
outstanding as of the Filing Date and (iii) each Debtor party to a guarantee
executed and delivered in respect of the Prepetition Obligations was
contingently liable to the Prepetition Lenders pursuant to such guarantee.
D. Without prejudice to the rights of any other party (but subject to
the limitations thereon described below in decretal paragraph 17), the Debtors
further admit that, (i) the Prepetition Obligations are secured by enforceable
liens and security interests granted by the applicable Debtors to the
Prepetition Agent, for the ratable benefit of the Prepetition Lenders, upon and
in substantially all of the Company's and the other applicable Debtors' assets
and property (including the setoff rights described in the Prepetition Loan
Documents and arising by operation of law, the "Prepetition Collateral"),
including without limitation, inventory, certain real property, accounts
receivable, equipment, general intangibles, and other tangible and intangible
personal property and the proceeds thereof, and (ii) as of the Filing Date, the
aggregate value of
<PAGE> 5
5
the Prepetition Collateral on a liquidation basis exceeded the aggregate amount
of the Prepetition Obligations. All the Debtors' cash constitutes proceeds of
the Prepetition Collateral and, therefore, is cash collateral of the
Prepetition Lenders within the meaning of Bankruptcy Code Section 363(a) (the
"Cash Collateral").
E. The Debtors do not have sufficient available sources of working
capital and financing to carry on the operation of their businesses without the
Postpetition Financing. The Debtors' ability to maintain business relationships
with their vendors, suppliers and customers, to pay their approximately 5,400
employees, to purchase and supply 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
Postpetition Financing, the continued operation of the Debtors' businesses
would not be possible, and serious and irreparable harm to the Debtors and
their estates would occur. The preservation, maintenance and enhancement of the
going concern value of the Company and the other Debtors are of the utmost
significance and importance to a successful reorganization of the Debtors under
Chapter 11 of the Bankruptcy Code.
F. Given the Debtors' current financial condition, financing
arrangements and capital structure, the Debtors cannot obtain unsecured credit
allowable under Bankruptcy Code Section 503(b)(1) as an administrative expense.
Financing on a postpetition basis is not otherwise available without the
Debtors (i) granting, pursuant to Bankruptcy Code Section 364(c)(1), claims
having priority over any and all administrative expenses of the kinds specified
in Bankruptcy Code Sections 503(b) and 507(b), other than as described below,
and (ii) securing, pursuant to Bankruptcy Code Sections 364(c) and (d), such
indebtedness and obligations with security interests in and liens upon the
property described below, all in accordance with and subject to the terms of
this Order and the Loan Documents.
<PAGE> 6
6
G. 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)
counsel to the Prepetition Agent and (iii) the creditors holding the 20 largest
(on a consolidated basis) unsecured claims against the Debtors. 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
Sections 102(1), 364(c) and 364(d) and Bankruptcy Rules 2002 and 4001(c).
H. The Postpetition Financing has been negotiated in good faith and at
arm's length between the Debtors and the Lenders, and any credit extended,
letters of credit issued and loans made to the Debtors 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 Section 364(e).
I. The terms of the Postpetition 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.
J. The Debtors have requested immediate entry of this Order pursuant to
Bankruptcy Rule 4001(c)(2). The permission granted herein to enter into the
Postpetition Financing and obtain funds thereunder, and to use the Cash
Collateral, is necessary to avoid immediate and irreparable harm to the
Debtors. This Court concludes that entry of this Order is in the best interest
of the Debtors' respective estates and creditors as its implementation will,
among other things, allow for the continued flow of goods to the Company
necessary to sustain the operation of the Debtors' existing businesses and
enhance the Debtor's prospects for successful reorganization.
<PAGE> 7
7
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 terms and conditions of the
Loan Documents are approved, and the Company and the Guarantors are authorized
to comply with and perform all of the terms and conditions contained therein,
and the Company is directed to repay amounts borrowed, and each Guarantor is
further directed to repay amounts guaranteed, 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 and the Lenders, 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 Company and
each Guarantor to the Agent and the Lenders under the Loan Documents and this
Order, together with any obligations at any time incurred by any Debtor to
Chase in its capacity as the principal concentration bank in the Debtors' cash
management system, are hereinafter referred to as the "Obligations."
3. Pending the Final Hearing, the Company is expressly authorized to
obtain Loans and Letters of Credit from the Lenders, and the Guarantors are
expressly authorized to guarantee all Obligations in respect of such Loans and
Letters of Credit, all on the terms and subject to the
<PAGE> 8
8
conditions set forth in the Loan Documents and this Order, as follows: (a)
under the Tranche A Commitments, a total of $40,000,000 of Tranche A Loans and
up to an aggregate face amount of $5,000,000 of Letters of Credit and (b) under
the Tranche B Commitments, Tranche B Loans in a total amount equal to the
aggregate amount of all proceeds of Prepetition Collateral (including all Cash
Collateral) applied to the repayment of the Prepetition Obligations. The
Company is authorized to use the proceeds of the Loans, to use Cash Collateral
and to request the issuance of Letters of Credit in the operation of the
Debtors' businesses, provided, that (i) the proposed Loan, Letter of Credit or
use of Cash Collateral is consistent with the terms of the Credit Agreement and
this Order and (ii) (x) prior to the repayment in full of the Prepetition
Obligations with Tranche B Loans on the date of entry of the Final Order (the
"Final Order Repayment Date"), the proposed Tranche A Loan is necessary after
the Company's use of the proceeds of all Tranche B Loans made prior to the
Final Order Repayment Date and (y) after the Final Order Repayment Date, the
proposed Tranche A Loan is necessary after the Company's use of all available
cash (other than cash permitted to be retained pursuant to the Credit
Agreement). Pending entry of the Final Order and the occurrence of the Final
Order Repayment Date, the Debtors are hereby authorized and directed to use the
proceeds of all Prepetition Collateral (including the Cash Collateral) received
by the Debtors to repay the Prepetition Obligations and the Obligations in
accordance with the terms of the Credit Agreement.
4. If an Event of Default (as defined in the Credit Agreement) occurs,
the Agent, acting at the direction of the Required Trance A Lenders (as defined
in the Credit Agreement) or the Required Tranche B Lenders (when applicable as
set forth and as defined in the Credit Agreement) may, subject to the
requirement contained in the Credit Agreement with respect to specified
remedies to provide five business days' prior written notice to the Company,
the United States Trustee and any statutory committees appointed in the Chapter
11 Cases, terminate the
<PAGE> 9
9
Postpetition Financing (the date of any such termination, the "Termination
Date") and declare the Loans to be due and payable, and the automatic stay
pursuant to Bankruptcy Code Section 362(a) shall be deemed lifted and modified,
without further order of this Court, 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. In addition, if the Termination Date or
such Event of Default shall occur prior to the Final Order Repayment Date, the
Company's right to use the Cash Collateral shall terminate automatically on the
Termination Date or on the third business day after the Agent, acting at the
direction of the Required Tranche A Lenders, provides written notice to the
Company, the United States Trustee and any statutory committees appointed in the
Chapter 11 Cases of the occurrence of an Event of Default and that such use of
Cash Collateral shall terminate as a result thereof. 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, perfection, priority or
enforceability of the Prepetition Obligations or the liens securing the
Prepetition Obligations, or to assert any claims or causes of action against the
Prepetition Lenders or the Prepetition Agent.
5. In accordance with Bankruptcy Code Section 364(c)(1), subject to
Paragraph 7 below, the Obligations shall constitute claims (the "Superpriority
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 Sections 105, 326, 328, 330, 331,
503(b), 506(c), 507(a), 507(b) and 726, 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.
Subject only to the Carve-Out, no cost or expense of administration under
Bankruptcy Code Sections 105, 364(c)(1), 503(b), 506(c), 507(b) or otherwise,
including those resulting from the conversion of any of the Chapter 11 Cases
pursuant to
<PAGE> 10
10
Bankruptcy Code Section 1112, shall be senior to, or pari passu with, the
Superiority Claims of the Lenders arising out of the Obligations. As long as no
Default or Event of Default (as each such term is defined in the Credit
Agreement) shall have occurred and be continuing, the Company and the
Guarantors shall be permitted to pay compensation and reimbursement of
expenses, allowed and payable under Bankruptcy Code Sections 330 and 331, as
the same may be payable, and the amount so paid shall not reduce the Carve-Out.
6. As security for the Obligations, 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 Debtors 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 property of the Debtors of any nature whatsoever, including,
without limitation, all cash contained in any account maintained by the Debtors
and the proceeds of all causes of action (other than causes of action arising
under the Bankruptcy Code) existing as of the Filing Date (collectively with
all proceeds and products of any or all of the foregoing, the "Collateral"):
(a) pursuant to Bankruptcy Code Section 364(c)(2), a first priority,
perfected Lien upon all of the Debtors' right, title and interest in, to
and under all Collateral (including the Prepetition Collateral after the
Final Order Repayment Date) that is not otherwise encumbered by a validly
perfected security interest or lien on the Filing Date;
(b) prior to the Final Order Repayment Date, pursuant to Bankruptcy
Code Section 364(d)(1), a first priority, senior, priming, perfected Lien
upon all of the Debtors' right, title and interest in, to and under the
Prepetition Collateral, but subject to any Permitted Liens (as defined in
the Credit Agreement); and
(c) pursuant to Bankruptcy Code Section 364(c)(3), a second priority,
junior, perfected Lien upon all of the Debtors' right, title and interest
in, to and under all Collateral (other than the Prepetition Collateral)
which is subject to a validly perfected security interest or lien in
existence as of the Filing Date, or a valid lien perfected (but not
granted) after the Filing Date to the extent such perfection in respect of
a pre-Filing Date claim is expressly permitted under the Bankruptcy Code.
To the extent set forth in the Credit Agreement and the other Loan Documents,
the Liens and Superpriority Claims granted to secure the Obligations under the
Tranche A Commitments shall
<PAGE> 11
11
be senior and prior to the Liens and Superpriority Claims granted to secure the
Obligations under the Tranche B Commitments.
7. Any provisions of this Order or the Credit Agreement to the contrary
notwithstanding, the Liens and Superpriority Claims granted to the Agent and the
Lenders pursuant to the Credit Agreement and this Order shall be subject and
subordinate to a carve-out (the "Carve-Out") for (a) following 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 Sections 327 or 1103(a), by the Debtors
and any statutory committee of unsecured creditors appointed in the Chapter 11
Cases and any disbursements of any member of such committee in an aggregate
amount not to exceed $3,000,000 (in addition to compensation previously awarded
whether or not paid) and (b) quarterly fees required to be paid pursuant to 28
U.S.C. Section 1930(a)(6) and any fees payable to the Clerk of the Bankruptcy
Court; provided, however, (x) following the Termination Date, amounts in the L/C
Cash Collateral Account (as defined in the Credit Agreement) shall not be
subject to the Carve-Out and (y) the Carve-Out shall not include professional
fees and disbursements incurred in connection with asserting any claims or
causes of action against the Prepetition Lenders or the Prepetition Agent,
including formal discovery proceedings in anticipation thereof, and/or
challenging or raising any defense to the Prepetition Obligations, any lien of
the Prepetition Agent or the Prepetition Lenders.
8. As adequate protection to the Prepetition Agent and the Prepetition
Lenders during the period from the date of entry of this Order until the Final
Order Repayment Date for any diminution in the value of the Prepetition
Lenders' interests in the Prepetition Collateral resulting from (a) the priming
of the Prepetition Agent's and Prepetition Lenders' liens by the Liens in favor
of the Agent and the Lenders granted in this Order and the Loan Documents
pursuant to
<PAGE> 12
12
Bankruptcy Code Section 364(d) and (b) the imposition of the automatic stay
pursuant to Bankruptcy Code Section 362:
(i) the Prepetition Agent and the Prepetition Lenders shall be and
they hereby are granted (effective upon the date of this Order and without
the necessity of the execution by the Debtors of mortgages, security
agreements, pledge agreements, financing statements or otherwise), valid
and perfected, replacement security interests in, and liens upon (the
"Replacement Liens"), all of the Debtor's right, title and interest in, to
and under the Collateral, 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 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;
(ii) the Prepetition Agent and the Prepetition Lenders shall be and
they hereby are granted pursuant to Bankruptcy Code Section 364(c)(i),
Superpriority Claims, junior only to (x) the Superpriority Claims granted
to the Agent and the Lenders in respect of the Obligations pursuant to this
Order and (y) the Carve-Out; and
(iii) on the Closing Date (as defined in the Credit Agreement), the
Final Order Repayment Date and as otherwise set forth in the Credit
Agreement, the Debtors shall make adequate protection payments to the
Prepetition Agent, for the ratable benefit of the Prepetition Lenders, in
cash in an amount equal to interest accrued and unpaid on the Prepetition
Obligations at the nondefault rate set forth in the Prepetition Credit
Agreement (without prejudice to the rights of the Prepetition Lenders to
assert a claim for the payment of additional interest calculated at any
other applicable rates of interest set forth in the Prepetition Credit
Agreement). As additional adequate protection, the Debtors are authorized
and directed to pay all reasonable out-of-pocket costs and expenses
incurred by the Prepetition Agent and the Prepetition Lenders (including,
without limitation, the reasonable fees and disbursements of counsel and
any financial consultants advising the Prepetition Agent and the
Prepetition Lenders) in connection with the enforcement and protection of
the rights of the Prepetition Agent and the Prepetition Lenders in the
Chapter 11 Cases.
9. Under the circumstances, and given that the Prepetition
Lenders' consent and that the grant of adequate protection set forth in
clause (iii) of paragraph 8 is also consistent with Bankruptcy Code Section
506(b), the adequate protection provided herein is reasonable and sufficient to
protect the interests of the Prepetition Lenders prior to the Final Order
Repayment Date. Notwithstanding any other provision hereof, the grant of
adequate protection to the Prepetition Agent and the Prepetition Lenders
pursuant hereto is without prejudice to the right of the Prepetition Agent and
the Prepetition Lenders prior to the Final order Repayment Date to seek
<PAGE> 13
13
modification of the grant of adequate protection provided hereby so as to
provide different or additional adequate protection, and without prejudice
to the right of the Debtors or any other party in interest to contest any such
modification. From and after the Final Order Repayment Date, the rights of the
Prepetition Agent and the Prepetition Lenders in respect of any grant of
adequate protection shall be governed by the Final Order and the Loan Documents.
10. Except as set forth in paragraphs 6, 7, and 8 above, the Liens and
Replacement Liens shall be prior and senior to all liens and encumbrances of
all other secured creditors in and to such Collateral granted, or arising,
after the Filing Date (including, without limitation, liens and security
interests, if any, granted in favor of any federal, state, municipal or other
governmental unit, commission, board or court for any liability of the
Debtors). Other than the Carve-Out, the Debtors shall not assert a claim under
Bankruptcy Code Section 506(c) for any costs and expenses incurred in
connection with the preservation, protection or enhancement of, or realization
by the Agent, the Lenders, the Prepetition Agent or the Prepetition Lenders
upon the Collateral or the Prepetition Collateral. The Liens and Replacement
Liens granted pursuant to this Order shall constitute valid and duly perfected
security interests and liens, and the Agent, the Lenders, the Prepetition Agent
and the Prepetition Lenders shall not 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 such security interests
and liens; and the failure by the Debtors to execute any documentation relating
to the Liens or Replacement Liens shall in no way affect the validity,
perfection or priority of such Liens or Replacement of Liens. If, however, the
Agent, any Lender or the Prepetition Agent, in its 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
<PAGE> 14
14
imposed by Bankruptcy Code Section 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 all such documents
shall be deemed to have been filed or recorded at the time of and on the date
of this Order.
11. As long as any portion of the Obligations remains unpaid, or any
Loan Document remains in effect, the Debtors shall not seek, and it shall
constitute an Event of Default (and automatic occurrence of the Termination
Date) if (a) there shall be entered any order dismissing any of the Chapter 11
cases or (b) except as otherwise provided in paragraph 8 hereof or as expressly
permitted under the Credit Agreement, 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 Sections 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 or (ii)
the obtaining of credit or the incurring of indebtedness that is entitled to
superpriority administrative status equal or superior to that granted to the
Agent and the Lenders pursuant to this Order; unless, in connection with any
transaction cited in clause (i) or (ii) of this paragraph 11, such order
requires that the Obligations shall first be indefeasibly paid in full
(including cash collateralization of Letters of Credit in accordance with the
terms of the Credit Agreement).
12. Upon the occurrence of and during the continuance of an Event of
Default, the Agent, acting at the direction of the Required Tranche A Lenders
or the Required Tranche B Lenders (when applicable as set forth in the Credit
Agreement), may exercise rights and remedies and take all or any of the
following actions without further modification of the automatic stay pursuant to
Bankruptcy Code Section 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
<PAGE> 15
15
order of or application to this Court; (a) terminate the Commitments and
thereafter cease to issue Letters of Credit or make Loans to the Company; (b)
declare the principal of and accrued interest, fees and other liabilities
constituting the Obligations to be due and payable; (c) setoff amounts in the
Concentration Account (as defined in the Credit Agreement), the L/C Cash
Collateral Account (in the case of the Agent acting at the direction of the
Required Tranche A Lenders) or any other accounts maintained with a Lender, or
otherwise enforce rights against any other Collateral in the possession of the
Agent or any Lender; and/or (d) take any other action or exercises any other
right or remedy permitted to the Lenders under the Loan Documents, this Order
or by operation of law; provided however, the Agent and the Lenders may take
the actions described in clauses (c) or (d) above only after providing five
business days' prior written notice to the Company, the United States Trustee
and any statutory committees appointed in the Chapter 11 Cases and provided
that no order prohibiting such actions is entered by this Court during such
five business day period. The Debtors waive any right to seek relief under the
Bankruptcy Code, including without limitation, under Bankruptcy Code Section
105, to the extent any such relief would in any way restrict or impair the
rights and remedies of the Agent and the Lenders set forth in this Order and in
the Loan Documents. All proceeds of Collateral and any other payments received
by the Agent or any Lender after the Termination Date or pursuant to the
exercise of any such rights and remedies upon the occurrence and during the
continuance of an Event of Default, shall be applied to the Obligations in the
manner set forth in the Credit Agreement.
13. 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 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
<PAGE> 16
16
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.
14. Having been found to be extending credit, issuing Letters of Credit
and making Loans to the Debtors in good faith, the Agent and the Lenders shall
be entitled to the full protection of the Bankruptcy Code Section 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, all uses of Cash Collateral and all Obligations incurred by the
Debtors pursuant hereto or the Loan Documents 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
Prepetition Agent and the Prepetition Lenders shall be entitled to all the
rights, privileges and benefits, including without limitation, the Liens,
Replacement Liens and Superpriority Claims granted herein.
15. 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 the Obligations shall
not be discharged by the entry of any such order or pursuant to Bankruptcy
Code Section 1141(d)(4), the Debtors 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 Superpriority Claims, Liens
<PAGE> 17
17
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 Superpriority 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 clauses (i) through
(iii) of paragraph 8(b) are indefeasibly paid in full and discharged.
16. The Lenders' willingness to continue to provide the Commitments
and to continue to make Loans and issue Letters of Credit under the Credit
Agreement on and after the date of entry of the Final Order is contingent upon
(a) the repayment in full of the Prepetition Obligations on the Final Order
Repayment Date (which repayment will be funded by the Company obtaining Tranche
B Loans under the Credit Agreement), (b) the release on the Final Order
Repayment Date of the Replacement Liens and all of the Prepetition Agent's and
the Prepetition Lenders' liens on and security interests in the Prepetition
Collateral securing the Prepetition Obligations, and (c) the approximately
$3,500,000 of letters of credit issued and outstanding under the Prepetition
Credit Agreement as of the Filing Date being deemed, on the Final Order
Repayment Date, to be Letters of Credit issued under the Credit Agreement.
Failure of the Final Order to authorize and approve such provisions will
constitute an Event of Default and the automatic occurrence of the Termination
Date.
17. The findings contained in paragraphs C and D shall be binding
upon all parties in interest, including but not limited to, the Debtors and any
statutory committee of unsecured creditors, unless (a) a party in interest
(including any statutory committee of unsecured creditors) has properly filed an
adversary proceeding or contested matter (subject to the limitation set forth in
the last sentence of decretal paragraph 4) challenging the validity,
enforceability or priority of the Prepetition Obligations or the Prepetition
Agent's and the Prepetition Lenders' liens on the Prepetition Collateral in
respect thereof no later than the date that is sixty (60) days after the date
<PAGE> 18
18
of appointment of a statutory committee of unsecured creditors and (b) the
Court rules in favor of the plaintiff in any such timely and properly filed
adversary proceeding or contested matter. If no such adversary proceeding or
contested matter is properly commenced as of such date, the Prepetition
Obligations shall constitute allowed claims for all purposes in the Chapter 11
Cases and any subsequent Chapter 7 cases, the Prepetition Agent's and the
Prepetition Lenders' liens on the Prepetition Collateral shall be deemed legal,
valid, binding, perfected, not subject to subordination and otherwise
unavoidable, and the Prepetition Obligations and the Prepetition Agent's and
the Prepetition Lenders' liens on the Prepetition Collateral shall not be
subject to subordination, avoidance or any other or further challenge by any
party in interest seeking to exercise the rights of the Debtors' estate,
including, without limitation, any successor thereto. If any such adversary
proceeding or contested matter is properly commenced as of such date, nothing
in this Order or the Loan Documents shall otherwise prevent the Court from
granting any appropriate relief.
18. Entry of this Order shall be without prejudice to any and all
rights, remedies, claims and causes of action which the Prepetition Agent or
the Prepetition Lenders may have against the Debtors or third parties, and
without prejudice to the right of the Prepetition Agent and the Prepetition
Lenders to seek relief from the automatic stay in effect pursuant to Bankruptcy
Code Section 362, or any other relief in the Chapter 11 Cases, and the right of
the Debtors to oppose any such relief. The provisions of this Order shall be
binding upon and inure to the benefit of the Agent, the Lenders, the
Prepetition Agent, the Prepetition 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
the Debtor's estates.
19. The Debtors shall, on or before February 4, 1998, mail copies of
a notice of the entry of this Order, together with a copy of this Order, a copy
of the Motion and a copy of the
<PAGE> 19
19
Credit Agreement (without Exhibits), to the parties having been given notice of
the Preliminary Hearing, to the creditors holding the 20 largest unsecured
claims against each Debtor, to any party which has filed prior to such date a
request for notices with this Court and to counsel for any statutory committee
of unsecured creditors appointed pursuant to Bankruptcy Code Section 1102. The
notice of entry of this Order shall state that any party in interest objecting
to the Postpetition Financing shall file written objections with the United
States Bankruptcy Court Clerk for the District of Delaware no later than 4:00
_.m. on February 18, 1998, which objections shall be served so that the same
are received on or before such date by: (a) Willkie, Farr & Gallagher, 153 East
53rd Street, New York, New York 10022, Attention: Marc Abrams, Esq., and Morris
Nichols, Arsht & Tunnell, 1201 N. Market Street, Wilmington, Delaware 19801,
Attention: William H. Sudell, Jr., Esq., Attorneys for the Debtors, (b) Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017, Attention:
Steven M. Fuhrman, Esq., and Richards, Layton & Finger, One Rodney Square,
Wilmington, Delaware 19801, Attention: Mark D. Collins, Esq., Attorneys for the
Agent and the Prepetition Agent, and (c) the Officer of the United States
Trustee.
20. The Final Hearing to consider the Motion will be held on February 20,
1998 at 10:00 a.m.
Dated: Wilmington, Delaware
February 2, 1998
/s/ PETER J. WALSH
-----------------------------
JUDGE
