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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: May 7, 1996
-----------------
(Date of the earliest event reported)
DISCOVERY ZONE, INC.
- - --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-21854 36-3877601
- - --------------- -------------- ----------------
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification Number)
110 East Broward Boulevard
Ft. Lauderdale, Florida 33301
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(Address of principal executive offices) (Zip Code)
954-627-2400
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Registrant's telephone number, including area code
Page 1 of 102
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Item 5. Other Events.
To provide Discovery Zone, Inc. (the "Company") and
seventeen of its direct subsidiaries and two of its indirect
subsidiaries (the "Subsidiaries") with the financing required
for a successful reorganization under chapter 11 of title 11,
11 U.S.C. Section Section 101 et seq. (the "Bankruptcy Code"),
the Company, the Subsidiaries and Madeline, LLC (the
"Lender") have entered into a Revolving Credit Agreement
dated as of April 30, 1996 (the "Revolving Credit
Agreement"), among the Company as borrower, the Subsidiaries
as guarantors, and the Lender. The Revolving Credit Agreement
provides that the Company may borrow up to the aggregate
principal amount of $17,000,000 (inclusive of a $7,000,000
subfacility for the issuance of letters of credit) outstanding
at any one time.
By motion dated April 10, 1996 (the "Motion"), the Company and
the Subsidiaries requested that the Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court") authorize the
Company and the Subsidiaries to obtain the financing under the
Revolving Credit Agreement. The Bankruptcy Court, on April
30, 1996, held a hearing with respect to the relief requested
by the Motion. On May 3, 1996, the Bankruptcy Court entered
an amended interim order (the "Interim Order") which
authorizes the Company to borrow up to the aggregate principal
amount of $8,369,000 outstanding pending the conclusion of a
final hearing on the Motion. The final hearing is scheduled
for May 20, 1996 at 9:30 a.m.
The Interim Order and the Revolving Credit Agreement are filed
as exhibits hereto and are incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The Interim Order and the Revolving Credit Agreement are filed
as exhibits hereto and are incorporated by reference herein.
Page 2 of 102
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SIGNATURE
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 hereunto duly authorized.
DISCOVERY ZONE, INC.
By: /s/ David A. Barclay
------------------------------------
David A. Barclay
Vice President and General Counsel
Dated: May 7, 1996
Page 3 of 102
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DISCOVERY ZONE, INC.
Current Report on Form 8-K
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
99.1 Interim Order entered May 3, 1996.
99.2 Revolving Credit Agreement dated as of April 30, 1996.
</TABLE>
Page 4 of 102
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EXHIBIT 99.1
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
IN RE :
:
DISCOVERY ZONE, INC., ET AL.,* : CHAPTER 11
: CASE NO. 96-411 (HSB)
:
:
DEBTORS. : (JOINTLY ADMINISTERED)
INTERIM ORDER PURSUANT TO SECTIONS 364(C)(1), 364(C)(2),
364(C)(3) AND 364(D) OF THE BANKRUPTCY CODE AND RULE 4001 OF THE
FEDERAL RULES OF BANKRUPTCY PROCEDURE AUTHORIZING
THE DEBTORS TO OBTAIN INTERIM POSTPETITION FINANCING,
GRANTING SENIOR LIENS AND PRIORITY ADMINISTRATIVE EXPENSE
STATUS, MODIFYING THE AUTOMATIC STAY, AND AUTHORIZING
THE DEBTORS TO ENTER INTO AGREEMENTS WITH MADELINE, LLC
Discovery Zone, Inc. ("Discovery Zone") and nineteen of its
affiliates as debtors and debtors in possession in the above-captioned chapter
11 cases (collectively, the
__________________________________
* Discovery Zone, Inc., Beaverton Fun Fitness, Inc., DJM Management, Inc., DZ
of Connecticut, Inc., DZ of Georgia, Inc., DZ of Massachusetts, Inc., DZ of
Missouri, Inc., DZ of New York, Inc., DZ of Pennsylvania, Inc., DZ of
Wisconsin, Inc., Portland Fun Fitness, Inc., Vancouver Fun Fitness, Inc.,
Discovery Zone (Puerto Rico), Inc., Leaps & Bounds, Inc., Semborg Corp., DZ
Party, Inc., DZGP, Inc., Discovery Zone Children's Amusement Corporation,
Discovery Zone L.P. and Tumble for Fun Limited Partnership.
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"Debtors"), having filed a motion, dated April 10, 1996, pursuant to 11 U.S.C.
Section 364 and Federal Rule of Bankruptcy Procedure 4001 (the "Motion"), for
an order seeking, inter alia:
(i) Authority pursuant to sections 364(c)(1), 364(c)(2),
364(c)(3) and 364(d) of the United States Bankruptcy Code, 11
U.S.C. Section Section 101 et seq. (the "Bankruptcy Code"), and Rules
4001 and 9014 of the Federal Rules of Bankruptcy Procedure (the
"Bankruptcy Rules"), for Discovery Zone to borrow or obtain cash
advances and Letters of Credit from Madeline, LLC (the "Lender"),
guaranteed by Beaverton Fun Fitness, Inc., DJM Management, Inc., DZ of
Connecticut, Inc., DZ of Georgia, Inc., DZ of Massachusetts, Inc., DZ
of Missouri, Inc., DZ of New York, Inc., DZ of Pennsylvania, Inc., DZ
of Wisconsin, Inc., Portland Fun Fitness, Inc., Vancouver Fun Fitness,
Inc., Discovery Zone (Puerto Rico), Inc., Leaps & Bounds, Inc.,
Semborg Corp., DZ Party, Inc., DZGP, Inc., Discovery Zone Children's
Amusement Corporation, Discovery Zone L.P. and Tumble For Fun Limited
Partnership (collectively, the "Guarantors"), up to the aggregate
principal amount of $17,000,000 (inclusive of a $7,000,000 subfacility
for the issuance of Letters of Credit) (the "Credit Facility")
outstanding at any one time pursuant to the terms of a Revolving
Credit Agreement, dated as of April 30, 1996 (the "Credit Agreement"),
and the Related Documents (as defined in the Credit Agreement)
(collectively, the "Loan Documents");
(ii) Authority for the Debtors to execute, deliver and
enter into the Loan Documents;
(iii) Approval of the terms and conditions of the Loan
Documents;
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(iv) Authority for the Debtors to execute and deliver,
from time to time, all such other documents, instruments and
agreements and perform such other acts as may be required in
connection with the Loan Documents;
(v) Authority for Discovery Zone, under section 364(c)(1)
of the Bankruptcy Code, to obtain postpetition financing and incur
postpetition indebtedness pursuant to the Loan Documents, guaranteed
by the Guarantors, which indebtedness due and owing by Discovery Zone,
and guaranty obligations owing by the Guarantors, to the Lender shall
(a) pursuant to section 364(c)(1) of the Bankruptcy Code, have
priority over any and all expenses and claims of the kind specified
in, inter alia, sections 105, 326, 328, 503(b), 506(c), 507(a), 507(b)
and 1114 of the Bankruptcy Code, (b) pursuant to section 364(c)(2) of
the Bankruptcy Code, be secured by first priority liens on and
security interests in all of the Debtors' now owned or hereafter
acquired unencumbered assets, (c) pursuant to section 364(c)(3) of the
Bankruptcy Code, be secured by junior liens on and security interests
in all other now owned or hereafter acquired assets, subordinate only
to Permitted Liens (as defined in the Loan Documents) and (d) pursuant
to section 364(d) of the Bankruptcy Code, be secured by liens on and
security interests in all now owned or hereafter acquired assets
senior to any liens or security interests held by any Debtor,
provided, however, that all liens and security interests granted to
the Lender and the Lender's superpriority administrative expense
claims are subject to the Carveout (as defined in Paragraph 15 below);
(vi) The modification of the automatic stay;
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(vii) Authority for the Debtors, pursuant to sections
364(c)(1), 364(c)(2), 364(c)(3) and 364(d) of the Bankruptcy Code and
Bankruptcy Rule 4001(c), after an interim hearing on the Motion (the
"Interim Hearing"), to obtain interim financing from the Lender on an
emergency basis, under the same terms and conditions set forth in the
Loan Documents, pending a final hearing on the Motion in accordance
with Bankruptcy Rule 4001(c) (the "Final Hearing"), the amount
outstanding at any one time of such loans, advances and the face
amount of Letters of Credit pending the entry of the Final Order (as
defined in paragraph 2 of the Motion) not exceeding the aggregate
principal amount of either (a) $5,000,000, in the event this Court
enters the Final Order on or before April 29, 1996, or (b) $9,000,000,
in the event the Final Order is not entered on or before April 29,
1996;
(viii) Scheduling and approving the form and method of
notice of the Final Hearing to consider the granting of full authority
to the Debtors to utilize the Credit Facility, and to obtain all
credit available and as needed under the Credit Facility as provided
and needed thereby; and
(ix) Granting the Debtors such other and further relief as
the Court deems necessary, appropriate, equitable and proper.
NOW, THEREFORE, upon the Motion, the files and pleadings in
these cases, and upon completion of the interim hearing with respect to the
Motion and the objection dated April 29, 1996 (the "Objection") interposed by
the statutory creditors' committee (the "Committee"), and the Court having
rendered its decision on the record and having granted
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the relief requested by the Committee in its Objection to the extent set forth
below, and after due deliberation and sufficient cause appearing therefor, the
Court hereby finds as follows:
A. Capitalized terms used in this Order and not
otherwise defined herein have the meanings ascribed to such terms in the Loan
Documents, the terms of which shall be, and they hereby are, incorporated
herein by reference as if fully set forth at length.
B. The Debtors filed voluntary petitions for relief
under chapter 11 of the Bankruptcy Code on March 25, 1996 (the "Petition
Date"), and are authorized to continue in the management and possession of
their businesses and properties as debtors in possession pursuant to sections
1107 and 1008 of the Bankruptcy Code.
C. Discovery Zone is the direct or indirect parent of
each of the other Debtors. The Debtors are principally engaged in the
operation of children's indoor entertainment and fitness facilities, which are
referred to as Discovery Zone FunCenters (each a "FunCenter"). As of the
Petition Date, the Debtors operated 293 FunCenters. By motions dated April 1,
1996 and April 25, 1996, the Debtors requested authority, nunc pro tunc, as
necessary, to close fifty-two FunCenters which were operating as of the
Petition Date. The Debtors, with the assistance of their professionals,
continue to review and analyze their overall FunCenter operations and,
specifically, the potential contributions of their FunCenters located in
various markets to the future configuration of the Debtors' overall FunCenter
operations. The Debtors expect that, during the course of these chapter 11
cases, the Debtors, after consultation with the Committee, will close those
presently operating FunCenters which the Debtors conclude are not part of the
Debtors' core business.
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D. The Debtors intend to operate a fundamentally sound
and valuable business, with a strong customer base, which provides employment
for a large number of employees, and the Debtors remain valuable customers for
their vendors.
E. The Debtors have requested that the Lender provide
postpetition financing to the Debtors, in order to provide funds to be used by
the Debtors for their general operating, working capital and other business
purposes in the ordinary course of the Debtors' businesses.
F. The Debtors are unable to obtain unsecured credit
allowable under section 503(b)(1) of the Bankruptcy Code, or pursuant to
sections 364(a) and (b) of the Bankruptcy Code or without the guaranties of the
Guarantors and the granting of the liens and security interests as set forth
herein and in the Loan Documents. After considering all alternatives, the
Debtors have concluded, in the exercise of their respective best and reasonable
business judgment, that the Credit Facility represents the best working capital
financing available.
G. No other source of postpetition financing exists on
terms more favorable than those offered by the Lender.
H. The financing proposed by the Motion will permit the
Debtors to have the funds necessary to pay their postpetition payroll, payroll
taxes, landlords, inventory suppliers, overhead and other expenses necessary
for the continued operation of the Debtors' businesses and the management and
preservation of the Debtors' assets and properties. In addition, the financing
proposed by the Motion and authorized pursuant to this Order will
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allow the Debtors to arrange for an advertising campaign which will take place
in the summer of 1996.
I. The relief requested in the Motion is necessary,
essential, and appropriate for the continued operation of the Debtors'
businesses and the management and preservation of their assets and properties.
The loans and advances under the Credit Agreement will benefit, and is in the
best interests of, the Debtors, their estates, creditors and equity security
holders.
J. The Motion was filed on April 10, 1996, and the
Debtors have provided actual notice of the Motion, the relief requested
thereunder and the terms of this Order, whether by first class mail, overnight
courier or hand delivery, to (i) the Office of the United States Trustee; (ii)
the Lender and its attorneys; (iii) all creditors known to the Debtors who may
have liens against the Debtors' assets; (iv) all landlords, owners, operators
and/or mortgagors of the premises at which any of the Debtors' inventory is
located; (v) the Committee and its counsel; (vi) the twenty largest unsecured
creditors of the Debtors; (vii) the United States Internal Revenue Service; and
(viii) all parties-in-interest that have filed Notices of Appearances in these
chapter 11 cases, all as more fully described in the Certificate of Service
filed by counsel for the Debtors. Sufficient and adequate notice of the Motion
and the interim hearing with respect thereto has been given pursuant to
Bankruptcy Rules 2002, 4001(c) and (d) and 9014 and section 102(1) of the
Bankruptcy Code as required by sections 364(c) and 364(d) of the Bankruptcy
Code and no further notice of, or hearing on the relief sought in, the Motion
is necessary or required.
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K. Consideration of the Motion constitutes a "core
proceeding" as defined in 28 U.S.C. Section Section 157(b)(2)(A), (D), (G),
(K), (M) and (O). This Court has jurisdiction over this proceeding and the
parties and property affected hereby pursuant to 28 U.S.C. Section Section 157
and 1334.
L. The terms of the Loan Documents between the Debtors
and the Lender, pursuant to which postpetition loans and advances may be made
or provided to Discovery Zone by the Lender, and pursuant to which the Lender
may cause the issuance of Letters of Credit, have been negotiated in good faith
and at arm's length as that term is used at section 364(e) of the Bankruptcy
Code. This Order is subject to, and the Lender is entitled to the benefits of,
the provisions of section 364(e) of the Bankruptcy Code.
M. Good, adequate and sufficient cause has been shown to
justify the granting of the relief requested herein and the immediate entry of
this Order.
ACCORDINGLY, IT IS HEREBY ORDERED, ADJUDGED AND DECREED, that:
1. The Motion is granted and approved to the extent
provided below, and the Objection is sustained to the extent provided below.
2. Good and sufficient notice of the Motion's request
for the entry of this Order and the hearing thereon has been provided in
accordance with Sections 102(1), 364(c)(1), (2) and (3), and 364(d) of the
Bankruptcy Code and Bankruptcy Rule 2002, and any requests for other and
further notice shall be and are hereby dispensed with and waived.
3. The relief granted by this Court pursuant to this
Order is necessary to avoid immediate and irreparable harm to the Debtors'
estates.
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4. Discovery Zone is unable to obtain cash advances and
a letter of credit facility as unsecured credit allowable under section
503(b)(1) of the Bankruptcy Code and without the guarantees of the Guarantors.
Without the availability of the Credit Facility, it will be materially more
expensive for the Debtors to fund their working capital needs. If the Debtors
are unable to finance their working capital needs, the Debtors' ability to
preserve the going-concern value of their businesses may be quickly eroded.
The enhancement of the going-concern values of the Debtors (collectively and
independently) is of utmost significance and importance to a successful
reorganization of the Debtors pursuant to the provisions of chapter 11 of the
Bankruptcy Code.
5. Discovery Zone will receive postpetition loans and/or
advances and credit and the Guarantors will receive other direct or indirect
benefits from the Credit Facility authorized by this Order.
6. Discovery Zone is hereby immediately authorized and
empowered to borrow from the Lender or to cause the Lender to issue Letters of
Credit and the Lender is authorized to lend or to cause the issuance of Letters
of Credit by the Letter of Credit Issuer pursuant to the terms of this Order
and the terms and conditions set forth in the Loan Documents, in such amount or
amounts as may be made available to Discovery Zone from the Lender, in
accordance with the terms of the Loan Documents, which Loan Documents are
hereby approved in all respects (including all rights and remedies set forth or
referred to in the Loan Documents). The amount of such loans and advances
shall not exceed the aggregate principal amount of $8.369 million outstanding
at any time pending the Final Hearing.
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7. The Debtors shall use the proceeds of the loans and
advances made, and the Letters of Credit issued, under the Credit Facility for
the payment of employee salaries, payroll, taxes, collection of accounts,
purchases of inventory, advertising, lease obligations, and other general
operating and working capital purposes in the ordinary course of the Debtors'
businesses (including amounts paid for such purposes which may constitute
administrative expense claims under the Bankruptcy Code, attributable to the
operation of the businesses of the Debtors which are approved by the Court) and
expenditures authorized by order of the Court, and in accordance with the terms
and conditions of the Loan Documents.
8. The terms and conditions of the Loan Documents, which
are incorporated into the terms and conditions of this Order, shall be
sufficient and conclusive evidence of the borrowing arrangements between the
Debtors and the Lender and of the Debtors' agreement as to the conditions of
the Loan Documents, for all purposes, including the payment of all principal,
interest, loan management fees, Credit Facility fees and other fees and
expenses, including attorneys' fees and legal expenses of the Lender as more
fully set forth in the Loan Documents. The Debtors' Obligations (as defined
below) shall be joint and several.
9. (a) The Debtors are authorized to do and perform all
acts, to make, execute and deliver all instruments and documents (including,
without limitation, the Loan Documents and Letter of Credit applications and
reimbursement agreements with third parties as contemplated by the Loan
Documents, all of which are hereby approved) which may be required or necessary
for the performance of the Debtors under the terms of this Order, the Loan
Documents and the financing hereby approved.
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(b) The Debtors are authorized to execute and deliver the
Contribution Agreement which provides for a fair and equitable sharing of the
joint and several obligations of the Debtors under the Credit Agreement and the
Credit Facility.
10. The Debtors are authorized and directed, subject to
the information and reasonableness requirements of 11 U.S.C. Section 330 and
Local Rule 27 and Attachment A to this Order, to pay or reimburse the Lender
for all present and future reasonable fees, costs and expenses, including (i)
attorneys' fees and legal expenses, and (ii) fees and other amounts which may
be required or necessary for the performance of the Debtors under the terms of
this Order, the Loan Documents and the financing hereby approved, or which may
be paid or incurred by the Lender to effectuate the financing transactions as
provided in this Order and the Loan Documents, all of which unpaid fees,
commissions, costs and expenses shall be and are included as part of the
principal amount of the Obligations (as defined below).
11. As security for the full and timely payment of any
and all obligations, liabilities and indebtedness of the Debtors to the Lender
arising under the Loan Documents and the Credit Facility (collectively, the
"Obligations"), the Lender shall have and is hereby granted (in each of the
above-captioned chapter 11 cases) (i) pursuant to section 364(c)(2) of the
Bankruptcy Code, first priority liens on and security interests in all of the
Debtors' now owned or hereafter acquired unencumbered assets, of whatever kind
or nature; provided, however, that (a) the Lender shall not have liens on or
security interests in any recoveries resulting from claims arising under
sections 544, 545, 547, 548, 549, 550 or 553 of the Bankruptcy Code (the
"Avoidance Action Proceeds") and (b) the Avoidance Action Proceeds shall not be
used to pay the superpriority administrative expense claims granted to the
Lender
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hereunder and under the Loan Documents, (ii) pursuant to section 364(c)(3) of
the Bankruptcy Code, junior liens on and security interests in all other now
owned or hereafter acquired assets, subject only to Permitted Liens and (iii)
pursuant to section 364(d) of the Bankruptcy Code, liens on and security
interests in all of the Debtors' now owned or hereafter acquired assets, which
liens and security interests shall be senior to any and all liens on or
security interests in such assets held by any Debtor (the assets described in
(i), (ii) and (iii) of this paragraph which are subject to a lien or security
interest in favor of the Lender collectively being the "Collateral").
12. Other than with respect to Permitted Liens, the liens
and security interests granted to the Lender hereunder and in the Loan
Documents shall not be subordinated to or pari passu with any other lien or
security interest, however arising, included but not limited to a lien or
security interest granted under section 364(d) of the Bankruptcy Code or
otherwise.
13. (a) The liens and security interests in favor of the
Lender described herein and in the Loan Documents shall be deemed valid,
binding, enforceable and perfected upon entry of this Order, and shall not be
subject to any lien or security interest which is avoided and preserved for the
benefit of the Debtors under section 551 of the Bankruptcy Code.
(b) The Lender shall not be required to file any
financing statements, notice of lien or similar instruments in any jurisdiction
or filing office, or to take any other action in order to validate or perfect
the liens and security interests granted by or pursuant to this Order or
pursuant to the Loan Documents.
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(c) Should the Lender, in its sole discretion, from time
to time, choose to file such financing statements, notices of lien or similar
instruments, take possession of any Collateral, or take any other action to
validate or perfect any such security interest or lien, the Debtors and their
officers are hereby directed to execute any such documents or instruments as
the Lender shall reasonably request and all such documents and instruments
shall be deemed to have been filed or recorded at the time and on the date of
entry of this Order.
(d) A photocopy of this Order may, in the discretion of
the Lender, be filed with or recorded in filing or recording offices in
addition to or in lieu of such financing statements, notices of lien or similar
instruments, and all filing offices are hereby directed to accept such
certified copy of this Order for filing and recording.
14. For all Obligations, and in addition to the foregoing
but subject to Paragraph 11 of this Order, the Lender is hereby granted an
allowed superpriority administrative claim in accordance with section 364(c)(1)
of the Bankruptcy Code having priority in right of payment over any and all
other obligations, liabilities and indebtedness of any Debtor, now in existence
or hereafter incurred by any Debtor, and over any and all administrative
expenses or priority claims of the kind specified in, or ordered pursuant to,
sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b) or 1114 of the
Bankruptcy Code.
15. The Lender's security interests in and liens upon the
Collateral and the superpriority administrative expense claim shall be
subordinate only to:
(a) the fees and expenses of the Office of the United
States Trustee pursuant to 28 U.S.C. Section 1930(a)(6);
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(b) the payment of allowed fees and expenses of
professionals retained in these chapter 11 cases pursuant to section
327 and 1103 of the Bankruptcy Code by the Debtors or any official
committee and the expenses of members of any official committee
appointed in these chapter 11 cases; and
(c) sales taxes collected by the Debtors that constitute
trust funds under Section 111.016 of the Texas Tax Code;
provided, however, that the Lender's security interests in and liens upon the
Collateral and the superpriority administrative expense claim shall be
subordinate only to payments made under subparagraphs (a) and (b) of this
paragraph in an amount not to exceed $1,500,000 in the aggregate outstanding at
any time (inclusive of any holdbacks on interim compensation required by this
Court) (the "Professional Expense Cap"); and it is further provided that after
the occurrence and during the continuance of an Event of Default during which
the Lender has ceased making loans and advances under the Credit Facility, any
payments actually made to professionals after or during such period, under
sections 330 and 331 of the Bankruptcy Code or otherwise in respect of fees and
expenses, shall reduce the Professional Expense Cap on a dollar-for-dollar
basis. All of the funds set forth in subparagraphs (a), (b) and (c) are
collectively referred to as the "Carveout". No other claim or expense, having
a priority senior or pari passu to that granted to the Lender in this Order,
shall be granted in these chapter 11 cases, or any superseding chapter 7 cases,
while any portion of the Obligations, the Credit Facility or the commitment
thereunder remains outstanding.
16. Notwithstanding the foregoing, the Debtors shall be
permitted to pay, as the same may become due and payable, (i) administrative
expenses of the kind specified in
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section 503(b) of the Bankruptcy Code incurred in the ordinary course of their
businesses and (ii) subject to the provisions of Subparagraph 15(b) hereof,
compensation and reimbursement of expenses to professionals allowed and payable
under sections 330 and 331 of the Bankruptcy Code.
17. The Debtors are authorized and directed, to the
extent required under the Loan Documents, either to deposit or cause to be
deposited into the Depository Accounts monies, checks, credit card sales
drafts, credit card sales or charge slips or receipts, drafts and any other
payments received from its account debtors and other parties, now or hereafter
obligated to pay the Debtors for services or other property of the Debtors'
estates. The Lender is authorized to apply such payments and proceeds received
by the Lender to the Obligations as set forth in this Order and the Loan
Documents.
18. The Debtors are authorized and directed, at the
Lender's request, to: (i) establish the Depository Account arrangements
designated in the Loan Documents, and if and to the extent any deposits or
transfers into the Depository Accounts are considered to be property of the
Debtors' estates, any bonding requirements set forth in section 345 of the
Bankruptcy Code, if applicable, are hereby waived; (ii) deposit proceeds, to
the extent required under the Loan Documents, of Collateral received by the
Debtors into the Depository Accounts established for the benefit of the Lender;
and (iii) enter into such agreements as may be necessary to effectuate such
arrangements.
19. The Debtors are hereby authorized and directed 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
Lender may reasonably require as evidence of and for
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the protection of the Obligations and the Collateral or which may be otherwise
deemed necessary by the Lender to effectuate the terms and conditions of this
Order and the Loan Documents, each of such documents, instruments and
agreements being included in the definition of "Loan Documents" contained
herein.
20. The Debtors are authorized and directed to provide to
the Lender, unless there is a written waiver by the Lender in each instance,
all of the documentation, reports, schedules, assignments, financial
statements, insurance policies and endorsements, access, inspection, audits and
other information which the Debtors are required to provide to the Lender under
the Loan Documents.
21. Except as modified by Paragraph 22 of this Order, the
automatic stay provisions of section 362 of the Bankruptcy Code are vacated and
modified to the extent necessary to permit the Lender to implement the terms
and conditions of the Loan Documents and the provisions of this Order,
including, without limitation, to perfect its liens and security interests and
to exercise its remedies under the Loan Documents.
22. Subject to the provisions of the Loan Documents, and
upon the expiry of five Business Days after the Lender shall have filed with
the Bankruptcy Court an affidavit identifying any default hereunder or Event of
Default under the Loan Documents (collectively, "Events of Default") and served
the same by hand delivery, telecopier or overnight mail upon counsel to the
Debtors and the Committee, the automatic stay provisions of section 362 of the
Bankruptcy Code are vacated and modified to the extent necessary so as to
permit the Lender to exercise all rights and remedies provided for in the Loan
Documents, without filing further pleadings or application to or order of this
Court; provided, however, that, notwithstanding
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anything to the contrary set forth herein or in the Loan Documents, the Lender
shall use only reasonable efforts to maximize the value of the Collateral in
connection with the exercise of its remedies hereunder or under the Loan
Documents. Upon the occurrence of any Event of Default, (a) the Lender shall
be relieved of any and all obligations to make additional advances and (b) the
Credit Facility and the Lender's commitment thereunder shall be terminated.
Subject only to the provisions of this Paragraph and the Loan Documents, the
Lender shall be and is hereby authorized, in its discretion, to take any and
all actions and remedies which the Lender may deem appropriate, in good faith
and in a commercially reasonable manner, to proceed against and realize upon
the Collateral and the Debtors hereby are directed to cooperate with the Lender
in the exercise of such rights, provided that nothing in this Order shall
prevent the Debtors from seeking to have the Bankruptcy Court adjudicate any
dispute with respect thereto.
23. Unless an Event of Default occurs sooner, in the
event that the Final Bankruptcy Court Order (as defined in the Credit
Agreement) is not entered on or before May 20, 1996, all of the Obligations
shall immediately become due and payable and the Lender shall be automatically
and completely relieved from the effect of any stay, including, without
limitation, any stay under section 362 of the Bankruptcy Code or any other
restriction on the enforcement of the liens and security interests or any other
rights granted to the Lender pursuant to the terms and conditions of the Loan
Documents or this Order, and the Lender shall be and is hereby authorized, in
its discretion and subject to the proviso in the first sentence of Paragraph 22
hereof, to take any and all actions and remedies which the Lender may deem
appropriate and to proceed against and realize upon the Collateral and any other
17
<PAGE> 19
property of the estates of the Debtors upon which it has been or may hereafter
be granted liens and security interests to obtain repayment of the Obligations,
including, without limitation, all such actions and remedies set forth in the
Loan Documents (except if the authority of Discovery Zone to borrow from the
Lender shall be extended with the prior written consent of the Lender, which
consent shall not be implied from any other action, inaction or acquiescence by
the Lender).
24. No costs or expenses of administration which have or
may be incurred in any of the Debtors' respective chapter 11 cases, any
conversion of any of the Debtors' respective chapter 11 cases pursuant to
section 1112 of the Bankruptcy Code, pursuant to sections 105, 506(c) or 522 of
the Bankruptcy Code, or in any future proceedings or cases related hereto,
shall be charged against the Lender, its claims or the Collateral, without the
prior written consent of the Lender, and no such consent shall be implied from
any other action, inaction or acquiescence by the Lender and no obligations
incurred or payments or other transfers made by or on behalf of the Debtors on
account of the financing arrangements with the Lender shall be avoidable or
recoverable from the Lender under sections 547, 548, 550 or 553 or any other
provision of the Bankruptcy Code.
25. No costs or expenses of administration including,
without limitation, professional fees allowed and payable under sections 330
and 331 of the Bankruptcy Code that have been or may be incurred in the
Debtors' cases, or after any conversion of any of these cases under section
1112 of the Bankruptcy Code or in any other proceeding related thereto, and no
priority claims are, or will be, prior to or on a parity with the
administrative claims of the Lender arising hereunder or will be paid from
proceeds of the Collateral granted to the
18
<PAGE> 20
Lender hereunder and under the Loan Documents; provided, however, that the
Lender will permit to be paid the Carveout from the proceeds of the Collateral
(the "Permitted Payments") in accordance with Paragraph 15 hereof; provided
further, however, that the parties entitled to any portion of the Carveout
shall not have any rights in connection with any foreclosure, sale or other
disposition of the Collateral hereunder (including, without limitation, the
right to require a sale of any Collateral), other than the right to receive
Permitted Payments from the proceeds thereof. Without limiting the priority of
the Lender's liens and security interests, subject to the rights of the holders
of Permitted Liens, the holders of allowed claims covered by the Carveout shall
have the right, to the extent unencumbered assets are unavailable to pay the
Carveout, to receive to the extent of such claims the initial net proceeds of
the liquidation of the Collateral not to exceed in the aggregate the
Professional Expense Cap to the extent available pursuant to Paragraph 15
hereof.
26. Except as otherwise provided in the Loan Documents,
so long as the Lender's commitment or any Obligation, liability of indebtedness
under the Loan Documents and this Order shall remain outstanding, (i) the
Debtors shall not, directly or indirectly, create, incur, assume or permit to
exist any security interest, encumbrance, lien or other security arrangement of
any kind, on or with respect to any of their respective assets, including, but
not limited to, their inventory, or take or fail to take any action which would
grant or create a lien or security interest in favor of any person (other than
the Lender) in such assets and (ii) there shall not be entered in the any of
the Debtor's respective chapter 11 cases or any subsequent chapter 7 cases any
further order which authorizes under any section of the Bankruptcy Code,
including sections 105, 363 or 364, the procurement of credit or the
19
<PAGE> 21
incurring of indebtedness secured by a lien or which is entitled to
superpriority administrative status which is equal to or superior to that
granted to the Lender herein, unless in each instance (x) the Lender shall have
given its prior written consent thereto and no such consent shall ever be
implied form any other action, inaction or acquiescence by the Lender or (y)
such other order requires that the Obligations be indefeasibly paid in full and
discharged contemporaneously with the entry of such order.
27. Except as otherwise provided for in the Loan
Documents, no order (i) dismissing the chapter 11 case of any of the Debtors
under sections 305 or 1112 of the Bankruptcy Code or otherwise shall be entered
unless prior to the entry thereof the Obligations owing to the Lender under the
Loan Documents shall have been paid in full in cash, and all outstanding
Letters of Credit shall have been terminated or cash collateralized in
accordance with the provisions of the Loan Documents, and the Lender's
obligation to make loans or to cause the issuance of Letters of Credit has been
terminated; (ii) converting the chapter 11 case of any of the Debtors under
section 1112 of the Bankruptcy Code or otherwise shall be entered unless such
order expressly provides that the priority of the claims of the Lender granted
herein shall be senior in right of payment to any claim allowed under section
503(b) of the Bankruptcy Code which is incurred or arises on or after the date
of such order; or (iii) confirming any plan of reorganization in any of the
Debtors' chapter 11 cases shall be entered unless such order provides for the
payment in full in cash of all Obligations payable or owing to the Lender under
the Loan Documents and the termination or cash collateralization of all
outstanding Letters of Credit in accordance with the provisions of the Loan
Documents on
20
<PAGE> 22
or before the effective date of, or substantial consummation of, the plan of
reorganization that is the subject of such order.
28. All advances under the Loan Documents (including the
issuance of Letters of Credit by the Letter of Credit Issuer) are made in
reliance upon this Order, and, therefore, the indebtedness evidenced by such
advances (and reimbursement obligations relating to Letters of Credit) prior to
the effective date of any stay, modification or vacation of this Order cannot
(i) be subordinated (except as otherwise provided in this Order as to the
Carveout), (ii) lose its priority lien status or its superpriority claim status
or (iii) be deprived of the status of the claims, liens and security interests
granted to the Lender under this Order or the Loan Documents, as a result of
any subsequent order in the Debtors' respective chapter 11 cases, or any
superseding chapter 7 cases.
29. The provisions of this Order shall be effective
immediately upon entry of this Order by the Court and any actions taken
pursuant hereto shall survive entry of, and shall govern with respect to any
conflict with, any order which may be entered confirming any plan of
reorganization, dismissing any of the Debtors' chapter 11 cases or which may be
entered converting any Debtor's chapter 11 case from chapter 11 to chapter 7.
The terms and provisions of this Order, as well as the priority of the Lender's
claims, liens and security interests, and all rights of the Lender and the
Obligations of each Debtor created or arising pursuant hereto or to the Loan
Documents, shall constitute a valid and binding obligation of each of the
Debtors, enforceable against each such Debtor in accordance with its terms, and
shall continue in the Debtors' chapter 11 cases and in any superseding chapter
7 cases under the Bankruptcy Code, and such claims, liens and security
interests shall maintain their priority
21
<PAGE> 23
as provided by this Order until satisfied and discharged in accordance with the
terms of the Loan Documents.
30. The provisions of this Order shall inure to the
benefit of the Debtors and the Lender and shall be binding upon the Debtors and
the Lender and the Debtors' respective successors and assigns, including any
Trustee or other fiduciary hereafter appointed as a legal representative of any
of the Debtors or with respect to property of the estates of any of the
Debtors, whether under chapter 11 of the Bankruptcy Code or any subsequent
chapter 7 case, and shall also be binding upon all creditors of the Debtors and
other parties in interest.
31. In making decisions to make advances to Discovery
Zone, or to issue Letters of Credit under the Loan Documents or to collect the
indebtedness and obligations of the Debtors, the Lender shall not be deemed to
be in control of the operations of the Debtors or to be acting as a
"responsible person" or "owner" or "operator" with respect to the operation or
management of the Debtors, including, without limitation, with respect to the
Collateral and any real property in which any of the Debtors' estates hold an
interest (as such terms, or any similar terms, are used in the United States
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, or any similar federal or state statute).
32. The terms of the financing arrangements between the
Debtors and the Lender were negotiated in good faith and at arm's length
between the Debtors and the Lender and any advances which are caused to be
issued to Discovery Zone by the Lender pursuant to the Loan Documents are
deemed to have been extended in good faith, as the term is used in section
364(e) of the Bankruptcy Code, and shall be entitled to the full protection of
section
22
<PAGE> 24
364(e) of the Bankruptcy Code in the event that this Order or any provision
hereof is vacated, reversed or modified, on appeal or otherwise.
33. If any or all of the provisions of this Order are
hereafter modified, vacated or stayed, such modification, vacation or stay
shall not affect (i) the validity of any obligation, indebtedness or liability
incurred by the Debtors to the Lender prior to the effective date of such
modification, vacation or stay, or (ii) the validity or enforceability of any
security interest, lien or priority authorized or created hereby or pursuant to
the Loan Documents. Notwithstanding any such modification, vacation or stay,
any indebtedness, obligations or liabilities incurred by the Debtors to the
Lender prior to the effective date of such modification, vacation or stay shall
be governed in all respects by the original provisions of this Order, and the
Lender shall be entitled to all the rights, remedies, privileges and benefits
granted herein and pursuant to the Loan Documents with respect to all such
indebtedness, obligations or liabilities.
34. Upon the payment in full of all Obligations to the
Lender, or upon the termination of this Order, the Lender and the Debtors shall
each be released from any and all obligations pursuant to the terms of this
Order and/or the Loan Documents.
35. To the extent the terms and conditions of the Loan
Documents are in conflict with the terms and conditions of this Order, the
terms and conditions of this Order shall control.
36. The Final Hearing with respect to the relief
requested in the Motion is set for 9:30 A.M. on May 20, 1996, in the courtroom
usually occupied by this Court, the United States Bankruptcy Court for the
District of Delaware, in Wilmington, Delaware, at
23
<PAGE> 25
which time any party-in-interest may appear and state its objections, if any,
to the borrowings by Discovery Zone, and the guaranty obligations of the
Guarantors. The following parties which have previously received copies of the
Motion shall, within three business days after execution of this Order by this
Court, be mailed copies of this Order by the Debtors by first class mail: (i)
the Office of the United States Trustee; (ii) the Lender and its attorneys;
(iii) all creditors known to the Debtors who may have liens against the
Debtors' assets; (iv) all landlords, owners, operators and/or mortgagors of the
premises at which any of the Debtors' inventory is located; (v) the Committee
and its counsel; (vi) the twenty largest unsecured creditors of the Debtors;
(vii) the United States Internal Revenue Service; and (viii) all
parties-in-interest that have filed Notices of Appearances in these chapter 11
cases. Objections shall be in writing and shall be filed with the Clerk of the
Bankruptcy Court, 5th Floor, with a copy served upon Shearman & Sterling, 599
Lexington Avenue, NY 10022-6065, Attention: Douglas P. Bartner; Young,
Conaway, Stargatt & Taylor, 1110 N. Market Street, Rodney Square North, 11th
Floor, Wilmington, DE 19801, Attention: Laura Davis Jones, Esq.; Schulte Roth
& Zabel, 900 Third Avenue, New York, NY 10022, Attention: Mark Neporent, Esq.
and Mark Broude, Esq.; and Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New
York, New York 10153-0119, Attention: Martin Bienenstock, Esq. and Pamela
Corrie, Esq., so that such objections are received before 4:30 p.m. on May 15,
1996; any objections by creditors or other parties-in-interest to any of the
provisions of this Order shall be deemed waived unless filed and received in
accordance with the notice on or before the close of business on such date.
24
<PAGE> 26
Dated: Wilmington, Delaware
___________, 1996
------------------------------
UNITED STATES BANKRUPTCY JUDGE
25
<PAGE> 1
EXHIBIT 99.2
<PAGE> 2
REVOLVING CREDIT AGREEMENT
dated as of April 30, 1996
among
DISCOVERY ZONE, INC.
as DEBTOR-IN-POSSESSION,
AS BORROWER,
MADELINE, LLC
AS LENDER,
and
THE GUARANTORS SIGNATORY HERETO,
each as DEBTOR-IN-POSSESSION,
AS GUARANTORS
$17,000,000
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS; CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.03. Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.01. Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) The Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Revolving Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.02. Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.03. Making of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.04. Mandatory Prepayment; Optional Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Optional Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.05. Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.06. Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.07. Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.08. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Time, Place and Manner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(c) Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Administration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(e) Anniversary Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(f) Audit and Collateral Monitoring Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(g) Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.09. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.10. Increased Costs and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.01. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Request for Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IV SECURITY; ADMINISTRATIVE PRIORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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<TABLE>
<S> <C>
4.01. Grant of Lien and Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.02. Administrative Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.03. Grants, Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.04. No Filings Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.05. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.01. Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.02. Authority and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.03. Execution and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.04. Authorizations and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.05. Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.06. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Historical Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.07. No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.08. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.09. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.11. Financial Accounting Practices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.12. Power To Carry On Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.13. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.14. Existing Liens; Capitalized Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.15. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.16. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.17. Accurate and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.19. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.20. Administrative Priority; Lien Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.21. Bankruptcy Court Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.22. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.23. Location of Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.24. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.25. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.26. Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI CONDITIONS OF CREDIT EXTENSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.01. Conditions Precedent to Initial Credit Extension . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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<TABLE>
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6.02. Conditions Precedent to Each Credit Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.01. Reporting and Information Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Quarterly Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Monthly Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Certain Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(e) Pleadings, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) Reports to Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(g) Other Reports and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(h) Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(i) Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(j) Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(k) Notice of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(l) Visitation and Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.02. Preservation of Existence and Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.03. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.04. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.05. Financial Accounting Practices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.06. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.07. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.08. Cash Management System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.09. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VIII NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.01. Final Bankruptcy Court Order; Administrative Priority; Lien Priority; Payment of Claims . . . . . . . 39
8.02. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.03. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.04. Guarantees and Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.05. Loans, Advances and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.06. Dividends and Related Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.07. Merger, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.08. Dispositions of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.09. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.10. Continuation of or Change In Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.11 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
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<TABLE>
<S> <C>
8.12. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.13. Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.14. EBITDAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.15. Gross Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.16. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE IX DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.02. Consequences of an Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.03. Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.01. Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.02. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.03. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.04. No Implied Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.06. Expenses; Taxes; Attorneys' Fees; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.07. Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.08. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.10. Prior Understandings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.11. Duration; Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.13. Successors and Assigns; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.14. The Lender as Party in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.15. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.16. Releases of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.17. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE XI GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.01. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.02. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.03. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.04. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.05. Costs of Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.06. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Letter of Credit Application
Exhibit D - Form of Pledge and Security Agreement
Exhibit E - Form of Security Agreement
Exhibit F - Form of Bankruptcy Court Order
Exhibit G-1 - Form of Opinion of General Counsel
Exhibit G-2 - Form of Opinion of Shearman & Sterling
Exhibit H - Form of Depository Bank Notice Letter
Exhibit I - Form of Release Certificate
Exhibit J - Form of Cash Concentration Account Agreement
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Schedule 5.01 - Jurisdictions of Qualification
Schedule 5.08 - Litigation
Schedule 5.16 - Subsidiaries
Schedule 5.18 - Insurance
Schedule 5.22 - Real Property
Schedule 5.23 - Bank Accounts
Schedule 5.25 - Licenses
Schedule 5.26 - Franchise Agreements
Schedule 8.02 - Liens
Schedule 8.03 - Indebtedness
Schedule 8.04 - Guarantees
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<PAGE> 9
REVOLVING CREDIT AGREEMENT
THIS CREDIT AGREEMENT, made as of April 30, 1996, among
DISCOVERY ZONE, INC., a Delaware Corporation, as debtor and
debtor-in-possession (the "Borrower"), the Guarantors signatory hereto, each as
debtor and debtor-in-possession (each a "Guarantor" and collectively the
"Guarantors"), and MADELINE, LLC (the "Lender").
BACKGROUND
The Borrower and the Guarantors filed voluntary petitions for
relief under chapter 11 of title 11 of the United States Code on March 25,
1996. The Borrower and the Guarantors have requested the Lender to provide the
Borrower with a $17,000,000 revolving credit facility, including a $7,000,000
subfacility for the issuance of letters of credit, and, subject to the terms
and conditions set forth herein, the Lender has agreed to provide such facility.
In consideration of the mutual covenants herein contained and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. In addition to other words and
terms defined elsewhere in this Agreement, as used herein the following words
and terms shall have the following meanings, respectively, unless the context
hereof otherwise clearly requires:
"Accounts Receivable" shall mean all rights of an Obligor to
payment for goods sold or services rendered, including accounts, contract
rights, general intangibles and any and all such rights evidenced by chattel
paper, instruments or documents, whether due or to become due and whether or
not earned by performance, and whether now or hereafter acquired or arising in
the future, and any proceeds arising therefrom or relating thereto.
"Affiliate" of a Person shall mean any Person which directly
or indirectly controls, or is controlled by, or is under common control with,
such Person. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreed Administrative Expense Priorities" shall mean that
administrative expenses with respect to the Obligors and, with respect to
clause (ii) of clause first, any official committee appointed by the Bankruptcy
Court, shall have the following order of priority:
<PAGE> 10
first, (i) amounts payable pursuant to 28 U.S.C. Section
1930(a)(6), (ii) allowed fees and expenses of professionals
retained in the Chapter 11 Cases pursuant to Section Section 327 and
1103 of the Bankruptcy Code, (iii) sales taxes collected by the
Obligors that constitute trust funds under Section 111.016 of the
Texas Tax Code, and (iv) allowed expenses of members of the Official
Committee of Unsecured Creditors appointed in the Chapter 11 Cases;
provided, however, that the amount entitled to priority under
subclauses (i), (ii) and (iv) of this clause first ("Priority
Expenses") shall not exceed $1,500,000 outstanding in the aggregate at
any time (inclusive of any holdbacks required by the Bankruptcy Court)
(the "Priority Expense Cap"); provided, however, that after the
occurrence and during the continuance of an Event of Default any
payments actually made to professionals under Section Section 330 and
331 of the Bankruptcy Code shall reduce the Priority Expense Cap;
second, all Obligations; and
third, all other allowed administrative expenses.
"Agreement" shall mean this Revolving Credit Agreement as
amended, modified, supplemented or restated from time to time.
"Avoidance Action Proceeds" shall mean recoveries received by
any of the Obligors from claims arising under Sections 544, 545, 547, 548, 549,
550 or 553 of the Bankruptcy Code.
"Bank" shall mean Citibank, N.A., its successors or any other
bank designated by the Lender to the Borrower from time to time that is
reasonably acceptable to the Borrower.
"Bankruptcy Code" shall mean Title 11, United States Code, 11
U.S.C. Section Section 101 et seq., as amended.
"Bankruptcy Court" shall mean the United States Bankruptcy
Court for the District of Delaware or such other court having original
jurisdiction over the Chapter 11 Cases.
"Benefit Plan" shall mean a defined benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which
any Obligor, or any ERISA Affiliate is or within the immediately preceding six
(6) years was an "employer" as defined in Section 3(5) of ERISA.
"Borrower" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Borrower's Account" shall have the meaning given that term in
Section 2.08(a) hereof.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on
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which banking institutions are authorized or obligated to close in New York,
New York.
"Capital Expenditures" shall mean, for any period on a
consolidated basis for the Obligors the sum, without duplication, of (i) the
aggregate amount of all expenditures, except interest capitalized during
construction, during such period which, in accordance with GAAP, are required
to be included in property, plant or equipment or similar fixed asset account
plus (ii) the entire principal amount of any debt obligations (including
obligations under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, to the extent required to be so recorded) assumed
in connection with any such expenditures.
"Capital Guideline" means any law, rule, regulation, policy,
guideline or directive (whether or not having the force of law and whether or
not the failure to comply therewith would be unlawful), (i) regarding capital
adequacy, capital ratios, capital requirements, the calculation of a bank's
capital or similar matters, or (ii) affecting the amount of capital required to
be obtained or maintained by the Letter of Credit Issuer or the manner in which
the Letter Of Credit Issuer allocates capital to any of its contingent
liabilities (including letter of credit), advances, acceptances, commitments,
assets or liabilities.
"Capitalized Lease" shall mean at any time any lease which is
required under GAAP to be capitalized on the balance sheet of the lessee at
such time, and "Capitalized Lease Obligation" of any Person at any time shall
mean the aggregate amount which is required under GAAP to be reported as a
liability on the balance sheet of such Person at such time as lessee under a
Capitalized Lease.
"Carve-Out Expenses" shall mean those amounts, fees, expenses
and claims set forth in clause "first" of the definition of the term "Agreed
Administrative Expense Priorities."
"Cash Collateral Account" shall mean the deposit account
maintained at the Bank, or such other bank as the Lender may select, which
deposit account shall be under the sole dominion and control of the Lender.
"Cash Concentration Account" shall mean the deposit account,
maintained by the Borrower at the Cash Concentration Account Bank and listed on
Schedule 5.23 hereto, which deposit account shall be under the sole dominion
and control of the Lender.
"Cash Concentration Account Agreement" shall mean the
agreement, substantially in the form of Exhibit J hereto, among the Lender, the
Borrower and the Cash Concentration Account Bank.
"Cash Concentration Account Bank" shall mean Harris Bank or
such other bank as the Borrower may select with the written approval of the
Lender.
"Chapter 11 Cases" shall mean each of the Obligors'
reorganization cases under chapter 11 of the Bankruptcy Code, pending in the
Bankruptcy Court.
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<PAGE> 12
"Closing Date" shall mean the first date on which each of the
conditions set forth in Section 6.01 shall have been satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to
sections of the Code shall be construed also to refer to any successor sections.
"Collateral" shall have the meaning given that term in Section
4.01 hereof.
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance or hazardous waste, including any such substance regulated
under any Environmental Law.
"Credit Extension" shall mean (a) the making of any Loan by
the Lender or (b) the issuance, or extension of the expiration date of, any
Letter of Credit which the Lender assists the Borrower in opening or
establishing.
"Cumulative EBITDAR" shall mean, for any fiscal quarter of the
Obligors after April 1, 1996, the aggregate EBITDAR for the period beginning on
such date and ending at the end of such fiscal quarter.
"Cumulative Gross Revenue" shall mean, for any fiscal quarter
of the Obligors after April 1, 1996, the aggregate Gross Revenue for the period
beginning on such date and ending at the end of such fiscal quarter.
"Current Commitment" shall have the meaning assigned to that
term in Section 2.01 hereof.
"Depository Accounts" shall mean the lock-box or blocked
depository accounts maintained by the Borrower for the collection of the cash
of the Borrower.
"Depository Bank" shall mean each financial institution at
which a Depository Account is maintained.
"Designated Borrowing Officer" shall mean John Chapman,
corporate controller, or any successor corporate controller of the Borrower.
"Designated Financial Officer" of a Person shall mean the
individual designated from time to time by the Board of Directors or governing
body performing like functions of such Person to be the chief financial officer
or Treasurer of such Person (and individuals designated from time to time by
the Board of Directors or governing body performing like functions of such
Person to act in lieu of the chief financial officer or the Treasurer).
"Disbursement Account" shall mean the deposit account in the
name of the
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<PAGE> 13
Borrower maintained at a bank in the United States designated by the Borrower
to the Lender from time to time into which there shall be deposited proceeds of
Loans and funds disbursed to the Borrower by the Lender.
"Dollar", "Dollars" and the symbol "$" shall mean lawful money
of the United States of America.
"EBITDAR" shall mean, for any period, the consolidated net
income (or net loss) of the Obligors for such period as determined in
accordance with GAAP, plus (i) the sum of, without duplication, the following
for the Obligors, (A) depreciation expense, (B) amortization expense net of
negative goodwill amortization, (C) the excess, if any, of gross interest
expense for such period over gross interest income for such period, in each
case determined in accordance with GAAP, (D) total income tax expense, (E)
restructuring expenses and (F) non-cash losses (provided that any such losses
do not at any time result in a cash outlay by any Obligor), which include the
cumulative effect on earnings from the adoption of GAAP pronouncements, less
(ii) extraordinary gains for the Obligors.
"Entry Date" shall mean the date the Interim Bankruptcy Court
Order or, if no Interim Bankruptcy Court Order is obtained, the Final
Bankruptcy Court Order is entered.
"Environmental Law" means all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect relating to
the regulation and protection of human health, safety, the environment and
natural resources. Environmental Laws include but are not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA"); the Hazardous
Material Transportation Act, as amended (49 U.S.C. Section 180 et seq.); the
Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et
seq.) ("RCRA"); the Toxic Substance Control Act, as amended (42 U.S.C. Section
7401 et seq.); the Clean Air Act, as amended (42 U.S.C. Section 740 et seq.);
the Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 et
seq.); and their state and local counterparts or equivalents.
"Environmental Liabilities and Costs" means, as to any Person,
all liabilities, monetary obligations, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, expert
and consulting and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand
by any other Person, and which relate to any environmental condition or a
Release.
"Environmental Lien" means any Lien in favor of any
Governmental Authority for Environmental Liabilities and Costs.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, and
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed also to refer to
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<PAGE> 14
any successor sections.
"ERISA Affiliate" shall mean any (i) corporation which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower, (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with the Borrower, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Borrower, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Event of Default" shall mean any of the Events of Default
described in Section 9.01 hereof.
"Filing Date" shall mean March 25, 1996.
"Final Bankruptcy Court Order" shall mean the order of the
Bankruptcy Court finally approving the Credit Extensions made and to be made to
the Borrower in accordance with this Agreement in form and substance
satisfactory to the Lender, as the same may be amended, modified or
supplemented from time to time with the express written joinder or consent of
the Lender and the Borrower.
"GAAP" shall mean generally accepted accounting principles as
such principles shall be in effect in the United States at the Relevant Date.
"Governmental Authority" shall mean any nation or government,
any federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Gross Revenue" shall mean, for any period, the revenue
received by the Obligors, including Accounts Receivable, from the operation of
their businesses for such period, as determined in accordance with GAAP.
"Guarantee" of or by any Person shall mean any obligation of
such Person guaranteeing any Indebtedness of any other Person (the "primary
obligor"), directly or indirectly through an agreement (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness
or to purchase (or to advance or supply funds for the purchase of) any security
for the payment of such Indebtedness, (ii) to purchase property, securities, or
services for the purpose of assuring the owner of such Indebtedness against
loss, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness; provided, however, that the term
Guarantee shall not include endorsements for collection or deposit, in either
case in the ordinary course of business.
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<PAGE> 15
"Guarantors" shall have the meaning given that term in the
introductory paragraph this Agreement and shall include any other Person which
from time to time guarantees all or any part of the Obligations.
"Indebtedness" shall mean as to any Person (i) indebtedness
for borrowed money; (ii) indebtedness for the deferred purchase price of
property or services (other than property including Inventory and services
purchased in the ordinary course of business); (iii) indebtedness evidenced by
bonds, debentures, notes or other similar instruments (other than performance,
surety and appeal or other similar bonds arising in the ordinary course of
business); (iv) obligations and liabilities secured by a Lien, claim or
encumbrance, upon property owned by such Person, whether or not owing by such
Person and even though such Person has not assumed or become liable for the
payment thereof; (v) obligations and liabilities directly or indirectly
Guaranteed by such Person; and (vi) obligations or liabilities created or
arising under any conditional sales contract or other title retention agreement
with respect to property used and/or acquired by such Person, even though the
rights and remedies of the lessor, seller and/or lender thereunder are limited
to repossession of such property.
"Indemnified Parties" shall have the meaning given that term
in Section 10.06 hereof.
"Interim Bankruptcy Court Order" shall mean the order of the
Bankruptcy Court, if any, approving the Credit Extensions in accordance with
this Agreement on an interim basis, as the same may be amended, modified or
supplemented from time to time with the express written joinder or consent of
the Lender and the Borrower.
"Inventory" means all goods and merchandise of the Borrower
including, but not limited to, all materials and supplies of every nature used
or usable in connection with the shipping, storing, advertising or sale of such
goods and merchandise, whether now owned or hereafter acquired and all such
property the sale or other disposition of which would give rise to Accounts
Receivable.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree
or award of any Governmental Authority.
"Lender" shall have the meaning given that term in the
introductory paragraph to this Agreement.
"Lender Account" shall mean an account in the name of the
Lender designated to the Borrower from time to time into which the Borrower
shall make all payments to the Lender under this Agreement.
"Letter of Credit Application" shall have the meaning given to
that term in Section 3.01 hereof.
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<PAGE> 16
"Letter of Credit" shall have the meaning given to that term
in Section 3.01.
"Letter of Credit Exposure" at any time shall mean the sum at
such time of (a) the aggregate amount of all Unreimbursed Draws under Letters
of Credit (whether or not such Letters of Credit are then outstanding) and (b)
the aggregate Undrawn Letter of Credit Availability under all outstanding
Letters of Credit.
"Letter of Credit Fees" shall mean all fees payable pursuant
to Section 2.08(c).
"Letter of Credit Guaranty" shall mean the guaranty delivered
by the Lender to the Letter of Credit Issuer of the Borrower's Reimbursement
Obligations under a reimbursement agreement, Letter of Credit Application or
other like document.
"Letter of Credit Issuer" shall mean the issuer of a Letter of
Credit, which issuer shall be mutually acceptable to the Lender and the
Borrower.
"Lien" shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
"Loan" or "Loans" shall mean any and all loan or loans made by
the Lender to the Borrower under this Agreement.
"Material Adverse Effect" shall mean a material adverse effect
upon (i) the business, operations or condition (financial or otherwise) of the
Obligors, taken as a whole, (ii) the ability of the Obligors, taken as a whole,
to perform their obligations hereunder or under the Note and any other Related
Document or (iii) the legality, validity or enforceability of this Agreement or
any Related Document, determined in the reasonable discretion of the Lender.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is, or within the immediately
preceding six (6) years was, contributed to by the Borrower or any ERISA
Affiliate.
"Net Sale Proceeds" shall mean proceeds (including any notes
received as consideration and any other non-cash considerations) received by
the Obligors from the sale, lease, assignment or other disposition outside of
the ordinary course of business of any asset or property of any such Person,
net of the costs and expenses of sale, lease, assignment or other disposition,
taxes paid or payable as a result thereof and amounts applied to the repayment
of Indebtedness secured by a Permitted Lien on the asset or property disposed
of.
"Note" shall mean the promissory note of the Borrower,
substantially in the form attached hereto as Exhibit A, executed and delivered
under this Agreement, as modified or restated from time to time, and any
promissory note or notes issued in exchange or replacement
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thereof, including all extensions, renewals, refinancings or refundings thereof
in whole or part.
"Notice of Borrowing" shall have the meaning given to that
term in Section 2.03.
"Obligations" shall mean all indebtedness, obligations and
liabilities of the Obligors to the Lender incurred under or related to this
Agreement, the Note or any other Related Document, whether such indebtedness,
obligations or liabilities are direct or indirect, secured or unsecured, joint
or several, absolute or contingent, due or to become due, whether for payment
or performance, now existing or hereafter arising, including, without
limitation all indebtedness, obligations (including Reimbursement Obligations)
and liabilities of any nature whatsoever, including amounts due under Section
10.06 hereof and similar agreements contained in the other Related Documents,
from time to time arising under or in connection with or evidenced or secured
by this Agreement, the Note, the Letters of Credit or any other Related
Document, including but not limited to the principal amount of Loans
outstanding, together with interest thereon, the amount of the Letter of Credit
Exposure, together with interest thereon and all expenses, fees and indemnities
hereunder or under any other Related Document. Without limitation, such
amounts include all Loans and interest thereon and the amount of all Letter of
Credit Exposure whether or not such Loans were made or any Letters of Credit to
which such Letter of Credit Exposure relates were issued in compliance with the
terms and conditions hereof or in excess of the Lender's obligation to lend and
arrange for the issuance of Letters of Credit hereunder. If and to the extent
any amounts in any account (including the Lender Account, the Depository
Account, the Cash Concentration Account or the Cash Collateral Account or
otherwise) constituting Collateral are applied to Obligations hereunder, and
the Lender is subsequently obligated to return or repay any such amounts to any
Person for any reason, the amount so returned or repaid shall be deemed a Loan
hereunder and shall constitute an Obligation.
"Obligors" shall mean the Guarantors and the Borrower.
"Office" when used in connection with the Lender shall mean
its office located at 950 Third Avenue, 20th Floor, New York, New York 10022 or
at such other office or offices of the Lender as may be designated in writing
from time to time by the Lender to the Borrower and when used in connection
with the Bank or the Letter of Credit Issuer shall mean the office of such
entity designated in writing from time to time by the Lender to the Borrower.
In the event Citibank, N.A. shall be the Bank or the Letter of Credit Issuer,
the Office for such entity shall until further written notice from the Lender
to the Borrower be its office located at One Court Square, Long Island City,
New York 11120.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Permitted Disposition" shall have the meaning given that term
in Section 10.16 hereof.
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"Permitted Indebtedness" shall have the meaning given that
term in Section 8.03 hereof.
"Permitted Liens" shall have the meaning given that term in
Section 8.02 hereof.
"Person" shall mean an individual, corporation, partnership,
limited liability company, trust, unincorporated association, joint venture,
joint-stock company, government (including political subdivisions),
Governmental Authority or agency, or any other entity.
"Plan" shall mean an employee benefit plan defined in Section
3(3) of ERISA in respect of which the Borrower or any ERISA Affiliate is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge and Security
Agreement, dated as of the date hereof, made by the Obligors, in favor of the
Lender, in the form of Exhibit D hereto, as modified, amended or supplemented
from time to time.
"Potential Default" shall mean any event or condition which
with notice or passage of time, or any combination of the foregoing, would
constitute an Event of Default.
"Prime Rate" shall have the meaning given that term in Section
2.05 hereof.
"Priority Expenses" shall mean those expenses entitled to a
priority as set forth in the clause "first" of the definition of the term
"Agreed Administrative Expense Priorities".
"Projections" shall have the meaning given that term in
Section 5.06(b) hereof.
"Regular Rate" shall have the meaning given that term in
Section 2.05 hereof.
"Reimbursement Obligation" shall mean the obligation of the
Borrower to reimburse the Lender for amounts payable by the Lender under a
Letter of Credit Guaranty in respect of any drawings made under any Letter of
Credit issued by the Letter of Credit Issuer, together with interest thereon.
"Related Documents" or "Loan Documents" means this Agreement,
the Note, the Security Agreement, the Pledge Agreement, the Letters of Credit,
each Letter of Credit Application, the Interim Bankruptcy Court Order, the
Final Bankruptcy Court Order, the other documents, instruments and agreements
referred to in Section 6.01 hereof, and all other instruments, agreements and
documents now existing or hereafter entered into or in effect by the Borrower
or any other Person from time to time creating, evidencing, directly or
indirectly guaranteeing, or granting the Lender a Lien to secure, any
obligations under or in connection with this Agreement, the Note, the Security
Agreement, the Pledge Agreement, the Letters of Credit, each Letter of Credit
Application, the Interim Bankruptcy Order, the Final Bankruptcy Court Order, or
any other Related Document, and all other instruments, agreements and
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documents from time to time delivered in connection with or otherwise relating
to any Related Document.
"Release" means, as to any Person, any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration by such Person of a Contaminant into the indoor or
outdoor environment or into or out of any property owned by such Person or any
of its Subsidiaries, including the movement of Contaminants through or in the
air, soil, surface water, groundwater or property.
"Release Certificate" shall have the meaning given that term
in Section 10.16 hereof.
"Relevant Date" shall mean the time a relevant computation or
determination is to be made or the date of relevant financial statements.
"Remedial Action" means all actions required by a Governmental
Authority to (i) clean up, remove, treat or in any other way address
Contaminants in the indoor or outdoor environment; (ii) prevent a Release or
condition that is reasonably likely to result in a Release or minimize further
release of Contaminants so they do not migrate or endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; or
(iii) perform pre-remedial studies and investigations and post-remedial
monitoring and care, unless such action shall have been stayed or enjoined by a
court of competent jurisdiction.
"Reportable Event" shall mean any of the events described in
Sections 4043(b) of ERISA (other than events for which the notice requirements
have been waived).
"Revolving Credit Commitment" shall mean the commitment of the
Lender to make Loans to the Borrower pursuant to Section 2.01(a) hereof (i)
during the period when the Interim Bankruptcy Court Order is in effect, in an
aggregate principal amount not to exceed $8,369,000, and (ii) during the period
when the Final Bankruptcy Court Order is in effect in an aggregate principal
amount not to exceed $17,000,000, as such amount may be permanently reduced
pursuant to the terms of this Agreement.
"Security Agreement" shall mean the Security Agreement
executed and delivered by the Obligors to the Lender substantially in the form
attached hereto as Exhibit E, as modified, amended or supplemented from time to
time.
"Stated Amount" of a Letter of Credit shall mean the face
amount thereof, drawn or undrawn, regardless of the existence or satisfaction
of any conditions or limitations on drawing.
"Subsidiary" means, with respect to any Person, any
corporation, limited or general partnership, trust, association or other
business entity of which an aggregate of 50% or more of the outstanding stock
or other interests entitled to vote in the election of the board of
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directors of such corporation (irrespective of whether, at the time, stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency), managers, trustees or
other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned or controlled by
such Person and/or one or more Subsidiaries of such Person.
"Termination Date" shall have the meaning given that term in
Section 2.01(a) hereof.
"Termination Event" shall mean (i) a Reportable Event with
respect to any Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA
Affiliate from a Benefit Plan during a plan year in which the Borrower or any
ERISA Affiliate was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the imposition of an obligation on the Borrower or any ERISA
Affiliate under Section 4041 of ERISA to provide affected parties written
notice of intent to terminate a Benefit Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of
proceedings to terminate a Benefit Plan; or (v) the partial or complete
withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan.
"Undrawn Letter of Credit Availability" with respect to a
Letter of Credit at any time shall mean the maximum amount available to be
drawn under such Letter of Credit at such time, regardless of the existence or
satisfaction of any conditions or limitations on drawing.
"Unreimbursed Draws" with respect to a Letter of Credit at any
time shall mean the aggregate amount at such time of all payments made by a
Letter of Credit Issuer or payments made by the Lender under a Letter of Credit
Guaranty in respect of such payments under such Letter of Credit, to the extent
not repaid by the Borrower.
1.02. Construction. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural and the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or." References in this Agreement to
"determination" by the Lender include good faith estimates by the Lender (in
the case of quantitative determinations) and good faith beliefs by the Lender
(in the case of qualitative determinations). The words "hereof," "herein,"
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. The section and
other headings contained in this Agreement and the Table of Contents preceding
this Agreement are for reference purposes only and shall not control or affect
the construction of this Agreement or the interpretation thereof in any
respect. Section, subsection and exhibit references are to this Agreement
unless otherwise specified.
1.03. Accounting Principles. Except as otherwise provided in
this Agreement, all computations and determinations as to accounting or
financial matters and all financial statements to be delivered pursuant to this
Agreement shall be made and prepared in accordance with GAAP (including
principles of consolidation where appropriate), and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP.
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ARTICLE II
THE CREDITS
2.01. Revolving Credit Loans.
(a) The Commitment. Subject to the terms and
conditions and relying upon the representations and warranties herein set forth
and subject to the Interim Bankruptcy Court Order or the Final Bankruptcy Court
Order, as the case may be, the Lender agrees to make loans to the Borrower at
any time and from time to time on or after the date hereof and to, but not
including, the Termination Date (as defined below), in an aggregate principal
amount not exceeding at any one time outstanding the Lender's Current
Commitment at such time. The Lender's "Current Commitment" at any time shall
be equal to the Revolving Credit Commitment, as such amount may have been
reduced under Section 2.04(a) hereof at such time. The Lender shall have no
obligation to make Loans hereunder or arrange for the issuance of Letters of
Credit on or after the Termination Date or which, when added to the aggregate
amount of all outstanding and contemporaneous Loans and the Letter of Credit
Exposure at such time, would cause the amount of all Loans and the Letter of
Credit Exposure at any time to exceed the Current Commitment at such time. The
"Termination Date" means the date on which the Revolving Credit Commitment
expires, which shall be the earliest of (i) the date of the substantial
consummation (as defined in Section 1101(2) of the Bankruptcy Code) of a plan
of reorganization in the Obligors' Chapter 11 Cases that has been confirmed by
an order of the Bankruptcy Court, (ii) May 24, 1996, if the Final Bankruptcy
Court Order shall not have been entered on or before such date, and (iii) May
2, 1998.
(b) Revolving Credit. Within the limits of time
and amount set forth in this Section 2.01, and subject to the provisions of
this Agreement, the Borrower may borrow, repay and reborrow hereunder.
2.02. Note. The obligation of the Borrower to repay the
unpaid principal amount of the Loans made to it by the Lender and to pay
interest thereon shall be evidenced in part by the Note dated the date of the
first Credit Extension with the blanks appropriately filled in. The executed
Note shall be delivered by the Borrower to the Lender on the Entry Date.
2.03. Making of Loans.
(a) The Borrower shall be entitled to request a
Loan not more frequently than once per calendar week. Whenever the Borrower
desires that the Lender make a Loan, the Borrower shall provide written notice
to the Lender (i) not later than 12:00 noon (New York City time) on the
Business Day (which must be a Monday or, if any Monday is not a Business Day,
the next succeeding Business Day) immediately prior to the date of the proposed
borrowing, setting forth: (A) the principal amount of the proposed borrowing,
and (B) the proposed borrowing date, which must be a Business Day. Such notice
shall be given by a
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writing in substantially the form of Exhibit B hereto containing the original
or facsimile signature of a Designated Borrowing Officer (a "Notice of
Borrowing"). On the date specified in such notice, the Lender shall, subject
to the terms and conditions of this Agreement, make such amount available to
the Borrower on the date specified in such notice in funds immediately
available, by depositing such proceeds in the Disbursement Account.
(b) The Lender shall be entitled to rely
conclusively on the Designated Borrowing Officer's authority to request a Loan
on behalf of the Borrower until the Lender receives written notice to the
contrary. The Lender shall have no duty to verify the authenticity of the
signature appearing on any Notice of Borrowing.
(c) Any notice of borrowing pursuant to this
Section 2.03 shall be irrevocable and the Borrower shall be bound to make a
borrowing in accordance therewith.
2.04. Mandatory Prepayment; Optional Prepayment.
(a) Mandatory Prepayment. (i) Exceeding Current
Commitment. If at any time the Current Commitment is less than the aggregate
unpaid principal amount of the Loans then outstanding, plus the Letter of
Credit Exposure at such time, the Borrower shall immediately prepay the Loans
in an amount of not less than the amount of such difference or, if the Loans
then outstanding are less than the amount of such difference, provide cash
collateral to the Lender in an amount equal to 105% of such excess, which cash
collateral shall be deposited and held in the Cash Collateral Account until
such time as such excess no longer exists. The Borrower may reduce the
Revolving Credit Commitment by providing two Business Days' written notice to
the Lender of such reduction (which notice shall be irrevocable). The
Revolving Credit Commitment shall also be reduced by the aggregate amount of
any and all prepayments required by Section 2.04(a)(ii) hereof in excess of
$3,000,000. Reductions in the Revolving Credit Commitment shall be irrevocable
and may not be reinstated. Concurrently with any notice of reduction of the
Revolving Credit Commitment, the Borrower shall give notice to the Lender of
any mandatory prepayment which notice shall specify a prepayment date no later
than the effective date of such reduction of the Revolving Credit Commitment.
(ii) Disposition of Assets, etc. Without
limiting any other provision of this Agreement or any other Related Document
permitting or requiring prepayment of the Loans in whole or part, the Borrower
shall prepay the Loans in whole or part without premium or penalty, in an
amount equal to 100% of the Net Sale Proceeds constituting cash received by any
Obligor from any sale, lease, transfer or other disposition of any asset
outside of the ordinary course of the business of the Obligors and the proceeds
of any claim made under any insurance policy covering any assets of the
Obligors. Any prepayment required under this clause (ii) shall be made on the
first Business Day after the consummation of such transfer, sale, disposition,
settlement, issuance or other event triggering a prepayment.
(iii) Failure to Obtain Final Bankruptcy
Court Order. Without limiting any other provision of this Agreement or any
other Related Document permitting or
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requiring prepayment of the Loans in whole or part, the Borrower shall prepay
the Loans in whole without premium or penalty on May 24, 1996, in the event the
Final Bankruptcy Court Order shall not have been entered on or before such
date, and shall provide cash collateral to the Lender in an amount equal to
105% of the stated amount of all outstanding Letters of Credit to be held in
the Letter of Credit Cash Collateral Account.
(iv) Other Mandatory Prepayments. The
Lender shall on each Business Day, apply all funds deposited in the Lender
Account to the payment, in whole or in part, of the Obligations outstanding.
(b) Optional Prepayment. The Borrower may
without penalty or premium at any time or from time to time prepay, in whole or
in part, any or all Loans then outstanding.
2.05. Interest Rate. Each Loan shall bear interest on the
principal amount thereof from time to time outstanding for each day until paid
at a rate per annum for each day equal to the Regular Rate for such day.
"Regular Rate" for any day shall mean the Prime Rate for such day plus 3.25%.
"Prime Rate", as used herein, shall mean the interest rate per annum publicly
announced from time to time by Chase Manhattan Bank in New York, New York or
its successors as its Prime Rate, such interest rate to change automatically
from time to time effective as of the announced effective date of each change
in the Prime Rate. The Prime Rate is not intended to be the lowest rate of
interest charged by Chase Manhattan Bank to its borrowers.
2.06. Interest Payment Dates. The Borrower shall pay
interest on the unpaid principal amount of each Loan from the date of such Loan
until such principal amount shall be paid in full, which interest shall be
payable monthly in arrears on the first Business Day of each month, commencing
May 1, 1996. After maturity of any principal amount of any Loan (by
acceleration, at scheduled maturity or otherwise), interest on such amount
shall be due and payable on demand.
2.07. Amortization. To the extent not due and payable
earlier pursuant to the terms of this Agreement, the entire unpaid principal
amount of each of the Loans shall be due and payable on the Termination Date.
2.08. Payments.
(a) Time, Place and Manner. Except as otherwise
provided in Section 2.04(b) hereof, all payments and prepayments to be made in
respect of principal, interest, commitment fee, facility fee or other amounts
due from the Borrower hereunder, under the Note or any other Related Document
shall be payable at or before 12:00 Noon, New York City time, on the day when
due without presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived. Such payments shall be made to the Lender at the
Lender Account in Dollars in funds immediately available at such office without
setoff, counterclaim or other deduction of any nature. The Lender shall
maintain a separate loan account (the "Borrower's
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Account") on its books in the name of the Borrower in which the Borrower will
be charged with Loans made by the Lender to it hereunder and with any other
Obligations. The Borrower hereby authorizes the Lender to, and the Lender may,
from time to time charge the Borrower's Account with any interest, fees or
expenses that are due and payable under this Agreement or any Related Document.
The Borrower confirms that any charges which the Lender may so make to the
Borrower's Account as herein provided will be made as an accommodation to the
Borrower and solely at the Lender's discretion and shall constitute a Loan to
the Borrower. The Borrower's Account will be credited upon receipt of "good
funds" in the Lender Account with all amounts actually received by the Lender
from the Borrower or others for the Borrower's Account. The Lender shall use
reasonable efforts to provide the Borrower with copies or other evidence of all
charges to the Borrower's Account promptly, provided that the failure to
provide such copies or such other evidence to the Borrower shall not relieve
the Borrower of any of its obligations under this Agreement. It is expressly
understood and agreed by the Borrower that the Lender shall have no
responsibility to inquire into the correctness of the apportionment, allocation
or disposition of any Loans made to the Borrower or of any Loans, interest,
fees, costs or expenses for which the Borrower is obligated under this
Agreement. Interest on all Loans and all fees that accrue on a per annum basis
shall be computed on the basis of the actual number of days elapsed in the
period during which interest or such fee accrues and a year of 360 days. In
computing interest on any Loan, the date of the making of such Loan shall be
included and the date of payment shall be excluded; provided, however, that if
a Loan is repaid on the same day in which it is made, one day's interest shall
be paid on such Loan.
(b) Facility Fee. The Borrower shall pay to the
Lender, a facility fee of $190,000, payable on the Closing Date.
(c) Letter of Credit Fees. The Borrower shall
pay to the Lender a fee for each Letter of Credit issued hereunder, such fee to
be equal to 2% per annum of the initial Stated Amount of such Letter of Credit.
This fee shall be payable in advance on or prior to the issuance of each such
Letter of Credit. The Borrower shall also pay the normal and customary letter
of credit fees and charges of the Letter of Credit Issuer for the
administration, issuance and processing of any Letters of Credit issued by such
Letter of Credit Issuer.
(d) Administration Fee. The Borrower shall pay
to the Lender an annual Administration Fee of $220,000 payable in quarterly
arrears, in four equal installments of $55,000, payable at the end of each
fiscal quarter of the Borrower following the Entry Date.
(e) Anniversary Fee. The Borrower shall pay to
the Lender a fee payable on the first anniversary of the Entry Date, in an
amount equal to 2% of the Revolving Credit Commitment on such date.
(f) Audit and Collateral Monitoring Fees. The
Borrower acknowledges that the Lender may upon reasonable notice to the
Borrower conduct audits and/or field examinations of the Borrower and the
Guarantors at any reasonable time and from time to time in a manner so as to
not unduly disrupt the business of the Borrower or Guarantors,
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provided that such notice shall not be required if an Event of Default has
occurred and is continuing. The Borrower agrees to pay, for the account of the
Lender, $1,000 per day per examiner plus the examiner's out-of-pocket costs and
reasonable expenses incurred in connection with all such visits, inspections,
audits and examinations.
(g) Fees. All fees required to be paid pursuant
to any Related Document shall be paid as required therein. All fees under this
Agreement or the other Related Documents are non-refundable under all
circumstances.
2.09. Use of Proceeds. The Borrower hereby covenants,
represents and warrants that the proceeds of the Loans made to them will be
used solely to fund working capital in the ordinary course of the Obligors'
businesses and for other general corporate purposes of the Obligors (including,
without limitation, payments of fees and expenses to professionals under
Section Section 330 and 331 of the Bankruptcy Code and administrative expenses
of the kind specified in Section 503(b) of the Bankruptcy Code incurred in the
ordinary course of business of the Obligors). The Borrower may disburse the
proceeds as Loans to any Obligor; provided, however, that the Borrower may not
disburse the proceeds of any Loan to any Subsidiary or Affiliate unless such
Subsidiary or Affiliate is (i) a debtor and debtor-in-possession in a Chapter
11 Case, and (ii) is a Guarantor under this Agreement.
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2.10. Increased Costs and Reduced Return.
(a) If the Letter of Credit Issuer shall have
determined that the adoption or implementation of, or any change in, any law,
rule, treaty or regulation, or any policy, guideline or directive of, or any
change in the interpretation or administration thereof by, any court, central
bank or other administrative or Governmental Authority, or compliance by the
Letter of Credit Issuer or any Person controlling the Letter of Credit Issuer
with any directive of or guideline from any central bank or other Governmental
Authority or the introduction of or change in any accounting principles
applicable to the Letter of Credit Issuer or any Person controlling the Letter
of Credit Issuer (in each case, whether or not having the force of law), shall
(i) change the basis of taxation of payments to the Letter of Credit Issuer or
any Person controlling the Letter of Credit Issuer of any amounts payable
hereunder or under any Letter of Credit Guaranty (except for taxes on the
overall net income of the Letter of Credit Issuer or any Person controlling the
Letter of Credit Issuer), (ii) impose, modify or deem applicable any reserve,
special deposit or similar requirement against any Letter of Credit or against
assets of or held by, or deposits with or for the account of, or credit
extended by, the Letter of Credit Issuer or any Person controlling the Letter
of Credit Issuer, or (iii) impose on the Letter of Credit Issuer or any Person
controlling the Letter of Credit Issuer any other condition regarding this
Agreement or any Letter of Credit, and the result of any event referred to in
clauses (i), (ii) or (iii) above shall be to increase the cost to the Letter of
Credit Issuer of issuing or guaranteeing any Letter of Credit, or agreeing to
issue or guaranty any Letter of Credit, or to reduce any amount received or
receivable by the Letter of Credit Issuer or the Lender hereunder or under any
Letter of Credit Guaranty, then, upon demand by the Letter of Credit Issuer or
the Lender, the Borrower shall pay to the Letter of Credit Issuer or the Lender
such additional amounts as will compensate the Letter of Credit Issuer or the
Lender for such increased costs or reductions in amount.
(b) If the Letter of Credit Issuer shall have
determined that any Capital Guideline or adoption or implementation of, or any
change in, any Capital Guideline by the Governmental Authority charged with the
interpretation or administration thereof, or compliance by the Letter of Credit
Issuer or any Person controlling such Letter of Credit Issuer with any Capital
Guideline or with any request or directive of any such Governmental Authority
with respect to any Capital Guideline, or the implementation of, or any change
in, any applicable accounting principles (in each case, whether or not having
the force of law), either (i) affects or would affect the amount of capital
required or expected to be maintained by the Letter of Credit Issuer or any
Person controlling the Letter of Credit Issuer and the Letter of Credit Issuer
determines that the amount of such capital is increased as a direct or indirect
consequence of any Letters of Credit issued or any guaranty with respect
thereto, or the Letter of Credit Issuer's other obligations hereunder, or (ii)
has or would have the effect of reducing the rate of return on the Letter of
Credit Issuer's or any such other controlling Person's capital to a level below
that which the Letter of Credit Issuer or such controlling Person could have
achieved but for such circumstances as a consequence of any Letters of Credit
issued, or any guaranty with respect thereto or any agreement to issue Letters
of Credit or the Letter of Credit Issuer's other obligations hereunder (in each
case, taking into consideration the Letter of Credit Issuer's or such
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other controlling Person's policies with respect to capital adequacy), then,
upon demand by the Letter of Credit Issuer or the Lender, the Borrower shall
pay to the Letter of Credit Issuer or the Lender from time to time such
additional amounts as will compensate the Letter of Credit Issuer for such cost
of maintaining such increased capital or such reduction in the rate of return
on the Letter of Credit Issuer's or such other controlling Person's capital.
(c) All amounts payable under this Section 2.10
shall bear interest from the date that is three Business Days after the date of
demand by the Letter of Credit Issuer or the Lender until payment in full to
the Letter of Credit Issuer or the Lender at the Regular Rate. A certificate
of the Letter of Credit Issuer or the Lender claiming compensation under this
Section 2.10 specifying the event herein above described and the nature of such
event shall be submitted by the Letter of Credit Issuer or the Lender to the
Borrower, setting forth the additional amount due and an explanation in
reasonable detail of the calculation thereof, the Letter of Credit Issuer's
reasons for invoking the provisions of this Section 2.10 and shall be final and
conclusive absent objectively determinable error.
ARTICLE III
LETTERS OF CREDIT
3.01. Letters of Credit.
(a) General. In order to assist the Borrower in
establishing or opening documentary and standby letters of credit (the "Letters
of Credit") with the Letter of Credit Issuer, the Borrower has requested the
Lender to join in the applications for such Letters of Credit, and/or guarantee
payment or performance of such Letters of Credit and any drafts or acceptances
thereunder through the issuance of the Letter of Credit Guaranty, thereby
lending the Lender's credit to the Borrower, and the Lender has agreed to do
so. These arrangements shall be handled by the Lender subject to the terms and
conditions set forth below. The Lender shall have no obligation to arrange for
the issuance of Letters of Credit on or after the Termination Date or which,
when added to the aggregate amount of all outstanding and contemporaneous Loans
and the Letter of Credit Exposure at such time, would cause the amount of all
Loans and the Letter of Credit Exposure at any time to exceed the Current
Commitment at such time. In addition, the Lender shall not be required to be
the issuer of any Letter of Credit. The Letter of Credit Issuer shall be a
bank mutually acceptable to the Lender and the Borrower. The Borrower will be
the account party for any application for a Letter of Credit, which shall be
substantially in the form of Exhibit C hereto or such other form as may from
time to time be approved by the Letter of Credit Issuer and the Lender, and
shall be duly completed in a manner reasonably acceptable to the Lender,
together with such other certificates, documents and other papers and
information as the Letter of Credit Issuer or the Lender may reasonably request
(the "Letter of Credit Application").
(i) The aggregate Letter of Credit Exposure shall not exceed
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$7,000,000. In addition, the amount, purpose, form and extent of the Letters
of Credit and changes or modifications thereof by the Borrower and/or the
Letter of Credit Issuer of the terms and conditions thereof shall in all
respects be subject to the prior approval of the Lender in the exercise of its
reasonable discretion, provided, however, that (x) the expiry date of all
Letters of Credit shall be no later than 15 days prior to the Termination Date
unless on or prior to 15 days prior to the Termination Date such Letters of
Credit shall be cash collateralized in an amount equal to 105% of the face
amount of such Letters of Credit and (y) the Letters of Credit and all
documentation in connection therewith shall be in form and substance reasonably
satisfactory to the Lender and the Letter of Credit Issuer.
(ii) The Lender shall have the right,
without prior notice to the Borrower, to charge the Borrower's Account with the
amount of any and all indebtedness, liability or obligation of any kind
(including indemnification for capital adequacy and reserve requirement
charges) incurred by the Lender under the Letter of Credit Guaranty at the
earlier of (x) payment by the Lender under the Letter of Credit Guaranty, or
(y) with respect to any Letter of Credit which is not cash collateralized as
provided in this Agreement, the occurrence and continuance of an Event of
Default. Any amount charged to the Borrower's Account shall be deemed a Loan
hereunder. Any charges, fees, commissions, costs and expenses charged to the
Lender for the Borrower's Account by the Letter of Credit Issuer in connection
with or arising out of Letters of Credit issued pursuant to this Agreement or
out of transactions relating thereto will be charged to the Borrower's Account
in full when charged to or paid by the Lender and when made by any such Letter
of Credit Issuer shall be conclusive on the Borrower.
(iii) The Borrower unconditionally
indemnifies the Lender and holds the Lender harmless from any and all loss,
claim or liability incurred by the Lender arising from any transactions or
occurrences relating to Letters of Credit established or opened for the
Borrower's Account, and any drafts or acceptances thereunder, and all
Obligations thereunder, including any such loss or claim due to any action
taken by the Letter of Credit Issuer, other than for any such loss, claim or
liability arising out of the gross negligence or willful misconduct of the
Lender as determined by a final judgment of a court of competent jurisdiction.
The Borrower further agrees to jointly and severally hold the Lender harmless
from any errors or omission, negligence or misconduct by the Letter of Credit
Issuer. The Borrower's unconditional obligation to the Lender hereunder shall
not be modified or diminished for any reason or in any manner whatsoever, other
than as a result of the Lender's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction. The
Borrower agrees that any charges incurred by the Lender for the Borrower's
Account by the Letter of Credit Issuer shall be conclusive on the Borrower and
may be charged to the Borrower's Account.
(iv) The Lender shall not be responsible
for the existence, character, quality, quantity, condition, packing, value or
delivery of the goods purporting to be represented by any documents; any
difference or variation in the character, quality, quantity, condition,
packing, value or delivery of the goods from that expressed in the documents;
the validity, sufficiency or genuineness of any documents or of any
endorsements thereof even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent
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or forged; the time, place, manner or order in which shipment is made; partial
or incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with the shipping thereof; or any breach of contract between the
shipper or vendors and the Borrower. Furthermore, without being limited by the
foregoing, the Lender shall not be responsible for any act or omission with
respect to or in connection with any goods covered by Letters of Credit.
(v) The Borrower agrees that any action
taken by the Lender, if taken in good faith and in the absence of gross
negligence or willful misconduct, or any action taken by the Letter of Credit
Issuer, under or in connection with the Letters of Credit, the guarantees, the
drafts or acceptances, shall be binding on the Borrower (with respect to the
Letter of Credit Issuer and the Lender) and shall not put the Lender in any
resulting liability to the Borrower. In furtherance thereof, the Lender shall
have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute any and all steamship or
airways guaranties (and applications therefore), indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances, or documents; and to agree to
any amendments, renewals, extensions, modifications, changes or cancellations
of any of the terms or conditions of any of the applications, Letters of
Credit, drafts or acceptances; all in the Lender's sole name, provided that the
Lender shall give the Borrower notice of such action promptly thereafter and
the Letter of Credit Issuer shall be entitled to comply with and honor any and
all such documents or instruments executed by or received solely from the
Lender, all without any notice to or any consent from the Borrower.
Notwithstanding any of the foregoing, in the absence of a continuing Event of
Default, the Lender shall not take any of the foregoing actions that result in
a departure in any material respect from the terms of the relevant Letter of
Credit or Letter of Credit Application.
(vi) Without the Lender's express consent
and endorsement in writing, which in the absence of a continuing Event of
Default shall not be unreasonably withheld, the Borrower agrees: (x) not to
execute any and all applications for steamship or airway guaranties,
indemnities or delivery orders; to grant any extensions of the maturity of,
time of payment for, or time of presentation of, any drafts, acceptances or
documents; or to agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances; and (y) after the
occurrence of an Event of Default which is not cured within any applicable
grace period, if any, or waived by the Lender, not to (A) clear and resolve any
questions of non-compliance of documents, or (B) give any instructions as to
acceptances or rejection of any documents or goods.
(vii) The Borrower agrees that any
necessary and material import, export or other license or certificates for the
import or handling of Inventory will have been promptly procured; all foreign
and domestic material governmental laws and regulations in regard to the
shipment and importation of Inventory or the financing thereof will have been
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promptly and fully complied with, in each case, where the failure to obtain
such certificate or license or the failure to comply with such laws could
result in a Material Adverse Effect; and any certificates in that regard that
the Lender may at any time reasonable request will be promptly furnished. As
between the Borrower, on the one hand, and the Lender and the Letter of Credit
Issuer, on the other hand, the Borrower assumes all risk, liability and
responsibility for, and agree to pay and discharge, all present and future
local, state, federal or foreign taxes, duties, or levies. As between the
Borrower, on the one hand, and the Lender and the Letter of Credit Issuer, on
the other hand, any embargo, restriction, laws, customs or regulations of any
country, state, city, or other political subdivision, where such Inventory is
or may be located, or wherein payments are to be made, or wherein drafts may be
drawn, negotiated, accepted, or paid, shall be solely the Borrower's risk,
liability and responsibility.
(viii) Upon any payments made to the Letter
of Credit Issuer under a Letter of Credit Guaranty, the Lender shall, without
prejudice to its rights under this Agreement (including that such unreimbursed
amounts shall constitute Loans hereunder), acquire by subrogation, any rights,
remedies, duties or obligations granted or undertaken by the Borrower to the
Letter of Credit Issuer in any application for Letters of Credit, any standing
agreement relating to Letters of Credit or otherwise, all of which shall be
deemed to have been granted to the Lender and apply in all respects to the
Lender and shall be in addition to any rights, remedies, duties or obligations
contained herein.
(ix) In the event that the Borrower is
required to provide cash collateral for any Letter of Credit, the Borrower
shall deposit such cash collateral in the Cash Collateral Account.
(b) Request for Issuance. The Borrower may from
time to time, upon notice not later than 12:00 noon, New York City time, at
least three (3) Business Days in advance, request the Lender to assist the
Borrower in establishing or opening a Letter of Credit by delivering to the
Lender, with a copy to the Letter of Credit Issuer, a Letter of Credit
Application, together with any necessary related documents.
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ARTICLE IV
SECURITY; ADMINISTRATIVE PRIORITY
4.01. Grant of Lien and Security Interest
(a) The Obligors hereby, jointly and severally,
assign, pledge, transfer, grant, bargain and sell, confirm and set over unto
the Lender, and hereby grant and create in favor of the Lender a security
interest in and to, all of the property, assets or interests in property or
assets of the Obligors of any kind or nature whatsoever, real or personal, now
existing or hereafter acquired or created, including without limitation all
property of the estates (within the meaning of the Bankruptcy Code) of the
Obligors , and all proceeds, rents, products and profits of any of the
foregoing other than Avoidance Action Proceeds (all property of the Obligors
subject to the security interest referred to in this Section 4.01 being
hereinafter referred to as the "Collateral").
(b) The liens and security interests in favor of
the Lender referred to in Section 4.01(a) hereof shall be valid and perfected
liens and security interests, prior to all other liens and interests hereafter
arising, except for Carve-Out Expenses and Permitted Liens. Such liens and
security interests and their priority shall remain in effect until the
Revolving Credit Commitment has been terminated and all Obligations have been
repaid in cash in full and all Letters of Credit outstanding are cash
collateralized in an amount equal to 105% of the face amount of such Letters of
Credit.
(c) Notwithstanding anything herein to the
contrary, no Person entitled to Carve-Out Expenses shall be entitled to sell or
otherwise dispose of Collateral.
4.02. Administrative Priority. Each of the Obligors hereby
agrees that the joint and several Obligations of the Obligors shall constitute
allowed administrative expenses in the Chapter 11 Cases having priority over
all administrative expenses and unsecured claims against the Obligors now
existing or hereafter arising, of any kind or nature whatsoever, including
without limitation all administrative expenses of the kind specified in Section
Section 503(b) and 507(b) of the Bankruptcy Code, subject, as to priority,
only to Carve-Out Expenses having priority over the Obligations to the extent
set forth in the Agreed Administrative Expense Priorities; provided, however,
that Avoidance Action Proceeds shall not be used to pay the superpriority
administrative expense claims granted to the Lender hereunder, provided,
further, that the Lender shall be entitled to receive Avoidance Action Proceeds
ratably with all other holders of administrative claims to the extent that the
superpriority administrative expense claims granted to the Lender hereunder are
not paid in full from the proceeds of the other assets of the Obligors.
4.03. Grants, Rights and Remedies Cumulative. The liens and
security interests granted pursuant to Section 4.01 hereof and administrative
priority granted pursuant to Section 4.02 hereof may be independently granted
by the Related Documents and by other Related Documents hereafter entered into.
This Agreement, the Interim Bankruptcy Court Order, the
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Final Bankruptcy Court Order and such other Related Documents supplement each
other, and the grants, priorities, rights and remedies of the Lender hereunder
and thereunder are cumulative.
4.04. No Filings Required. The liens and security interests
referred to in Section 4.01 hereof and in the Related Documents shall be deemed
valid and perfected by entry of the Interim Bankruptcy Court Order and the
Final Bankruptcy Court Order, as the case may be, and entry of such orders
shall have occurred on or before the date of the initial Credit Extension
hereunder. The Lender shall not be required to file any financing statements,
notices of lien, mortgages or similar instruments in any jurisdiction or filing
office, or to take possession of any Collateral or to take any other action in
order to validate or perfect the liens and security interests granted by or
pursuant to this Agreement, the Interim Bankruptcy Order and the Final
Bankruptcy Court Order, as the case may be, or any other Related Document. If
the Lender shall, in its sole discretion, from time to time choose to file such
financing statements, notices of lien, mortgages or similar instruments, take
possession of any Collateral, or take any other action to validate or perfect
any such security interests or liens, all such documents shall be deemed to
have been filed or recorded at the time and on the date of entry of the Interim
Bankruptcy Court Order or, if no Interim Bankruptcy Court Order is obtained,
the Final Bankruptcy Court Order. The foregoing shall not apply to such of the
Collateral as is or may hereafter be located outside of the territorial limits
of the United States of America to the extent that the same may not be subject
to the jurisdiction of the Bankruptcy Court.
4.05. Survival. The liens, security interests, lien
priorities, administrative priorities and other rights and remedies granted to
the Lender pursuant to this Agreement, the Interim Bankruptcy Court Order, the
Final Bankruptcy Court Order and the other Related Documents (specifically
including but not limited to the existence, perfection and priority of the
liens and security interests provided herein and therein, and the
administrative priority provided herein and therein) shall not be modified,
altered or impaired in any manner by any other financing or extension of credit
or incurrence of debt by the Obligors (pursuant to Section 364 of the
Bankruptcy Code or otherwise), or by any dismissal or conversion of the Chapter
11 Cases, or by any other act or omission whatever. Without limitation,
notwithstanding any such order, financing, extension, incurrence, dismissal,
conversion, act or omission:
(a) except for the Carve-Out Expenses having
priority over the Obligations to the extent set forth in the Agreed
Administrative Expense Priorities and subject to the proviso in
Section 4.02, no costs or expenses of administration which have been
or may be incurred in the Chapter 11 Cases or any conversion of the
same or in any other proceedings related thereto, and no priority
claims, are or will be prior to or on a parity with any claim of the
Lender against the Obligors in respect of any Obligation,
(b) the liens and security interests in favor of
the Lender set forth in Section 4.01 hereof and in the Related
Documents shall constitute valid and perfected first priority liens
and security interests, subject only to the Permitted Liens to which
such liens and security interests shall or may be subordinate and
junior, and shall be prior to all other liens and interests, now
existing or hereafter arising, in favor of any other creditor
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or any other Person whatever, and
(c) the liens and security interests in favor of
the Lender set forth in Section 4.01 hereof and in the Related
Documents shall continue valid and perfected without the necessity
that the Lender file financing statements, notices of lien, mortgages
or otherwise perfect its liens and security interests under applicable
nonbankruptcy law except for such Collateral as is or may hereafter be
located outside of the territorial limits of the United States of
America to the extent that the same may not be subject to the
jurisdiction of the Bankruptcy Court.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Obligors hereby each jointly and severally represent and
warrant to the Lender as follows:
5.01. Organization and Qualification. Each of the Obligors
is a corporation, duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of the Obligors is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to qualify would have a Material Adverse Effect on the Obligors.
Schedule 5.01 hereto correctly sets forth as of the date hereof the
jurisdictions in which the Obligors are qualified to do business.
5.02. Authority and Authorization. Each of the Obligors has
all necessary corporate power to execute and deliver this Agreement and the
other Related Documents to which it is or is to be a party. As of the Entry
Date, each of the Obligors will have the power and authority to perform its
obligations hereunder and thereunder, and all such action has been duly and
validly authorized by all necessary corporate and judicial action.
5.03. Execution and Binding Effect. As of the Entry Date,
this Agreement and each of the other Related Documents required to be executed
and delivered on or prior to the date hereof have been duly and validly
executed and delivered by the Obligors party thereto, and constitute legal,
valid and binding obligations of the Obligors party thereto, enforceable in
accordance with the terms hereof or thereof, except as enforceability thereof
may be limited by any applicable bankruptcy, reorganization, insolvency or
other laws affecting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in equity or at
law. Each Related Document that is not required to be executed and delivered
by the Obligors party thereto on or prior to the Entry Date, when executed and
delivered, will be validly executed and delivered by the Obligors party thereto
and will constitute legal, valid and binding obligations of the Obligors party
thereto enforceable in accordance with the terms thereof, except as
enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other laws affecting creditors' rights generally
or by general
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principles of equity, regardless of whether such enforceability is considered
in equity or at law.
5.04. Authorizations and Filings. No authorization,
consent, approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any Governmental
Authority is or will be necessary in connection with execution and delivery by
the Obligors of this Agreement or the other Related Documents, consummation of
the transactions herein or therein contemplated, performance of or compliance
with the terms and conditions hereof or thereof or to ensure the legality,
validity, enforceability and admissibility in evidence hereof or thereof,
except for the Interim Bankruptcy Court Order and the Final Bankruptcy Court
Order.
5.05. Absence of Conflicts. Neither the execution and
delivery of this Agreement or the other Related Documents to which any of the
Obligors is a party nor consummation of the transactions herein or therein
contemplated nor performance of or compliance with the terms and conditions
hereof or thereof will (a) violate any Law, (b) conflict with or result in a
breach of or default under the Obligors' respective charter or by-laws, or any
material agreement or instrument to which the Obligors are parties or by which
they or any of their properties (now owned or hereafter acquired) may be
subject or bound (other than conflicts, breaches and defaults validly cured by
the Interim Bankruptcy Court Order and the Final Bankruptcy Court Order) or (c)
result in the creation or imposition of any Lien upon any property (now owned
or hereafter acquired) of the Obligors, except the Liens in favor of the Lender.
5.06. Financial Statements. (a) Historical Statements.
The Obligors have heretofore furnished to the Lender a consolidated balance
sheet of the Borrower as of December 31, 1995 and the related statements of
operations and cash flows for the fiscal year then ended, as examined and
reported on by independent certified public accountants, and a balance sheet
and related statements of operations and cash flows of the Borrower for the
period ended February 29, 1996, as certified by a Designated Financial Officer.
Such financial statements (in the case of the statements as of December 31,
1995, including the notes thereto) present fairly, in all material respects,
the financial condition of the Obligors as of the end of such fiscal year and
as of the end of such period and the results of their operations and the cash
flows for the fiscal year and months then ended, all in conformity with GAAP
applied on a basis consistent with that of the preceding fiscal year, subject
(in the case of the interim financial statements) to year-end adjustments.
Except as disclosed therein, the Obligors do not have any material contingent
liabilities (including liabilities for taxes), unusual forward or long term
commitments or unrealized or anticipated losses from unfavorable commitments.
(b) Projections. The Obligors have heretofore
furnished to the Lender projections for the fiscal year of each of the Obligors
ending December 31, 1996 and December 31, 1997 (the "Projections"), and such
projections have been prepared in accordance with the standard set forth in the
second sentence of Section 5.17 hereof.
5.07. No Event of Default. No event has occurred and is
continuing and no condition exists which constitutes an Event of Default or
Potential Default. None of the Obligors
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is in violation of any term of its charter or by-laws.
5.08. Litigation. Except as set forth in the financial
statements referred to in Section 5.06 hereof and Schedule 5.08 hereof (which
has previously been delivered to the Lender), there is not, to the best
knowledge of the Obligors, any pending or threatened proceeding by or before
any Governmental Authority, arbitrator or grand jury against or affecting the
Obligors or any ERISA Affiliate, with respect to any Environmental Law or ERISA
law, which, if adversely decided, can reasonably be expected to have a Material
Adverse Effect.
5.09. ERISA. None of the Obligors or any ERISA Affiliate
maintains or has an obligation to contribute to any Plan, any Benefit Plan or
any Multiemployer Plan. None of the Obligors or any ERISA Affiliate nor any
fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged in a
nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of
the Code or (ii) has taken or failed to take any action which would constitute
or result in a Termination Event which in each case would have a Material
Adverse Effect. None of the Obligors or any ERISA Affiliate has engaged in a
transaction within the meaning of Section 4069 of ERISA which would have a
Material Adverse Effect. None of the Obligors or any ERISA Affiliate has
incurred any liability to the PBGC which remains outstanding other than the
payments of premiums, and there are no premium payments which have become due
which are unpaid. None of the Obligors or any ERISA Affiliate has made a
complete or partial withdrawal under Section 4203 or 4205 of ERISA from a
Multiemployer Plan in either case which would have a Material Adverse Effect.
There are no pending, or to the knowledge of the Obligors or any ERISA
Affiliate, threatened claims, actions, proceedings or lawsuits (other than
claims for benefits in the normal course) asserted or instituted against (i)
any Plan or its assets, (ii) any fiduciary with respect to any Plan, or (iii)
the Obligors or any ERISA Affiliate with respect to any Plan.
5.10. Taxes. All tax returns required to be filed by the
Obligors have been properly prepared, executed and filed. All taxes,
assessments, fees and other governmental charges upon the Obligors or upon any
of their respective properties, incomes, sales or franchises which are shown
thereon as due and payable have been paid. The reserves and provisions for
taxes, if any, on the books of the Obligors are adequate for all open years and
for its current fiscal period. None of the Obligors knows of any proposed
additional assessment or basis for any material assessment for additional taxes
(whether or not reserved against).
5.11. Financial Accounting Practices, etc. The Obligors
each make and keep books, records and accounts which, in reasonable detail,
accurately and fairly reflect their respective transactions and dispositions of
their respective assets and each maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization,
(ii) transactions are recorded as necessary (A) to permit preparation of
financial statements in conformity with GAAP except as previously disclosed to
the Lender and (B) to maintain accountability for assets, and (iii) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
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5.12. Power To Carry On Business. Each of the Obligors has
all the requisite power and authority to own and operate its properties and to
carry on its business as now conducted and as presently planned to be conducted
(subject to Bankruptcy Court approval with respect to transactions outside the
ordinary course of business).
5.13. No Material Adverse Change. Between February 29, 1996
and the date hereof there has not occurred any event which may be reasonably
expected to have a Material Adverse Effect, other than events that customarily
occur as a result of events leading up to and following the commencement of a
case under chapter 11 of the Bankruptcy Code.
5.14. Existing Liens; Capitalized Leases. There are no Liens
on any assets of the Obligors other than (a) Liens created as of the Entry Date
in favor of the Lender hereunder and under the other Related Documents, (b)
obligations related to Capitalized Leases which do not exceed $50,000 in the
aggregate, and (c) Permitted Liens.
5.15. Compliance with Laws. None of the Obligors is in
violation of or otherwise liable under any Law (including but not limited to
violations pertaining to the conduct of their respective businesses or the use,
maintenance or operation of the real and personal properties owned or possessed
by them), except for violations which in the aggregate do not have a Material
Adverse Effect and violations or any enforcement actions which will be stayed
by virtue of the filing of the Chapter 11 Cases.
5.16. Subsidiaries. Schedule 5.16 hereto is a complete and
correct description of the name, jurisdiction of incorporation and ownership of
the outstanding capital stock of each Subsidiary of each Obligor in existence
on the date hereof. All shares of such stock owned by each Obligor or one or
more of its Subsidiaries, as indicated in such Schedule, are owned free and
clear of all liens, security interests and other charges and encumbrances.
5.17. Accurate and Complete Disclosure. No representation or
warranty made by the Obligors under this Agreement or any other Related
Document and no written statement made by the Obligors in any financial
statement (furnished pursuant to this Agreement or otherwise), certificate,
report, exhibit or document furnished by the Obligors to the Lender pursuant to
or in connection with this Agreement or any other Related Document is or was or
will be, when delivered, when taken together with all other information
supplied by the Obligors to the Lender, false or misleading in any material
respect (including by omission of material information necessary to make such
representation, warranty or statement, in light of the circumstances under
which it was made, not misleading). To the extent the Obligors furnish any
projections of the financial position and results of operations of the Obligors
for, or as at the end of, certain future periods, such projections were
believed at the time furnished to be reasonable, have been or will have been
prepared on a reasonable basis and in good faith by the Obligors and have been
or will be based on assumptions believed by the Obligors to be reasonable at
the time made and upon the best information then reasonably available to the
Obligors.
5.18. Insurance. Each of the Obligors maintains with
financially sound and
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reputable insurers adequate insurance with respect to their properties and
businesses and those of their respective Subsidiaries. Schedule 5.18 hereto
sets forth a list of all insurance currently maintained by the Obligors and
their respective Subsidiaries.
5.19. Environmental Matters.
(a) The Obligors are in compliance in all
material respect with all applicable Environmental Laws;
(b) The Obligors have obtained all material
permits, approvals, authorizations and licenses required by Environmental Laws
necessary for their operations, and all such permits, approvals, authorizations
and licenses are in good standing and the Obligors are in material compliance
with all material terms and conditions of such permits, approvals,
authorizations and licenses;
(c) None of the Obligors or any of their
respective currently owned or leased property or operations is subject to any
outstanding written order from or agreement with any Governmental Authority or
other Person or is subject to any judicial or docketed administrative
proceeding respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any
Environmental Liabilities and Costs arising from a Release or threatened
Release except for any such order or proceeding which would not reasonably be
expected to have a Material Adverse Effect; and
(d) None of the Obligors has received any written
notice or claim to the effect that it is or is reasonably expected to be liable
to any Person as a result of a Release that can reasonably be expected to have
a Material Adverse Effect.
5.20. Administrative Priority; Lien Priority.
(a) After the Entry Date, the Obligations of the
Obligors will constitute allowed administrative expenses in the Chapter 11
Cases having priority over all administrative expenses and unsecured claims
against the Obligors now existing or hereafter arising, of any kind or nature
whatsoever, including without limitation all administrative expenses of the
kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code, subject,
as to priority, only to Carve-Out Expenses having priority over the Obligations
to the extent set forth in the Agreed Administrative Expense Priorities, and
subject to the proviso in Section 4.02.
(b) The Obligations will be secured by a valid
and perfected lien on and security interest in all of the Collateral.
5.21. Bankruptcy Court Order. The Interim Bankruptcy Court
Order or the Final Bankruptcy Court Order, as the case may be, is in full force
and effect, and has not been reversed, stayed, modified or amended absent the
joinder and consent of the Lender.
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5.22. Real Property. Schedule 5.22 hereto sets forth a
complete and accurate description and list as of the date hereof of the
location, by state and street address, of all of the real property owned by the
Obligors together with a statement as to whether such real property is the
subject of a contract of sale (and, if so, a statement as to the status of such
sale and of any motion to the Bankruptcy Court with respect thereto). Each of
the Obligors has good and marketable title in fee simple to the real property
set forth opposite such Obligor's name in such Schedule.
5.23. Location of Bank Accounts. Schedule 5.23 hereto sets
forth a complete and accurate list as of the date hereof of all deposit
accounts including all Depository Accounts and the Cash Concentration Accounts,
maintained by the Obligors together with a description thereof (i.e. the bank
at which such deposit account is maintained and the account number and the
purpose thereof).
5.24. Use of Proceeds. The Obligors will use the proceeds of
the Loans and the Letters of Credit, respectively, in accordance with Sections
2.09 and 3.01(a)(i) hereof, respectively.
5.25. Intellectual Property. The Obligors own or license or
otherwise have the right to use all material licenses, permits, patents, patent
applications, trademarks, trademark applications, service marks, tradenames,
copyrights, copyright applications, franchises, authorizations and other
intellectual property rights that are necessary for the operations of their
businesses, without infringement upon or conflict with the rights of any other
Person with respect thereto, except for such infringements and conflicts which,
individually or in the aggregate, could not have a Material Adverse Effect.
Set forth in Schedule 5.25 is a complete and accurate list as of the date
hereof of all such material licenses, permits, patents, patent applications,
trademarks, trademark applications, service marks, tradenames, copyright
registration numbers, copyright applications, franchises, authorizations and
other intellectual property rights of the Obligors. No slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by Obligors infringes upon or
conflicts with any rights owned by any other Person, and no claim or litigation
regarding any of the foregoing is pending or threatened, except for such
infringements and conflicts which could not have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of the Obligors, no
patent, invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or proposed, which, individually or in
the aggregate, could have a Material Adverse Effect.
5.26. Franchises. Set forth in Schedule 5.26 is a complete
and accurate list of all franchise agreements in effect as of the date hereof.
None of the Obligors has entered into any other franchise agreement or similar
arrangement which has not been terminated as of the date hereof.
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ARTICLE VI
CONDITIONS OF CREDIT EXTENSIONS
6.01. Conditions Precedent to Initial Credit Extension. The
obligation of the Lender to make the initial Credit Extension hereunder
(whether such Credit Extension shall consist of the making of a Loan or
assistance to the Borrower in establishing or opening Letters of Credit) is
subject to the satisfaction on or before the date thereof of each of the
following conditions, in addition to the conditions set forth in Section 6.02:
(a) The Interim Bankruptcy Court Order or the
Final Bankruptcy Court Order, as the case may be, substantially in the
form of Exhibit F hereto, shall have been entered by the Bankruptcy
Court on or before May 2, 1996, approving, on an emergency and interim
basis in the case of the Interim Bankruptcy Court Order, the
transaction contemplated therein and the Lender shall have received a
certified copy of the same, and such order shall be in full force and
effect and shall not have been reversed, stayed, modified or amended.
(b) The Borrower shall have executed and
delivered to the Lender the Note in substantially the form of Exhibit
A hereto, which shall be dated the Entry Date.
(c) The Obligors shall have executed and
delivered to the Lender the Security Agreement and the Pledge
Agreement, each of which shall be dated the Entry Date.
(d) The Borrower shall have paid to the Lender
all fees when due and other amounts due and payable to the Lender when
due, including but not limited to amounts due under Section 2.08 or
10.06 hereof. The Borrower shall have paid to counsel to the Lender
all reasonable fees and other client charges due to such counsel on
the date of the initial Credit Extension.
(e) The Lender shall have received certificates
satisfactory in form and substance to it from the Obligors, signed by
the Designated Borrowing Officer, certifying as to (i) true copies of
Obligors' charter and by-laws, (ii) true copies of all corporate
action taken by the Obligors relative to the Related Documents and the
transactions contemplated thereby (which shall designate one or more
Designated Financial Officers and Designated Borrowing Officers),
(iii) the true signatures and incumbency of the Designated Borrowing
Officers and (iv) such other matters as the Lender may reasonably
request.
(f) The liens and security interests in favor of
the Lender pursuant hereto shall be valid and perfected first priority
Liens prior (except for Permitted Liens to which such liens and
security interests are subordinate and junior) to all other Liens in
or on the Collateral intended to be subject thereto.
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(g) The Obligors shall have caused all property
insurance policies to show the Lender as loss payee as its interest
may appear and, with respect to Inventory, all such policies shall
name the Lender as first payee.
(h) The Lender shall have received from the
general counsel of the Obligors, and from Shearman & Sterling, outside
counsel to the Obligors, favorable opinions substantially in the form
of Exhibits G-1 and G-2 hereto respectively.
(i) The Lender shall have received certified
copies of requests for copies or information on Form UCC-11 or reports
from a reporting company satisfactory to the Lender, listing all
effective UCC financing statements, tax liens and judgment liens in
each of the jurisdictions in which any of the Obligors has any
personal property or real property, which name as debtor the Obligors,
together with copies of such financing statements, none of which shall
cover any of the Collateral.
(j) The Lender shall have received a certificate,
signed by the Designated Financial Officer, certifying that the cash
of the Obligors is no less than $1,000,000.
(k) All legal proceedings in connection with the
transactions contemplated by this Agreement and the other Related
Documents shall be satisfactory to the Lender and the Lender shall
have received all such counterpart originals or certified or other
copies of such documents and proceedings in connection with such
transactions, in form and substance reasonably satisfactory to the
Lender, as the Lender may from time to time request.
6.02. Conditions Precedent to Each Credit Extension. The
obligation of the Lender to make any Credit Extension hereunder (whether such
Credit Extension shall consist of the making of a Loan or assistance to the
Borrower in establishing or opening Letters of Credit) is subject to the
accuracy as of the date hereof of the representations and warranties herein
contained, to the performance by the Borrower of its obligations to be
performed hereunder or under the Related Documents on or before the date of
such Credit Extension and to the satisfaction of the following further
conditions:
(a) The representations and warranties of the
Obligors contained in Article V hereof and in each Related Document
shall be true in all material respects and as of the date of each
Credit Extension hereunder with the same effect as though made on and
as of each such date.
(b) No Event of Default and no Potential Default
shall have occurred and be continuing or exist or shall occur or exist
after giving effect to such Credit Extension.
(c) On the date of such Credit Extension, the
Interim Bankruptcy
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Court Order or the Final Bankruptcy Court Order, as the case may be,
in form and substance satisfactory to the Lender shall be in full
force and effect and shall not have been reversed, stayed, modified or
amended. Unless the Lender shall have joined in or expressly
consented in writing to the same, there shall be no motion pending
which is not being contested by the Obligors in good faith or with
respect to which the relief has been granted in an order that has not
been stayed pending appeal: (i) to reverse, modify or amend the
Interim Bankruptcy Court Order or the Final Bankruptcy Court Order, as
the case may be, or (ii) to permit any administrative expense or
unsecured claim against the Obligors, now existing or hereafter
arising, of any kind or nature whatsoever, to have administrative
priority as to the Obligors equal or superior to the priority of the
Lender in respect of the Obligations, except for Carve-Out Expenses
having priority over the Obligations to the extent set forth in the
Agreed Administrative Expense Priorities, or (iii) to grant or permit
the grant of a Lien on any property or assets of the Obligors.
(d) The aggregate unpaid principal amount of the
Loans and the Letter of Credit Exposure shall not exceed, and after
giving effect to the requested Credit Extension will not exceed, the
Current Commitment.
(e) The Lender shall have received from the
Borrower a Notice of Borrowing from a Designated Borrowing Officer
specifying the date, which shall be a Business Day, on which such Loan
is to be made, the principal amount of such Loan and the account
information where such Loan is to be received, or a completed Letter
of Credit Application, as appropriate.
(f) All legal proceedings in connection with the
transactions contemplated by this Agreement and the other Related
Documents shall be reasonably satisfactory to the Lender and the
Lender shall have received all such counterpart originals or certified
or other copies of such documents and proceedings in connection with
such transactions, in form and substance reasonably satisfactory to
the Lender, as the Lender may from time to time reasonably request.
Any written request by the Borrower for any Credit Extension hereunder shall
constitute a representation and warranty by the Obligors that the conditions
set forth in this Section 6.02 have been satisfied as of the date of such
request. Failure of the Lender to receive notice from the Borrower to the
contrary before such Credit Extension is made shall constitute a further
representation and warranty by the Obligors that the conditions set forth in
this Section 6.02 (other than those set forth in clause (e)) have been
satisfied as of the date of such Credit Extension.
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ARTICLE VII
AFFIRMATIVE COVENANTS
The Obligors jointly and severally covenant to the Lender as
follows, subject to waiver by the Lender as provided herein:
7.01. Reporting and Information Requirements.
(a) Annual Reports. (i) As soon as practicable
and in any event within 90 days after the close of each fiscal year of the
Borrower, the Borrower shall furnish to the Lender a consolidated statement of
operations and cash flows of the for such fiscal year and a consolidated
balance sheet of the as of the close of such fiscal year, and notes to each,
all in reasonable detail, setting forth in comparative form the corresponding
figures for the preceding fiscal year, with such statements and balance sheet
to be certified by independent certified public accountants of recognized
national standing selected by the Obligors and reasonably satisfactory to the
Lender. The certificate or report of such accountants shall be free of
exceptions or qualifications (including, without limitation, a qualification
that the financial statements are not fairly presented but excluding a "going
concern" qualification arising solely due to the filing of the Chapter 11
cases) with respect to such statements and balance sheets being prepared in
compliance with GAAP and shall in any event contain a written statement of such
accountants substantially to the effect that (i) such accountants examined such
statements and balance sheet in accordance with generally accepted auditing
standards and accordingly made such tests of accounting records and such other
auditing procedures as such accountants considered necessary in the
circumstances and (ii) in the opinion of such accountants such statements and
balance sheets present fairly, in all material respects, the consolidated
financial position of the Borrower as of the end of such fiscal year and the
results of its operations and the changes in its financial position for such
fiscal year, in conformity with GAAP applied on a basis consistent with that of
the preceding fiscal year (except for changes in application in which such
accountants concur). A copy of such certificate or report shall be delivered
to the Lender and signed by such independent public accountants and, as soon as
available, a copy of any management letter received by the Obligors from its
independent public accountants, shall be delivered to the Lender.
(ii) Each set of statements and balance
sheets delivered pursuant to this Section 7.01(a) shall be accompanied by a
certificate or report dated the date of such statements and balance sheets by
the accountants who certified or reported on such statements and balance sheets
stating in substance that they have reviewed this Agreement and that in making
the examination necessary for their certification of such statements and
balance sheets they did not become aware of any Event of Default or Potential
Default based upon any financial covenant, or if they did become so aware, such
certificate or report shall state the nature and period of existence thereof,
if determinable.
(b) Quarterly Reports. (i) As soon as
practicable and in any event
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within 45 days after the close of each of the first three fiscal quarters of
the Borrower in each fiscal year, the Borrower shall furnish to the Lender
unaudited consolidated statements of operations and cash flows of the Borrower
and a consolidated balance sheet of the Borrower as of the close of such fiscal
quarter, all in reasonable detail setting forth in comparative form the
corresponding fiscal quarter for the preceding fiscal year, and certified by a
Designated Financial Officer of the Borrower as presenting fairly, in all
material respects, the consolidated financial position of the Borrower as of
the end of such quarter and the results of its operations and the changes in
its financial position for such quarter, in conformity with GAAP applied in a
manner consistent except as otherwise disclosed therein with that of the most
recent audited financial statements furnished to the Lender, subject to
year-end adjustments.
(ii) Each set of statements and balance
sheets delivered pursuant to Section 7.01(b) shall be accompanied by a
certificate dated the date of such statements and balance sheet by a Designated
Financial Officer stating in substance that he has reviewed this Agreement and
that to the best of his knowledge he did not become aware of any Event of
Default or Potential Default, or if he did become so aware, such certificate
shall state the nature and period of existence thereof, if determinable, and
that the Borrower has complied with the EBITDAR and Gross Revenue covenants set
forth in Section 8.14 and 8.15, respectively.
(c) Monthly Reports. (i) As soon as practicable
and in any event within twenty (20) days after the end of each month (including
the month in which this Agreement is executed), the Borrower shall furnish to
the Lender unaudited consolidated statements of operations and cash flows for
the Borrower for such month and for the period from the beginning of such
fiscal year to the end of such month, and an unaudited consolidated balance
sheet of the Borrower on a consolidated basis as of the end of such month, all
in reasonable detail, setting forth in comparative form the corresponding
figures for the same periods during the preceding fiscal year (except for the
balance sheets, which shall set forth in comparative form the corresponding
balance sheets as of the prior fiscal year end), and certified by a Designated
Financial Officer of the Borrower as presenting fairly, in all material
respects, the consolidated financial position of the Borrower as of the end of
such month and the results of its operations and cash flows for such month, in
conformity with GAAP applied in a manner consistent except as otherwise
disclosed therein with that of the most recent adjusted financial statements
furnished to the Lender, subject to year-end adjustments.
(ii) Each set of statements and balance
sheets delivered pursuant to Section 7.01(c) shall be accompanied by a
certificate dated the date of such statements and balance sheets by a
Designated Financial Officer stating in substance that he has reviewed this
Agreement and that to the best of his knowledge he did not become aware of any
Event of Default or Potential Default, or if he did become so aware, such
certificate shall state the nature and period of existence thereof, if
determinable.
(d) Certain Reports. Upon the reasonable request
of the Lender, the Obligors shall provide the Lender with copies of all
consultants' reports, investment bankers'
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reports, accountants' management letters, final business plans, and similar
documents. The Obligors shall not be obligated to provide copies of any
documents which are subject to an evidentiary privilege and as to which
disclosure to the Lender would cause such privilege to be waived, but if the
Obligors claim that any document is so privileged, it shall promptly provide
the Lender with a letter describing the document and stating the basis for such
claim of privilege.
(e) Pleadings, Etc. The Obligors shall give or
cause to be given or served on the Lender and its counsel copies of all
pleadings, motions, applications, financial information and other papers and
documents filed or received by the Obligors in the Chapter 11 Cases.
(f) Reports to Committees. Promptly after the
sending thereof, the Obligors shall give the Lender copies of all written
reports given by the Obligors to any official or unofficial creditors'
committee in the Chapter 11 Cases, provided that Obligors shall not be
obligated to provide the Lender with any materials relating to a plan of
reorganization, post-reorganization capital structure or enterprise value
before such documents are made publicly available, or materials relating to
negotiations strategy with respect to a plan of reorganization.
(g) Other Reports and Information. Promptly upon
their becoming available, the Obligors shall deliver to the Lender a copy of
(i) all reports, financial statements or other information delivered by the
Obligors to their shareholders, (ii) all reports, proxy statements, financial
statements and other information generally distributed by the Obligors to their
creditors or the financial community in general and (iii) any audit or other
reports submitted to the Obligors by independent accountants in connection with
any annual, interim or special audit of the Obligors.
(h) Further Information. The Obligors will
promptly furnish to the Lender such other information and in such form as the
Lender may reasonably request.
(i) Projections. The Borrower shall furnish to
the Lender on or before September 30, 1996 financial projections, in form and
substance satisfactory to the Lender, for the fiscal year ending December 31,
1998, and such projections shall be prepared in accordance with the standard
set forth in the second sentence of Section 5.17 hereof.
(j) Notice of Event of Default. Promptly upon
becoming aware of any Event of Default or Potential Default, the Borrower shall
give the Lender notice thereof, together with a written statement of a
Designated Financial Officer of the Borrower setting forth the details thereof
and any action with respect thereto taken or contemplated to be taken by the
Borrower.
(k) Notice of Material Adverse Change. Promptly
upon becoming aware thereof, the Obligors shall give the Lender notice of any
event which the Obligor believe in good faith is reasonably likely to have, or
actually has had, Material Adverse Effect.
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(l) Visitation and Verification. Each Obligor
shall permit the Lender, or any agents or representatives thereof at any time
during normal business hours to examine and make copies of any abstracts from
their records and books of account, to visit and inspect their properties, to
verify materials, leases, notes, accounts receivable, inventory, deposit
accounts and other assets of the Obligors to conduct audits, physical counts,
valuations or examinations and to discuss their affairs, finances and accounts
with any of the directors, officers, managerial employees, independent
accountants or other representatives thereof, provided that the foregoing shall
be in a manner so as not to unreasonably disrupt the business of the Obligors.
7.02. Preservation of Existence and Franchises. Subject to
Section 8.08 hereof, each Obligor shall maintain (which may be by virtue of the
stay imposed in the Chapter 11 Cases) its corporate existence, rights and
franchise in full force and effect in its jurisdiction of incorporation. The
Obligors shall qualify and remain qualified (which may be by virtue of the stay
imposed in the Chapter 11 Cases) as foreign corporations in each jurisdiction
in which failure to qualify would have a Material Adverse Effect.
7.03. Insurance. The Obligors shall maintain insurance at
the levels currently in effect with financially sound and reputable insurers as
listed on Schedule 5.18 hereto and promptly cause all such policies to show the
Lender as loss payee or additional insured as its interest may appear on such
policies and, with respect to the Collateral, all relevant policies shall name
the Lender as loss payee on such policies. The Obligors shall provide to the
Lender a copy of each such policy listed on Schedule 5.18.
7.04. Maintenance of Properties. Each of the Obligors shall,
(i) maintain or cause to be maintained in good repair, working order and
condition the properties now or hereafter owned by it and (ii) make or cause to
be made all needful and proper repairs, renewals, replacements and improvements
thereto to the extent required so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (iii)
maintain all leased property in compliance with the requirements of any
applicable lease, in each case other than sales of property or rejection of
leases approved by the Bankruptcy Court and otherwise permitted by the terms of
this Agreement.
7.05. Financial Accounting Practices, etc. The Obligors
shall make and keep books, records and accounts which, in reasonable detail,
accurately and fairly reflect their transactions and dispositions of their
assets and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization, (ii) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with GAAP and (B) to maintain accountability for assets, and (iii)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
7.06. Compliance with Laws. The Obligors shall comply with
all applicable Laws (including but not limited to compliance in respect of
products that they sell or service they
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perform, conduct of their businesses, or use, maintenance or operation of real
and personal properties owned or possessed by them) with respect to which
failure to comply would have a Material Adverse Effect.
7.07. Further Assurances. The Obligors promptly shall do,
execute, acknowledge, deliver, record, file, register and perform any and all
such further acts, deeds, conveyances, security agreements, assignments,
estoppel certificates, financing statements, assurances and other instruments
as the Lender may reasonably request from time to time in order (a) to carry
out more effectively the purposes of this Agreement or any other Related
Document, (b) to subject to valid and perfected first priority liens and
security interests all Collateral (subject, as to priority, to the Permitted
Liens), (c) to perfect and maintain the validity, effectiveness and priority of
any of the Related Documents and the liens and security interests intended to
be created thereby, and (d) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm unto the Lender the rights granted or now or
hereafter intended to be granted to the Lender under any Related Document. The
assurances contemplated by this Section 7.07 shall be given under applicable
nonbankruptcy Law as well as the Bankruptcy Code, it being the intention of the
parties that the Lender may request assurances under applicable nonbankruptcy
Law, and such request shall be complied with (if otherwise made in good faith
by the Lender) whether or not the Interim Bankruptcy Court or the Final
Bankruptcy Court Order is in force and whether or not dismissal of the Chapter
11 Cases or any other action by the Bankruptcy Court is imminent, likely or
threatened.
7.08. Cash Management System.
(a) The Obligors agree and covenant to (i) cause
all cash, other than de minimus amounts maintained at each store in the
ordinary course of business, and all proceeds from Accounts Receivable, the
sale of Inventory, and Net Sales Proceeds constituting cash to be deposited
into the Depository Accounts in the ordinary course of business of the Obligors
consistent with past practice, (ii) cause all remittances on credit card sales
to be transferred into the Cash Concentration Account or a Depository Account
on a daily basis, (iii) cause all funds in the Depository Accounts to be
transferred into the Cash Concentration Account on a daily basis, (iv) cause
all cash deposited in the Cash Concentration Account to be sent to the Lender
Account on a daily basis, (v) instruct the Lender to cause all funds
transferred to the Lender Account to be credited to the Borrower's Account and
applied to reduce the Obligations outstanding from time to time, (vi) take all
such actions as the Lender deems necessary or advisable to send all cash, all
proceeds from the sale of Inventory, all remittances or other proceeds of
Collateral to the Lender Account to be applied to the Obligations, (vii)
execute and deliver to the Lender on or before the Closing Date (A) an original
notice letter for each Depository Bank listed on Schedule 5.23, substantially
in the form of Exhibit H hereto, which will be sent to each such Depository
Bank and (B) a Cash Concentration Account Agreement, executed by the Borrower
and the Cash Concentration Account Bank, and (viii) take such actions as the
Lender deems necessary or advisable to grant to the Lender dominion and control
over the funds in the Cash Concentration Account. The Obligors shall promptly,
and in any event not later than five (5) days after the opening of any such new
account, notify the Lender in writing of the creation of any new
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Depository Account and shall at the time of such notice execute and deliver to
the Agent a notice letter, substantially in the form of Exhibit H hereto.
(b) Upon receipt by the Obligors of collections
of cash and any proceeds from Accounts Receivable, the sale of Inventory and
Net Sale Proceeds, the Obligors shall immediately deposit all such payments
into the Cash Concentration Account or any Depository Account. The Obligors
shall cause all funds in the Depository Accounts and all remittances or other
proceeds of credit card sales to be promptly transferred from the financial
institution that receives such remittances or other proceeds or from the
Depository Accounts to the Cash Concentration Account.
(c) Notwithstanding anything in this Section 7.08
to the contrary, the Obligors shall be permitted to retain, in any bank
accounts other than the Depository Accounts, cash at any time not to exceed
$750,000 in the aggregate.
7.09. Taxes. Each of the Obligors shall pay and discharge,
to the extent consistent with the rights and obligations of the Obligors as
debtors-in-possession under the Bankruptcy Code, all post-petition taxes,
assessments and governmental charges upon it, its income and its properties,
which arise from or relate to operations of the Obligors or other events
occurring after the Filing Date, prior to the date on which penalties are
attached thereto, unless and to the extent only that (a) such taxes,
assessments and governmental charges shall be contested in good faith and by
appropriate proceedings by the Obligors and (b) adequate reserves are
maintained by the Obligors with respect thereto.
ARTICLE VIII
NEGATIVE COVENANTS
The Obligors jointly and severally covenant to the Lender as
follows, subject to waiver by the Lender as provided herein:
8.01. Final Bankruptcy Court Order; Administrative Priority;
Lien Priority; Payment of Claims.
(a) None of the Obligors shall at any time seek,
consent to or suffer to exist any modification, stay, vacation or amendment of
the Interim Bankruptcy Court Order or the Final Bankruptcy Court Order, as the
case may be, except for modifications and amendments agreed to by the Lender.
(b) None of the Obligors shall at any time suffer
to exist a priority for any administrative expense or unsecured claim against
the Obligors (now existing or hereafter arising of any kind or nature
whatsoever, including without limitation any administrative expenses of the
kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code) equal or
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superior to the priority of the Lender in respect of the Obligations, except
for the Carve-Out Expenses having priority over the Obligations to the extent
set forth in the Agreed Administrative Expense Priorities.
(c) None of the Obligors shall at any time suffer
to exist any Lien on the Collateral having a priority equal or superior to the
Liens and security interests in favor of the Lender in respect of the
Obligations, or any Liens except for Permitted Liens.
(d) Prior to the date on which the Obligations
have been paid in full in cash and the Revolving Credit Commitment has been
terminated, none of the Obligors shall pay any administrative expense claims
except (i) Priority Expenses and (ii) other administrative expense claims
incurred in the ordinary course of the business of the Borrower, in each case
to the extent and having the order of priority set forth in the Agreed
Administrative Expense Priorities.
8.02. Liens. The Obligors shall not, at any time create,
incur, assume or suffer to exist Liens on any of their properties or assets,
tangible or intangible, now owned or hereafter acquired, or agree or become
liable to do so, except for the following ("Permitted Liens"):
(a) Liens in favor of the Lender;
(b) Liens which were in existence on the Closing
Date and are listed on Schedule 8.02 hereof;
(c) Deposits or pledges to secure utility and
similar services, to secure workmen's compensation, unemployment
insurance, old age benefits or other social security obligations, or
in connection with or to secure the performance of bids, tenders,
trade contracts or leases, or to secure statutory obligations, or
stay, surety, appeal or custom bonds, or other pledges or deposits of
like nature, and all in the ordinary course of business;
(d) Liens on property to be used by the Obligors
in the ordinary course of their business, securing payment of all or
part of the purchase price thereof, and Liens with respect to
equipment leases which equipment is used by the Obligors in the
ordinary course of their business, provided that the aggregate amount
of Indebtedness at any one time outstanding incurred after the Filing
Date and secured by such Liens shall not exceed $1,000,000, and
further provided that such Liens are confined solely to the property
so purchased, leased, improvements thereto and proceeds thereof;
(e) Zoning restrictions, rights of way, consents,
covenants, reservations, encumbrances, easements, minor restrictions
on the use of real property, minor irregularities in title thereto and
other minor Liens, charges and encumbrances that do not secure the
payment of money or the performance of an obligation and that do not
in the aggregate materially detract from the value of a property or
asset to, or materially
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impair its use in the business of, the Obligors;
(f) Nonconsensual Liens of warehousemen,
materialmen, mechanics, carriers and landlords and other like Persons,
which Liens arise in the ordinary course of the Obligors' business;
(g) Liens in connection with any taxes,
assessments, charges, levies or claims that are not yet due and
payable or which the Obligors are contesting in good faith and by
appropriate proceedings diligently conducted so long as reserves or
other appropriate provisions as may be required by GAAP have been made
therefor and so long as the failure to pay the same does not have a
Material Adverse Effect;
(h) Liens in favor of any Governmental Authority
in respect of customs or import duties; and
(i) extensions, renewals or replacements of any
Lien permitted pursuant to clauses (a)-(h) above; provided that the
principal amount of the obligation secured thereby is not increased
and that any such extension, renewal or replacement is limited to the
property originally encumbered thereby.
8.03. Indebtedness. The Obligors shall not create, incur,
assume or suffer to exist any Indebtedness, except for the following
("Permitted Indebtedness"):
(a) Indebtedness in favor of the Lender and to
any Letter of Credit Issuer under any Letter of Credit Application;
(b) Indebtedness secured by a Permitted Lien;
(c) Indebtedness in existence on the Closing Date
and listed on Schedule 8.03 hereto;
(d) Indebtedness contemplated by the Interim
Bankruptcy Court Order or Final Bankruptcy Court Order, as the case
may be;
(e) accounts payable and accrued expenses arising
out of transactions (other than borrowings) in the ordinary course of
business;
(f) Indebtedness incurred in connection with
Capital Expenditures, to the extent permitted under Section 8.12
hereof;
(g) Indebtedness to any other Obligor; and
(h) extensions, renewals or replacements of any
Indebtedness permitted pursuant to clauses (a)-(g) above, provided
that the principal amount of such
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<PAGE> 50
Indebtedness is not increased by such extension, renewal or
replacement.
8.04. Guarantees and Contingent Liabilities. The Obligors
shall not at any time be or become liable under any Guarantee, except:
(a) Guarantees in favor of the Lender;
(b) Guarantees in existence on the Closing Date
and listed on Schedule 8.04 hereto;
(c) contingent liabilities arising from the
endorsement of negotiable or other instruments for deposit or
collection or similar transactions in the ordinary course of business;
(d) Guarantees of any Indebtedness incurred by
any Obligor hereunder; and
(e) extensions, renewals or replacements of any
Guarantee permitted pursuant to clauses (a)-(d) above; provided that
the principal amount of the obligation guaranteed thereby is not
increased by such extension, renewal or replacement.
8.05. Loans, Advances and Investments. Except as otherwise
expressly permitted by this Section 8.05, the Obligors shall not at any time
make or suffer to remain outstanding any loan or advance to, or purchase,
acquire or own any stock, bonds, notes or securities of, or any partnership
interest (whether general or limited) in, or any other interest in, or make any
capital contribution to, any other Person. By way of illustration, and without
limitation of the foregoing, it is understood that the Obligors will be deemed
to have made an advance to a Person: (x) to the extent that any Obligor
performs any service for such Person (including but not limited to management
services), or transfers any property to such Person, and is not reimbursed for
such service or property and (y) to the extent that any Obligor pays any
obligation on behalf of such Person. The amount of such advance shall be
deemed to be the fair value of the services so performed or property so
transferred (in the case of clause (x)) or the amount so paid by such Obligor
(in the case of clause (y)).
The following are excepted from the operation of this Section
8.05:
(a) advances to employees to meet expenses
incurred by such employees or with respect to salary advances and
other similar advances, in each case to non-Affiliates and in the
ordinary course of business;
(b) ownership of any capital stock, bonds, notes,
securities, partnership or joint venture interests on the Filing Date
and any similar items received in respect thereof; and
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(c) loans or advances to any other Obligor; and
(d) the Cash Collateral Account and the other
accounts permitted or required to be maintained pursuant hereto, any
investment of funds on deposit in the foregoing to the extent
expressly permitted hereunder.
8.06. Dividends and Related Distributions. The Obligors
shall not declare, make, pay or agree to pay, any dividend or other
distribution of any nature (whether in cash, property, securities or otherwise)
on account of or in respect of shares of their capital stock or on account of
the purchase, redemption, retirement or acquisition of any shares of capital
stock (or warrants, options or rights therefor).
8.07. Merger, etc. The Obligors shall not merge with or into
or consolidate with any other Person, or sell, lease (as lessor) or otherwise
dispose of all or a substantial portion of its assets (whether in one
transaction or in a series of transactions), or agree to do any of the
foregoing; provided, however, that each Obligor shall be permitted to merge
with or into any other Obligor.
8.08. Dispositions of Assets. The Obligors shall not sell,
convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily
or involuntarily (any of the foregoing being referred to in this Section 8.08
as a "transaction" and any series of related transactions constituting but a
single transaction), any of their properties or assets, tangible or intangible
(including but not limited to sale, assignment, discount or other disposition
of accounts, contract rights, chattel paper or general intangibles with or
without recourse), except:
(a) transactions in the ordinary course of
business
(b) sales during any fiscal year of equipment or
fixtures which are worn out or obsolete, provided that the Net Sales
Proceeds of such sales in the aggregate do not exceed $150,000; or
(c) the Obligors shall be permitted to close
stores so long as the Obligors continue to operate at least 161
stores; or
(d) sales of equipment or fixtures in connection
with store closings permitted pursuant to this Agreement.
8.09. Affiliates. The Obligors will not provide funds to any
Affiliate except:
(a) that the Obligors may pay wages, salaries,
directors' fees and related benefits and may make expense
reimbursements to Affiliates in the ordinary course of business;
(b) each Obligor may advance funds to other
Obligors; and
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(c) each Obligor may enter into or be a party to
any transaction with any Affiliate in the ordinary course of business
in a manner and to an extent consistent with past practice of such
Obligor which is necessary or desirable for the prudent operation of
its business for fair consideration and on terms no less favorable to
such Obligor as are available from unaffiliated third parties.
8.10. Continuation of or Change In Business. Each of the
Obligors shall continue to engage in its business substantially as conducted
and operated during the present and preceding fiscal year except as otherwise
permitted in this Agreement, and the Obligors will not engage in any other
business.
8.11. Payments. The Obligors shall not make any payment of
principal or interest or otherwise on account of any Indebtedness or trade
payable incurred prior to the Filing Date, provided that such payments may be
made: (i) to the holders of, or in respect of, wage and employee benefit
obligations (including expense reimbursements) which arose prior to the Filing
Date; (ii) to landlords in connection with the assumption of unexpired leases
under Section 365 of the Bankruptcy Code in an aggregate amount not to exceed
$6,500,000; and (iii) to other lessors and non-debtor parties to executory
contracts in connection with the assumption of such leases and contracts under
Section 365 of the Bankruptcy Code, in each case after prior written notice of
such payment has been given by the Obligors to the Lender and subject to
approval of the Bankruptcy Court.
8.12. Capital Expenditures. The Obligors shall not permit
Capital Expenditures for the Obligors to exceed $4,000,000 in the aggregate for
each fiscal year.
8.13. Lease Obligations. The Obligors shall not create,
incur or suffer to exist any obligations as lessee (i) for the payment of rent
for any real or personal property in connection with any sale and leaseback
transaction, or (ii) for the payment of rent for any real or personal property
under leases or agreements to lease other than obligations under Capitalized
Leases which would not cause the aggregate amount of all obligations under
Capitalized Leases entered into after the Effective Date owing by the Obligors
in any fiscal year, together with all other Capital Expenditures for such
fiscal year, to exceed the amount set forth in Section 8.12.
8.14. EBITDAR.
(a) The Obligors shall not permit EBITDAR for
each fiscal quarter of the Obligors ending on the dates listed below to be less
than the amount specified opposite each such date:
<TABLE>
<CAPTION>
Fiscal Quarter EBITDAR
-------------- -------
<S> <C>
June 30, 1996 $(16,385,000)
September 31, 1996 $ 1,801,000
</TABLE>
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<PAGE> 53
<TABLE>
<S> <C>
December 31, 1996 $ 336,000
March 31, 1997 $ 799,000
June 30, 1997 $(1,425,000)
September 31, 1997 $ 2,666,000
December 31, 1997 $ 795,000
</TABLE>
(b) The Obligors shall not permit Cumulative EBITDAR for
each fiscal quarter of the Obligors ending on the dates listed below to be less
than the amount specified opposite each such date:
<TABLE>
<CAPTION>
Fiscal Quarter Cumulative EBITDAR
-------------- -------------------
<S> <C>
June 30, 1996 $(16,385,000)
September 31, 1996 $(14,584,000)
December 31, 1996 $(14,248,000)
March 31, 1997 $(13,449,000)
June 30, 1997 $(14,874,000)
September 31, 1997 $(12,208,000)
December 31, 1997 $(11,413,000)
</TABLE>
8.15. Gross Revenue.
(a) The Obligors shall not permit Gross Revenue
for each fiscal quarter of the Obligors ending on the dates listed below to be
less than the amount specified opposite each such date:
<TABLE>
<CAPTION>
Fiscal Quarter Gross Revenue
-------------- -------------
<S> <C>
June 30, 1996 $34,111,000
September 31, 1996 $36,780,000
December 31, 1996 $32,674,000
March 31, 1997 $40,351,000
June 30, 1997 $33,849,000
September 31, 1997 $38,619,000
December 31, 1997 $34,307,000
</TABLE>
(b) The Obligors shall not permit Cumulative Gross
Revenue for each fiscal quarter of the Obligors ending on the dates listed
below to be less than the amount specified opposite each such date:
<TABLE>
<CAPTION>
Fiscal Quarter Cumulative Gross Revenue
-------------- ------------------------
<S> <C>
June 30, 1996 $34,111,000
September 31, 1996 $70,891,000
</TABLE>
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<PAGE> 54
<TABLE>
<S> <C>
December 31, 1996 $103,565,000
March 31, 1997 $143,916,000
June 30, 1997 $177,765,000
September 31, 1997 $216,384,000
December 31, 1997 $250,691,000
</TABLE>
8.16. Fiscal Year. The Obligors shall not permit their
fiscal years to end on a day other than the Saturday closest to December 31, or
apply to the Bankruptcy Count for authority to do so.
ARTICLE IX
DEFAULTS
9.01. Events of Default. An Event of Default shall mean the
occurrence or existence of one or more of the following events or conditions
(whatever the reason for such Event of Default and whether voluntary,
involuntary or effected by operation of Law):
(a) The Obligors shall fail to make any payment
of principal under this Agreement or any Reimbursement Obligation when
due; or the Obligors shall fail to pay when due any other amount
payable under this Agreement or any other Related Document (including
but not limited to the making of deposits in the Depository Accounts,
the Cash Concentration Account or the Cash Collateral Account),
including any interest or fee due hereunder or under any other Related
Document; or
(b) Any representation or warranty made by any of
the Obligors under this Agreement or any other Related Document or any
statement made by any of the Obligors in any financial statement,
certificate, report, or document furnished to the Lender pursuant to
or in connection with this Agreement or any other Related Document,
shall prove to have been false or misleading in any material respect
as of the time when made (including by omission of information
necessary to make such representation, warranty or statement, in light
of the circumstances under which it was made, not misleading); or
(c) The Obligors shall default in the performance
or observance of any covenant contained in Article VII (other than
Section 7.01, 7.04, 7.05 and 7.07) or Article VIII hereof; or
(d) The Obligors shall default in the performance
or observance of (i) the covenants contained in Section 7.01, 7.04,
7.05 and 7.07 and such default shall have continued unremedied for a
period of five days, or (ii) any other covenant, agreement or duty
under this Agreement or any other Related Document (to the extent not
otherwise set forth in this Section 9.01) and such default shall have
continued unremedied for a period
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<PAGE> 55
of 30 days; or
(e) An order with respect to the Chapter 11 Cases
shall be entered by the Bankruptcy Court, or any of the Obligors shall
file an application for an order with respect to the Chapter 11 Cases,
(i) appointing a trustee in any such Case or (ii) appointing an
examiner in such Case with the authority to perform the duties of a
trustee in respect of the estate of any of the Obligors or the
operation of the business of any of the Obligors, in addition to those
duties set forth in subsections 1106(a)(3) and 1106(a)(4) of the
Bankruptcy Code; or
(f) An order with respect to any of the Chapter
11 Cases shall be entered by the Bankruptcy Court converting such
chapter 11 case to a chapter 7 case; or
(g) An order or plans shall be entered by the
Bankruptcy Court confirming a plan of reorganization in the Chapter 11
Cases which does not contain a provision for termination of the
Revolving Credit Commitment and payment in full in cash of all
Obligations of the Obligors hereunder and under the other Related
Documents on or before the effective date of such plan or plans upon
entry thereof; or
(h) An order shall be entered by the Bankruptcy
Court dismissing any of the Chapter 11 Cases which does not contain a
provision for termination of the Revolving Credit Commitment and
payment in full in cash of all Obligations of the Obligors hereunder
and under the other Related Documents upon entry thereof; or
(i) An order with respect to any of the Chapter
11 Cases shall be entered by the Bankruptcy Court without the express
prior written consent of the Lender, (i) to revoke, reverse, stay,
modify, supplement or amend the Final Bankruptcy Court Order or (ii)
to permit any administrative expense or any claim (now existing or
hereafter arising, of any kind or nature whatsoever) to have
administrative priority as to any of the Obligors equal or superior to
the priority of the Lender in respect of the Obligations, except for
allowed administrative expenses having priority over the Obligations
to the extent set forth in the Agreed Administrative Expense
Priorities, or (iii) to grant or permit the grant of a Lien on the
Collateral; or
(j) An application for any of the orders
described in clauses (e), (f), (g), (h) or (i) above shall be made (i)
by a Person other than the Obligors and such application is not
contested by the Obligors in good faith and the relief requested is
granted in an order that is not stayed pending appeal or (ii) by the
Obligors; or
(k) An order shall be entered by the Bankruptcy
Court that is not stayed pending appeal granting relief from the
automatic stay to any creditor of any of the Obligors with respect to
any claim secured by any asset or assets of the Obligor having a book
value equal to or exceeding $500,000 in the aggregate; provided,
however, that it shall not be an Event of Default if relief from the
automatic stay is lifted solely for the
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purpose of allowing such creditor to determine the liquidated amount
of its claim against the Obligors; or
(l) Any non-monetary judgment or order shall be
entered against any Obligor which does or could reasonably be expected
to have a Material Adverse Effect, and there shall be a period of ten
consecutive days during which a stay or enforcement of such judgment
or order shall not be in effect.
9.02. Consequences of an Event of Default. If an Event of
Default shall occur and be continuing or shall exist, the Lender may, by notice
to the Borrower,
(i) declare the Revolving Credit Commitment
terminated, whereupon the Revolving Credit Commitment will
terminate immediately and any fees hereunder shall be
immediately due and payable without further order of or
application to the Bankruptcy Court, presentment, demand,
protest or further notice of any kind, all of which are hereby
expressly waived, and an action therefor shall immediately
accrue; or
(ii) declare the unpaid principal amount of the
Note, interest accrued thereon, the total amount of the Letter
of Credit Exposure that is not cash collateralized in
accordance with this Agreement and all other amounts owing by
the Obligors hereunder or under the Note to be immediately due
and payable without further order of or application to the
Bankruptcy Court, presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived,
and an action therefor shall immediately accrue; or
(iii) give notice to the Obligors of the occurrence
and continuance of an Event of Default; or
(iv) at any time when there are no Loans
outstanding, maintain cash collateral (to the extent the
Obligors have or receive cash) equal to 105% of all
outstanding Letters of Credit; or
(v) apply all funds deposited in the Cash
Concentration Accounts and in the Cash Collateral Account to
the payment, in whole or in part, of the Obligations; or
(vi) upon five Business Days' written notice to
the Borrower, set-off amounts in the Cash Concentration
Accounts or any other accounts under the dominion and control
of the Lender and apply such amounts to the Obligations of the
Obligors hereunder and in the Related Documents; or
(vii) upon five Business Days' written notice to
the Borrower, exercise all rights and remedies which the
Lender may have under any other Related
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<PAGE> 57
Document.
9.03. Certain Remedies. If an Event of Default occurs, the
Lender may exercise all rights and remedies which the Lender may have hereunder
or under any other Related Document or at law (including but not limited to the
Bankruptcy Code and the Uniform Commercial Code) or in equity or otherwise.
All such remedies shall be cumulative and not exclusive.
ARTICLE X
MISCELLANEOUS
10.01. Holidays. Except as otherwise provided herein,
whenever any payment or action to be made or taken hereunder or under the Note
shall be stated to be due on a day which is not a Business Day, such payment or
action shall be made or taken on the next following Business Day and such
extension of time shall be included in computing interest or fees, if any, in
connection with such payment or action.
10.02. Records. The unpaid principal amount of the Note, the
unpaid interest accrued thereon, the interest rate or rates applicable to such
unpaid principal amount, the duration of such applicability, the Lender's
Current Commitment, the Stated Amount of each Letter of Credit, the principal
amount of all Reimbursement Obligations, the Letter of Credit Exposure, and the
accrued and unpaid commitment fee, facility fee, administration fee and Letter
of Credit Fees shall at all times be ascertained from the records of the
Lender, which shall be conclusive absent manifest error.
10.03. Amendments and Waivers. The Lender and the Obligors
may from time to time enter into agreements amending, modifying or
supplementing this Agreement or the Note or any other Related Document, and the
Lender may from time to time grant waivers or consents to a departure from the
due performance of the obligations of the Obligors hereunder or thereunder.
Any such agreement, waiver or consent must be in writing and shall be effective
only to the extent specifically set forth in such writing. In the case of any
such waiver or consent relating to any provision hereof any Event of Default or
Potential Default so waived or consented to shall be deemed to be cured and not
continuing, but no such waiver or consent shall extend to any other or
subsequent Event of Default or Potential Default or impair any right consequent
thereto.
10.04. No Implied Waiver; Cumulative Remedies. No course of
dealing and no delay or failure of the Lender in exercising any right, power or
privilege under this Agreement, the Note or any other Related Document shall
affect any other or future exercise thereof or exercise of any other right,
power or privilege; nor shall any single or partial exercise of any such right,
power or privilege or any abandonment or discontinuance of steps to enforce
such a right, power or privilege preclude any further exercise thereof or of
any other right, power or privilege.
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<PAGE> 58
The rights and remedies of the Lender under this Agreement, the Note and the
other Related Documents are cumulative and not exclusive of any rights or
remedies which the Lender has thereunder or at law or in equity or otherwise.
The Lender may exercise its rights and remedies against the Obligors and the
Collateral as the Lender may elect, and regardless of the existence or adequacy
of any other right or remedy.
10.05. Notices.
(a) All notices, requests, demands, directions
and other communications (collectively "notices") under the provisions of this
Agreement or the Note shall be in writing (including telexed and telecopied
communication) unless otherwise expressly permitted hereunder and shall be sent
by first-class or first-class express mail, or by telex or telecopy with
confirmation in writing mailed first-class, or by overnight courier, or by
personal delivery, in all cases with charges prepaid. Any properly given
notice shall be effective when received. All notices shall be sent
(i) If to any of the Obligors, at the following address:
Discovery Zone, Inc.
110 East Broward Boulevard
Fort Lauderdale, Florida 33301
Attention: General Counsel
Telephone: (954) 627-2400
Telecopy: (954) 627-2480
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Douglas P. Bartner, Esq.
Telephone: (212) 848-8190
Telecopy: (212) 842-7179
and (ii) if to the Lender, at the address stated on the signature page hereof
together with, in the case of a letter of credit request and Letter of Credit
Application sent pursuant to Section 3.01(a) a copy to the Lender at the
address for the Lender provided on the signature page hereof, or in accordance
with the last unrevoked written direction from such party to the other parties
hereto.
(b) Nothing in this Agreement or in any other
Related Document shall be construed to limit or affect the obligation of the
Obligors or any other Person to serve upon the Lender in the manner prescribed
by the Bankruptcy Code any pleading or notice required to be given to the
Lender pursuant to the Bankruptcy Code.
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(c) The Lender may rely, and shall be fully
protected in relying, on any notice purportedly made by or on behalf of the
Borrower, and the Lender shall have no duty to verify the identity or authority
of any Person giving such notice. The preceding sentence shall apply to all
notices whether or not made in a manner authorized or required by this
Agreement or any other Related Document.
10.06. Expenses; Taxes; Attorneys' Fees; Indemnification.
The Borrower agrees to pay or cause to be paid, on demand, and to save the
Lender harmless against liability for the payment of, all reasonable
out-of-pocket expenses, regardless of whether the transactions contemplated
hereby are consummated, including but not limited to reasonable fees and
expenses of counsel for the Lender, accounting, due diligence, periodic field
audits, investigation, monitoring of assets, miscellaneous disbursements,
examination, reasonable travel, reasonable lodging and meals, incurred by the
Lender from time to time arising from or relating to: (a) the negotiation,
preparation, execution, delivery, performance and administration of this
Agreement and the other Related Documents, (b) any requested amendments,
waivers or consents to this Agreement or the other Related Documents whether or
not such documents become effective or are given, (c) the administration,
preservation and protection of any of the Lender's rights under this Agreement
or the other Related Documents, (d) the defense of any claim or action asserted
or brought against the Lender by any Person that arises from or relates to this
Agreement, any other Related Document, the Lender's claims against the
Obligors, or any and all matters in connection therewith, (e) the commencement
or defense of, or intervention in, any court proceeding arising from or related
to this Agreement or any other Related Document, (f) the filing of any
petition, complaint, answer, motion or other pleading by the Lender, or the
taking of any action in respect to Collateral or other security, in connection
with this Agreement or any other Related Document, (g) the protection,
collection, lease, sale, taking possession of or liquidation of, any Collateral
or other security in connection with this Agreement or any other Related
Document, (h) any attempt to enforce any lien or security interest in any
Collateral or other security in connection with this Agreement or any other
Related Document, (i) any attempt to collect from the Obligors, (j) the receipt
of any advice with respect to any of the foregoing, (k) all Environmental
Liabilities and Costs arising from or connection with the past, present or
future operations of the Obligors involving any damage to real or personal
property or natural resources or harm or injury alleged to have resulted from
any Release of Contaminants on, upon or into such property; (l) any costs or
liabilities incurred in connection with the investigation, removal, cleanup
and/or remediation of any Contaminant present or arising out of the operations
of any facility of the Obligors; or (m) any costs or liabilities incurred in
connection with any Environmental Lien. Without limitation of the foregoing or
any other provision of any Related Document: (x) the Borrower agrees to pay
all stamp, document, transfer, recording or filing taxes or fees and similar
impositions now or hereafter determined by the Lender to be payable in
connection with this Agreement or any other Related Document, and the Borrower
agrees to save the Lender harmless from and against any and all present or
future claims, liabilities or losses with respect to or resulting from any
omission to pay or delay in paying any such taxes, fees or impositions, and (y)
if the Borrower fails to perform any covenant or agreement contained herein or
in any other Related Document, the Lender may itself perform or cause
performance of such covenant or agreement, and the expenses of the Lender
incurred in connection therewith shall be
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reimbursed on demand by the Borrower. The Borrower agrees to indemnify and
defend the Lender and its directors, officers, agents, employees and affiliates
(collectively the "Indemnified Parties") from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages, costs or expenses of
any nature whatsoever (including reasonable attorneys' fees and amounts paid in
settlement) incurred by, imposed upon or asserted against any of them arising
out of or by reason of any investigation, litigation or other proceeding
brought or threatened relating to, or otherwise arising out of or relating to,
the execution of this Agreement or any other Related Document, the transactions
contemplated hereby or thereby or any Loan or proposed Loan or Letter of Credit
or proposed Letter of Credit hereunder (including, but without limitation, any
use made or proposed to be made by the Borrower of the proceeds of any thereof,
or the delivery or use or transfer of or the payment or failure to pay under
any Loan or Letter of Credit) but excluding any such losses, liabilities,
claims, damages, costs or expenses to the extent finally judicially determined
to have resulted from the gross negligence or willful misconduct of the
Indemnified Parties.
10.07. Application. Except to the extent, if any, expressly
set forth in the Related Documents, the Lender shall have the right to apply
any payment received or applied by it in connection with the Obligations to
such of the Obligations then due and payable as it may elect.
10.08. Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
10.09. Governing Law. This Agreement and the Note shall be
deemed to be contracts under the laws of the State of New York, without regard
to choice of law principles, and for all purposes shall be governed by and
construed and enforced in accordance with the laws of said State except as the
law is governed by the Bankruptcy Code.
10.10. Prior Understandings. This Agreement supersedes all
prior understandings and agreements, whether written or oral, among the parties
hereto relating to the transactions provided for herein.
10.11. Duration; Survival. All representations and
warranties of the Obligors contained herein or made in connection herewith
shall survive the making of and shall not be waived by the execution and
delivery of this Agreement, the Note or any other Related Document, any
investigation by or knowledge of the Lender, the making of any Loan hereunder,
or any other event whatever. All covenants and agreements of the Obligors
contained herein shall continue in full force and effect from and after the
date hereof so long as the Borrower may borrow hereunder and until the
Obligations have been paid in full and no Letters of Credit remain outstanding.
Without limitation, it is understood that all obligations of the Obligors to
make payments to or indemnify the Lender (including, without limitation,
obligations arising under
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Section 10.06 hereof) shall survive the payment in full of the Note and all
Reimbursement Obligations and of all other obligations of the Obligors
thereunder and hereunder, termination of this Agreement and all other events
whatsoever and whether or not any Loans are made or Letters of Credit issued
hereunder.
10.12. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
10.13. Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and
inure to the benefit of the Lender, the Obligors and their respective
successors and assigns (including, except for the right to request Loans or
Letters of Credit, any trustee succeeding to the rights of the Borrower
pursuant to chapter 11 of the Bankruptcy Code or pursuant to any conversion to
a case under chapter 7 of the Bankruptcy Code), except that the Borrower may
not assign or transfer any of its rights hereunder without the prior written
consent of the Lender.
(b) The Lender may at any time sell, assign or
participate any portion or portions, without the consent of the Borrower, to up
to three assignees and/or participants; provided, however, that the Lender
agrees to act as the agent on behalf of any transferees or assignees of any
interest in this Agreement. The Borrower shall provide Notes and agree to any
amendment and/or restatement of this Agreement and the Related Documents as may
be requested by the Lender to reflect any such sales or assignments.
10.14. The Lender as Party in Interest. The Obligors hereby
stipulate and agree that the Lender is and shall remain a party in interest in
the Chapter 11 Cases and shall have the right to participate, object and be
heard in any motion or proceeding in connection therewith. Nothing in this
Agreement or any other Related Document shall be deemed to be a waiver of any
of the Lender's rights or remedies under applicable law or documentation.
Without limitation of the foregoing, the Lender shall have the right to make
any motion or raise any objection it deems to be in its interest (specifically
including but not limited to objections to use of proceeds of the Loans, use of
Letters of Credit, to payment of professional fees and expenses or the amount
thereof, to sales or other transactions outside the ordinary course of business
or to assumption or rejection of any executory contract or lease), whether or
not the action or inaction by the Obligors which is the subject of such motion
or objection violates or is expressly permitted by any covenant or provision of
this Agreement or any other Related Document.
10.15. Confidentiality. Upon the Borrower or any Obligor
delivering to the Lender, or permitting the Lender to inspect, any written
information pursuant to this Agreement, the Lender shall treat such information
as confidential in accordance with its customary practices to the extent such
information is conspicuously marked confidential or to the extent that the
Borrower otherwise advises the Lender that such information is confidential.
The Lender agrees
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to hold such information in confidence from the date of disclosure thereof.
Subject to the other provisions of this Section 10.15, the Lender may disclose
confidential information to its officers, directors, employees, attorneys,
accountants or other professionals engaged by the Lender and then only after
such third party has agreed to hold such information in confidence to the same
extent as if it were the Lender. Notwithstanding the foregoing, the provisions
of this Section 10.15 shall not apply to information within any one of the
following categories or any combination thereof: (i) information the substance
of which, at the time of disclosure by the Lender, has been disclosed to or is
known to any creditor or official or unofficial creditors' committee (other
than information as to which such creditor or creditor's committee is then
under an obligation of nondisclosure), or any Person other than (A) a director,
officer, employee or agent of the Borrower or a professional engaged by the
Borrower and (B) a Person who is then under an obligation of nondisclosure
(otherwise than as a consequence of a wrongful act of the Lender), (ii)
information which the Lender had in its possession prior to receipt thereof
from the disclosing party, or (iii) information received by the Lender from a
third party having no obligations of nondisclosure with respect thereto.
Nothing contained in this Section 10.15 shall prevent any disclosure: (x)
believed in good faith by the Lender to be required by any Law or guideline or
interpretation or application thereof by any Governmental Authority, arbitrator
or grand jury charged with the interpretation or administration thereof or
compliance with any request or directive of any Governmental Authority,
arbitrator or grand jury (whether or not having the force of law), (y)
determined by counsel for the Lender to be necessary or advisable in connection
with its obligations to any Governmental Authority or the enforcement or
preservation of rights under or in connection with this Agreement or any other
Related Document or (z) of any information which has been made public by a
Person other than the Lender. The Lender shall have the right to disclose any
confidential information described in this Section 10.15 to a Letter of Credit
Issuer and to a participant or assignee or prospective participant or assignee
in Loans hereunder, provided that the Lender shall have obtained from such
participant or assignee or prospective participant or assignee an agreement to
hold such information in confidence to the same extent as if it were the Lender.
10.16. Releases of Collateral.
(a) Upon the request of the Borrower made in
connection with any sale, transfer or other disposition permitted pursuant to
Section 8.08 of this Agreement (a "Permitted Disposition") and provided that
the Net Sale Proceeds of any such Permitted Disposition are paid or pledged, as
the case may be, to the Lender pursuant to Section 8.08 of this Agreement, the
Lender shall, at the expense of the Obligors, release, without recourse,
representation or warranty, its Lien on any such Collateral. Notwithstanding
anything to the contrary, the Lender shall not have any obligation to release
its Lien on any such Collateral if the Lender determines, in its sole
discretion exercised reasonably, that the conditions of this Section 10.16 have
not been satisfied.
(b) The Borrower may exercise its rights under
this Section 10.16 at any time during the term of this Agreement in connection
with a Permitted Disposition by delivering to the Lender, not less than ten
(10) Business Days prior to the date of the proposed
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Permitted Disposition and release, a certificate substantially in the form of
Exhibit I hereto (the "Release Certificate") of the Chief Executive Officer or
Designated Financial Officer of the Borrower which shall (i) refer to this
Section 10.16, (ii) identify the assets proposed to be sold and any documents
that the Borrower is requesting the Lender to sign in connection with any such
proposed release, and be accompanied by a counterpart of any such documents
executed and acknowledged by all parties thereto (if any) other than the Lender
(and in form for execution by the Lender), (iii) certify, as of the date of the
Release Certificate, that, (A) both immediately before and immediately after
giving effect to such requested release no Event of Default or Potential
Default has occurred and is continuing, and (B) the Net Sale Proceeds of such
Permitted Disposition has been paid or will be paid to the Lender pursuant to
the terms of Section 2.04(a)(ii) of this Agreement, and (iv) certify that the
Lender shall receive a payment of the cash Net Sale Proceeds and a pledge of
the non-cash Net Sale Proceeds in accordance with the terms of Section
2.04(a)(ii) of this Agreement.
10.17. Waiver of Jury Trial. BY ITS EXECUTION AND DELIVERY
OF THIS AGREEMENT, EACH OF THE OBLIGORS HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION AGAINST THE LENDER, ANY PARTICIPANT, ASSIGNEE, INDEMNIFIED PARTY
OR LETTER OF CREDIT ISSUER, BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, THE NOTE OR ANY OTHER RELATED DOCUMENT, ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
LENDER OR THE OBLIGORS IN CONNECTION HEREWITH OR THEREWITH. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS AGREEMENT.
ARTICLE XI
GUARANTY
11.01. Guaranty. In consideration of financial
accommodations given or to be given or continued to the Borrower by the Lender
pursuant to this Agreement, each of the Guarantors irrevocably and
unconditionally guarantees to the Lender payment when due, whether by
acceleration or otherwise, of any and all of the Obligations, together with all
interest thereon and all attorneys' fees, costs and expenses of collection
incurred by the Lender in enforcing any of such liabilities.
11.02. Waiver. (a) Each of the Guarantors waives notice of
acceptance of this guaranty and notice of any liability to which it may apply,
and waives presentment, demand of payment, protest, notice of dishonor or
nonpayment of any such liabilities, suit or taking other action by the Lender
against, and any other notice to, any party liable thereon (including the
Guarantors). The Lender may at any time and from time to time (whether or not
after revocation
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or termination of this guaranty) without the consent of, or notice to the
Guarantors (except as shall be required by applicable statutes and cannot be
waived), without incurring responsibility to the Guarantors, without impairing
or releasing the obligations of the Guarantors hereunder, upon or without any
terms or conditions and in whole or in part:
(i) change the manner, place or terms of
payment, and/or change or extend the time of payment of, renew or
alter, any Obligations, any security therefor, or any liability
incurred directly or indirectly with respect thereto, and the guaranty
herein made shall apply to the Obligations as so changed, extended,
renewed or altered;
(ii) modify in any manner whatsoever any
of the Related Documents notwithstanding that such amendments or
modifications may result in the Obligations exceeding the aggregate
principal sums set forth in this Agreement and the other Related
Documents;
(iii) sell, exchange, release, surrender,
realize upon or otherwise deal with in any manner and in any order any
property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, the Obligations hereby guaranteed or any
Obligations and/or any offset there against;
(iv) fail to perfect, or continue the
perfection of, any lien or security interest in any such property, or
delay in the perfection of any such lien or security interest;
(v) exercise or refrain from exercising
any rights against the Borrower or others (including the Guarantors)
or otherwise act or refrain from acting;
(vi) settle or compromise any Obligation
hereby guaranteed or any security therefor, and may subordinate the
payment of all or any part thereof to the payment of any liability
(whether due or not) of the Borrower to creditors of the Borrower
other than the Lender and the Guarantors; and
(vii) apply any sums by whomsoever paid or
howsoever realized to any Obligations to the Lender regardless of what
Obligations remain unpaid.
No invalidity, irregularity or unenforceability of all or any part of the
Obligations, or of any security therefor shall affect, impair or be a defense
to this guaranty, and this guaranty is a primary obligation of the undersigned.
(b) This guaranty is a continuing one and all
Obligations to which it now or hereafter applies or may apply under the terms
hereof shall be conclusively presumed to have been created in reliance hereon.
As to the Guarantors, this guaranty shall continue until all Obligations shall
have been indefeasibly repaid in full, notwithstanding a revocation by, or
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complete or partial release for any cause of, any other guarantor, the Borrower
or anyone liable in any manner for the Obligations.
(c) Upon the occurrence and during the
continuance of an Event of Default and the Lender's exercise for its rights
under Sections 9.02(i) or (ii) hereof, and at any time thereafter, the Lender
may, without notice to the Borrower or any other Person, make the Obligations
to the Lender, whether or not then due, immediately due and payable hereunder
as to the Guarantors, and the Lender shall be entitled to enforce the
Obligations hereunder.
(d) No delay on the part of the Lender in
exercising any of its options, powers or rights, or partial or single exercise
thereof, shall constitute a waiver thereof. No waiver of any of its rights
hereunder, and no modification or amendment of this guaranty, shall be deemed
to be effective unless the same shall be in writing, signed by a duly
authorized officer of the Lender, and the same shall be effective only for the
period, on the condition and for the specific instances and purposes specified
therein and the same shall in no way impair the rights of the Lender or the
obligations of the Guarantors to the Lender in any other respect at any other
time.
(e) The Guarantors agree that, should the Lender
bring any judicial proceedings in relation to this guaranty and the Related
Documents, the Guarantors will not interpose any counterclaim or setoff of any
nature other than mandatory counterclaims.
11.03. Subordination. Any and all rights and claims of the
Guarantors against the Borrower or any of its property, arising by reason of
any payment by the undersigned to the Lender pursuant to the provisions of this
guaranty, shall be subordinate and subject in right of payment to the prior
indefeasible payment in full in cash of all liabilities of the Borrower to the
Lender.
11.04. Covenants. The Guarantors will ensure that each
financial statement of the Guarantors, including without limitation, any
audited or unaudited financial statement or balance sheet and any condensed
balance sheet, which is delivered by or on behalf of the Guarantors or any of
its Subsidiaries to any Person other than a shareholder of the Guarantors,
shall contain, or shall be accompanied by, an accurate written disclosure of
the existence and amount of this guaranty.
11.05. Costs of Collection. In the case of any proceedings
to collect any liabilities of the Guarantors to the Lender, the Guarantors
shall pay all reasonable costs and expenses of every kind for collection,
including reasonable attorneys' fees, and after deducting such costs and
expenses from the proceeds of collection, the Lender shall apply any residue to
any of such liabilities of the Guarantors, who shall continue to be liable for
any deficiency, all such amounts payable on demand. As used herein "attorneys'
fees" shall include, without limitation, all fees of counsel (including,
without limitation, those incurred on appeals) arising from such services and
all reasonably incurred expenses, costs, charges and other fees of such
counsel, and all such fees shall constitute liabilities of the Guarantors to
the Lender.
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11.06. Claims. If claim is ever made upon the Lender for
repayment or recovery of any amount or amounts received by the Lender in
payment or on account of any Obligations and the Lender repays all or part of
said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over the Lender or any of its property,
or (b) any settlement or compromise of any such claim effected by the Lender
with any such claimant (including the Borrower), then and in such event the
Guarantors agree that any such judgment, decree, order, settlement or
compromise shall be binding upon the Guarantors, notwithstanding any revocation
hereof or the cancellation of any note or other instrument evidencing any
liability of the Borrower, and the Guarantors shall be and remain liable to the
Lender hereunder for the amount so repaid or recovered to the same extent as if
such amount had never originally been received by the Lender.
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IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed and delivered this Agreement as of the
date first above written.
BORROWER
DISCOVERY ZONE, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
GUARANTORS
BEAVERTON FUN FITNESS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DJM MANAGEMENT, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
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DZ OF CONNECTICUT, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DZ OF GEORGIA, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DZ OF MASSACHUSETTS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DZ OF MISSOURI, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
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DZ OF NEW YORK, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DZ OF PENNSYLVANIA, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DZ OF WISCONSIN, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
PORTLAND FUN FITNESS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
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VANCOUVER FUN FITNESS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DISCOVERY ZONE (PUERTO RICO), INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
LEAPS & BOUNDS, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
SEMBORG CORP.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
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DZGP, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DISCOVERY ZONE CHILDREN'S
AMUSEMENT CORPORATION
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DZ PARTY, INC.
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
DISCOVERY ZONE L.P.
as debtor and debtor-in-possession
By: DZGP, Inc., its general partner as
debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
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TUMBLE FOR FUN LIMITED PARTNERSHIP
as debtor and debtor-in-possession
By: Discovery Zone Children's Amusement
Corporation, its general partner
as debtor and debtor-in-possession
By:
------------------------------------
Name:
Title:
LENDER
MADELINE, LLC
By:
------------------------------------
Name:
Title:
Address for Notices:
Madeline, LLC
950 Third Avenue, 20th Floor
New York, New York 10022
Attention: Kevin Genda
Telephone: (212) 421-2600
Telecopy: (212) 421-2947
with a copy to:
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attention: Mark A. Neporent, Esq.
Telephone: (212) 758-0404
Telecopier: (212) 593-5955
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