Exhibit 99(a)
HELLER FINANCIAL, INC.
900 CIRCLE 75 PARKWAY N.W., SUITE 900
ATLANTA, GEORGIA 30339
770 984 2400
August 27, 1997
Mr. Peter McGeough
Executive Vice President
Seaman Furniture Company
300 Crossways Park Drive
Woodbury, New York 11797
Re: Secured Credit Facility for
Seaman Furniture Company, Inc.
Dear Sir:
Heller Business Credit, a division of Heller Financial, Inc. ("Heller") is
pleased to offer you a commitment for a senior credit facility in the
aggregate principal amount of $35,000,000 (the "Credit Facility"). The Credit
Facility will be provided to Borrower (defined below) and would be used to (i)
finance a portion of the acquisition of the common stock of Borrower (the
"Acquisition") by the Seaman Furniture Company Buyout Group (the "Purchaser");
(ii) provide for the Borrower's ongoing working capital needs; and (iii) pay
the fees, costs and expenses associated with the Acquisition.
The terms of this financing are outlined herein and are subject to
satisfactory documentation acceptable to Lender and its counsel,
Borrower: Seaman Furniture Company, Inc.
Revolver: A five year, $25,000,000 revolving loan facility
("Revolver") based upon an advance rate up to 70%
of the net amount of eligible inventory. The
advance rate would reduce by 1% at the end of
each of the first five quarters until reaching
65%, and would remain at 65% thereafter.
Eligible inventory would consist of inventory
satisfying Heller's eligibility and reserve
requirements which terms and conditions will be
set forth in the loan documents. The facility
would include a sub-limit for Letters of Credit
in an amount to be determined. The outstanding
face amount of all Letters of Credit would be
reserved against availability under the Revolver.
Term Loan: A five year term loan ("Term Loan") in an
aggregate principal amount up to $10,000,000.
The Term Loan will be payable in equal $125,000
monthly installments of principal during each
twelve month period following the closing date
("Loan Year") according to the amortization
schedule set forth below, with a final payment of
$2,500,000 due at the end of Loan Year Five:
LOAN
YEAR AMORTIZATION
---- ------------
One $1,500,000
Two $1,500,000
Three $1,500,000
Four $1,500,000
Five $4,000,000
Excess Cash Flow Sweep: In addition to scheduled amortization of the Term
Loan, mandatory prepayment of the Term Loan would
be required quarterly in amounts equal to 75% of
Borrower's "excess cash flow" (to be defined in
the Credit Facility documentation) beginning with
the fiscal quarter ended 1/31/98, with
adjustments to be made, if any, at the end of
each fiscal year. Prepayments would be applied to
the Term Loan in inverse order of maturity.
Interest: Borrower will pay interest under the Credit
Facility as follows:
Revolver: Base Rate floating or Libor plus 2.00%
Term Loan: Base Rate plus 0.75% floating or Libor plus 2.75%
Interest Calculation: Interest will be payable monthly in arrears on
Base Rate Loans, and at the end of the interest
period (but not less frequently than every three
months) on Libor loans, commencing the first day
of the period following the initial funding under
the Credit Facility, and would be calculated
daily on the basis of a 360-day year for the
actual number of days elapsed. Borrower could
elect interest periods of one, two, three or six
months on Libor loans. There may not be more than
five interest periods in existence at any time.
Security: All obligations under the Facility will be
secured by a first priority, senior, valid and
perfected security interest in and lien upon all
of Borrower's now owned and hereafter acquired
real (except as set forth in the next sentence)
and personal property, including but not limited
to, inventory, accounts, patents, trademarks,
contract rights, store leases (i.e., assignment
of the leases to the extent allowable by the
respective landlords with assignment to be
delivered at Closing (or within sixty (60) days
thereafter) and Leasehold Mortgages, to the
extent allowable by landlord, to be signed at
Closing and filed either at Closing (based upon
mutual agreement of Borrower and Lender) or at
Lender's option, thereafter subject to certain
agreed upon hurdles) and general intangibles (the
"Collateral"). Landlord and mortgagee waivers
will be required at Closing (or within ninety
(90) days thereafter) subject further to Lender's
right to establish rent reserves for locations
without such waivers. The Loan Documentation will
contain a negative pledge on the capital stock of
the Borrower. Lender will obtain a second
mortgage on the Central Islip, NY warehouse,
subject to the approval of the first mortgage
holder. Except for a prior existing mortgage in
the approximate outstanding principal amount of
$5.8 million against this warehouse, and UCC-1s
filed in respect of accounts receivables of the
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Borrower sold to Household Finance pursuant to
Borrower's accounts receivable program with
Household Finance, liens on any of the Borrower's
assets in favor of persons other than Lender
would be prohibited, subject to certain permitted
encumbrances to be set forth in the loan
documents.
Collections: Borrower would cause all sales proceeds and all
customer payments to be directed to a lock
box/depository account at a bank acceptable to
Lender. For the purpose of calculating interest,
all proceeds received by Heller would be credited
to Borrower's loan account on the first business
day after Heller's receipt of immediately
available federal funds in Heller's account at
The First National Bank of Chicago. Heller will
release its lien on accounts to permit Borrower's
accounts receivable program with Household
Finance, subject to a satisfactory intercreditor
agreement by and between Heller and Household.
Fees: Borrower would be required to pay the following
fees:
Closing Fee: 0.50% of the total Credit Facility due on
closing.
Commitment Fee: A non-refundable Commitment Fee of $75,000 is due
upon issuance of this letter. The Commitment Fee
would be applied to the Closing Fee, at closing.
Unused Facility Fee: 0.375% per annum on the average daily balance of
the unused portion of the Revolver, payable
monthly in arrears.
Letter of Credit Fee: 2.0% per annum on the average undrawn face amount
of all Letters of Credit outstanding, payable
monthly in arrears. In addition, Borrower would
pay all fees, costs and expenses due to banks for
any bank letters of credit issued for Borrower's
account.
Audit Fee: $750 per audit day per Heller auditor, plus out-
of-pocket expenses, or the out of pocket fees,
costs and expenses paid to third party auditors.
Prepayment Fee: The Credit Facility may be prepaid in full, or
the Term Loan in part, at any time, subject to
payment of a termination fee on the total
committed Credit Facility or, in the case of a
partial prepayment of the Term Loan (other than a
"mandatory prepayment") on the amount prepaid,
equal to 2.0% in the first year, 1.5% in the
second year and 1.0% in the third year.
Conditions Precedent: On or before the closing date the following
conditions precedent would have been satisfied in
a manner reasonably satisfactory to Heller:
Real-Estate Appraisal: Heller would have received a real estate
appraisal on the Central Islip, NY warehouse and
on the sixteen acres of land owned by Borrower.
Such appraisal would be prepared by an appraiser
retained by Heller in conformance with FIRREA
appraisal requirements.
Equipment Appraisal:
Heller will have received an appraisal of
furniture and fixtures, office equipment and
leasehold improvements prepared by an appraiser
retained by Heller.
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Lease Appraisal:
Heller will have received an appraisal of the
store leases conducted by an appraiser retained
by Heller.
Business Plan: Heller will have received a Business Plan
including financial projections acceptable in
form and content. Heller shall have the
opportunity to discuss the Business Plan with
Borrower's operating management, and be satisfied
as to the likelihood of its successful
implementation.
Environmental Matters: Heller shall be satisfied that there are no
existing or potential environmental liabilities
which would have a material adverse impact on the
financial condition or business operations of
Borrower.
Insurance: Receipt of insurance policies or binders for
insurance in types and amounts, under terms and
conditions satisfactory to Heller with
appropriate endorsements naming Heller as loss
payee.
Equity: A cash equity investment of $24,000,000 to
$28,000,000 by the Seaman Furniture Company
Buyout Group in exchange for Borrower's common
and/or preferred stock on terms and conditions
reasonably satisfactory to Heller.
Credit Facility Documentation:
The Credit Facility will be subject to formal
loan documentation, fully acceptable to Heller,
and its counsel. The documentation would contain
such terms, conditions, representations,
warranties, covenants and events of default
customary for loans of this type as Heller will
require. Satisfactory Intercreditor Agreements
with the warehouse mortgage lender and Household
Finance would also be required.
Financial Covenants: Financial covenants will include tangible net
worth, minimum EBITDA, maximum Indebtedness to
EBITDA, fixed charge coverage, total interest
coverage, capital expenditure limitations, as
well as limitations upon dividends and
transactions with affiliates. Financial and other
reporting requirements shall be as set forth in
the documentation.
Warranties: Warranties will include, but not be limited to,
evidence satisfactory to Heller that (i) the
financial condition, projections and prospects of
Borrower are as represented, (ii) Borrower has
complied with all applicable laws, and (iii) no
material adverse condition affecting, or change
in the business, assets, financial condition,
prospects or projected cash flows of Borrower
exists or has occurred.
Other Indebtedness:
The Credit Facility and the warehouse mortgage
referenced above will be the only funded debt
allowed to be incurred by Borrower except for
specific amounts of other indebtedness which
would be specified and permitted in the
documentation.
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Solvency:
Borrower would be required to satisfy Heller on
the closing date with a letter from Borrower's
CFO that after giving effect to the transactions
contemplated by the Credit Facility it is
solvent, able to meet its obligations as they
mature and have sufficient capital to enable it
to operate its business. Borrower would have not
less than $2,500,000 in excess availability under
the Revolver on the closing date, after giving
effect to the payment of all fees, costs and
expenses associated with the transaction.
Capital, Organization,
Legal Structure, Tax: Borrower's tax assumptions, capital,
organization, ownership and legal structure, must
be reasonably satisfactory to Heller and not
impair the ability of Heller to enforce its
claims against the Collateral; all Collateral
must be freely pledgeable as collateral security
for the Credit Facility.
Acquisition Documents: Borrower will further be required to make
available, in preliminary and final form, as and
when created, all documentation pertaining to the
Acquisition, which documentation would be subject
to Heller's review and reasonable approval.
Expenses: Borrower has agreed to pay on demand all
reasonable costs, fees and expenses incurred or
to be incurred by Heller in connection with the
examination, review, documentation,
administration, syndication and/or closing of the
Credit Facility, including but not limited to,
per diem charges of Heller's internal auditors,
counsel fees (including the allocated cost of
internal counsel), consultants, appraisers and
auditor fees and expenses; and all other out-of-
pocket expenses relating to any of the foregoing,
whether or not the financing transaction
contemplated by this letter shall be approved or
closed.
Break-Up Fee: Borrower further has agreed that if Borrower
finances the acquisition with funds provided by a
source other than Heller including for such
purposes, (i) a new financing by Borrower's
existing lender or an extension of an existing
financing (ii) a public offering or private
placement of debt or equity or (iii) hereafter, a
tender offer, merger, or sale of substantially
all of Borrower's assets, whether or not Borrower
is the acquirer or is acquired, then Heller shall
be deemed to have earned, and Borrower agrees to
pay a fee in the amount of $150,000 in the event
of items (i) and (ii) and $100,000 in the event
item (iii) occurs (the "Break-up Fee"). The
Break-up Fee shall be due and payable on demand.
Participation/Assignment: Heller would have the right at any time to sell,
assign or transfer any portion of the Credit
Facility to one or more other lenders. In
connection therewith, Heller would have the right
to disclose to such prospective lender(s) on a
confidential basis any and all information
regarding or relating to Borrower or this
transaction. Borrower would agree to make its
senior management and facilities available to
prospective assignees/participants both prior to
and after closing as reasonably required by
Heller.
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Indemnification and
limitation of Liability: By signing this letter, Borrower further agrees
to indemnify Heller its directors, officers,
employees agents, auditors, accountants, and
consultants, counsel and affiliates from, and
hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses
including amounts paid in settlement, incurred by
any of them arising out of or by reason of any
investigation, litigation or other proceeding
brought or threatened relating to any loan made
or proposed to be made to Borrower in connection
herewith.
Borrower agrees that in any action arising from
an alleged breach of this letter the only damages
that may be sought are those which are direct and
reasonably foreseeable as the probable result of
any breach hereof and any right to indirect,
special or punitive damages or lost anticipated
profits is hereby waived.
This commitment will remain outstanding through and including November 30,
1997, if signed, accepted and returned by September 10, 1997.
We appreciate the opportunity to work with you.
Very truly yours,
Heller Financial, Inc.
By: /s/ Eric C. Fischer
___________________________________
Eric C. Fischer
Senior Vice President
AGREED:
Seaman Furniture Company, Inc.
By: /s/ Peter McGeough, V.P.
_____________________________________
Title: Vice-President
Date: 8/28/97
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