Exhibit 10.5
February 28, 1994
LADD Furniture, Inc.
One Plaza Center - Box HP3
High Point, NC 27261-1500
Attention: William S. Creekmuir, Senior Vice
President and Chief Financial Officer
RE: $15 Million Committed Line of Credit
Ladies/Gentlemen:
LADD Furniture, Inc., a North Carolina corporation (the
"Borrower"), has requested that PNC Bank, National Association
(the "Bank") make available to it a $15,000,000 unsecured,
committed line of credit (the "Line of Credit"). The Bank is
willing to establish the Line of Credit upon the following terms
and conditions:
1. The Line of Credit shall be available for a period of one
year from the date hereof to February 28, 1995 (the "Termination
Date"). During the period of the Line of Credit, the Borrower
shall have the right to borrow, repay and reborrow amounts
hereunder; provided that principal amounts outstanding and all
accrued unpaid interest under the Line of Credit shall be repaid
in full on or before the Termination Date.
2. The maximum aggregate principal amount outstanding under the
Line of Credit shall at no time exceed $15,000,000. The
Borrower's obligation to repay shall be evidenced by a Line of
Credit Note substantially in the form of Exhibit "A" hereto (the
"Line of Credit Note"). Repayment of the Line of Credit Note
shall be guaranteed by the companies listed on Schedule 1 hereto
and by any other company which may become a "Material Subsidiary"
as defined in the Credit Agreement dated as of January 15, 1993
among the Borrower, The Chase Manhattan Bank (National
Association) as Agent, the Banks parties thereto (the "Existing
Banks") and the Guarantors (the "Existing Credit Agreement"),
pursuant to a Guaranty and Suretyship Agreement substantially in
the form of Exhibit "B" hereto (the "Guaranty Agreement"). This
Letter Agreement, the Line of Credit Note and the Guaranty
Agreement are collectively referred to as the "Loan Documents".
3. Upon the Borrower's application and subject to the Borrower's
compliance with all of the provisions of this letter agreement
(the "Agreement"), the Bank will make an advance to the Borrower
under the Line of Credit in such an amount or amounts as the
Borrower may request (the "Line of Credit Loans").
4. The proceeds of the Line of Credit Loans shall be used by the
Borrower as direct extensions of credit from the Bank to fund
working capital needs of the Borrower and other general corporate
purposes.
5. All amounts outstanding under the Line of Credit shall bear
interest at a rate per annum selected by the Borrower from the
interest rate options set forth below; it being understood that
the Borrower may select different options to apply simultaneously
to different portions of the Line of Credit Loans and may select
up to four (4) different interest periods to apply simultaneously
to different portions of the Line of Credit Loans bearing
interest at the As Offered Rate or Euro-Rate as set forth below.
(i) As Offered Rate. A rate per annum (computed on the
basis of a year of 360 days and the actual number of
days elapsed), determined in the Bank's sole
discretion, as offered from time to time by the Bank to
the Borrower as the rate at which the Bank would
advance funds to the Borrower in the principal amount
requested for the interest period requested (the "As
Offered Rate").
(ii) Prime Rate. A rate per annum (computed on the
basis of a year of 365 or 366 days, as the case may be,
and the actual number of days elapsed) equal to the
rate of interest announced from time to time by the
Bank at its principal office as its prime rate, which
rate may not be the lowest interest rate then being
charged commercial borrowers by the Bank (the "Prime
Rate").
(iii) Euro-Rate. A rate of interest per annum (computed
on the basis of a year of 360 days and the actual
number of days elapsed) equal to the sum of (A) the
rate at which deposits in U.S. dollars are offered to
the Bank in the London Interbank Market plus (B) the
Applicable Margin for Eurodollar Loans defined and
determined as set forth in Section 1.01 of the Existing
Credit Agreement, for the Interest Period (as
hereinafter defined) in an amount equal to the advance
and having a comparable maturity as determined at or
about 11 a.m. (London time) two Business Days prior to
the commencement of the Interest Period (the "Euro-
Rate"). For the purpose hereof, the following terms
shall have the following meanings: (x) "Business Day"
shall mean a day on which banks are open for business
in Pittsburgh, Pennsylvania and on which transactions
are conducted in the London Interbank Market; and (y)
"Interest Period" shall mean the period of one, two or
three months selected by the Borrower commencing on the
date of disbursement of an advance and each successive
period selected by the Borrower thereafter; provided,
that if an Interest Period would end on a day which is
not a Business Day, it shall end on the next succeeding
Business Day, unless such day falls in the succeeding
calendar month in which case the
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Interest Period shall
end on the next preceding Business Day. In no event
shall any Interest Period end on a day after the
Expiration Date.
The Borrower shall pay accrued interest on the unpaid principal
balance of the Note in arrears: (i) for the portion of Line of
Credit Loans bearing interest at the Prime Rate on the last
Business Day of each December, March, June and September of each
year during the term hereof, (ii) for the portion of Line of
Credit Loans bearing interest at the Euro-Rate or As Offered
Rate, on the last day of each Interest Period, and (iii) for all
Line of Credit Loans, at maturity, whether by acceleration or
otherwise of the Note, and after maturity, on demand until paid
in full.
6. The Borrower shall notify the Bank of each election of an
interest rate option, each conversion from one interest rate
option to another, the amount of the Loans then outstanding to be
allocated to each interest option and where relevant the Interest
Periods. Any such communication may be oral or written and if
oral, it shall be followed immediately by written confirmation of
such interest rate option election executed by an authorized
officer of the Borrower.
7. After the principal amount of all or any part of the Line of
Credit Loans shall have become due and payable, whether by
acceleration or otherwise, all the Loans shall bear interest at a
rate per annum which shall be 200 basis points (2%) per annum
above the rate otherwise in effect under the Prime Rate option,
Euro-Rate option or As-Offered Rate option, as applicable.
8. Notwithstanding anything to the contrary herein:
(a) On written demand, together with the written evidence
of the justification therefor, the Borrower agrees to pay the
Bank all direct costs incurred and any losses suffered or
payments made by the Bank as a consequence of making the Line of
Credit Loans by reason of any change in law or regulation or its
interpretation imposing any reserve, deposit, allocation of
capital or similar requirement (including without limitation,
Regulation D of the Board of Governors of the Federal Reserve
System) on the Bank, its holding company or any of their
respective assets.
(b) The Borrower agrees to indemnify the Bank against any
loss or expense which the Bank, as a consequence of either (i)
the Borrower's failure to make a payment on the due date thereof
or (ii) the Borrower's payment, prepayment or conversion of any
As Offered Rate portion or any Euro-Rate portion of the Loans on
a day other than the last day of the applicable Interest Period,
may sustain or incur in liquidating or employing deposits from
third parties acquired to effect, fund or maintain such As
Offered Rate portion or Euro-Rate portion or any part thereof.
The Bank's determination of an amount payable under this
subparagraph (b) shall, in the absence of manifest error, be
conclusive and shall be payable on demand.
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9. Beginning on March 31, 1994 and continuing on the last day of
each calendar quarter thereafter until the Termination Date, the
Borrower shall pay a facility fee to the Bank, in arrears, at the
rate of twenty-five (25) basis points per annum on the average
daily unused portion of the Line of Credit during the calendar
quarter then ending. The facility fee shall be computed on the
basis of a year of 365 or 366 days, as the case may be, and paid
on the actual number of days elapsed.
10. Each request for an advance under the Line of Credit shall
constitute, as of the time made, a certification by the Borrower
that the Borrower shall have performed and complied with all
agreements and conditions herein required under this Letter
Agreement, and at the time of the advance, no condition or event
shall exist which constitutes an Event of Default.
11. As conditions to the establishment of the Line of Credit,
the Borrower shall provide to the Bank the following:
(a) this Agreement and the Line of Credit Note, duly executed
by the Borrower;
(b) The Guaranty Agreement, executed by the Guarantors; and
(c) evidence of the due authorization by the Borrower of this
Agreement and the Line of Credit Note and by the Guarantors of
the Guaranty Agreement, an opinion of counsel to the Borrower and
the Guarantors and such other instruments as the Bank shall
reasonably require in form and substance satisfactory to the
Bank.
12. The Bank shall open and maintain on its books a loan account
in the name of the Borrower with respect to advances, payments
and the computation and payment of interest, fees and other
amounts due hereunder. Such loan account shall be conclusive and
binding on the Borrower as to the amount at any time due to the
Bank from the Borrower except in the case of error in
computation.
13. Covenants. Unless waived in writing by the Bank or until
payment in full and termination of the Line of Credit:
(a) The Borrower will promptly submit to Bank such
information relating to the Borrower or any Guarantor as the Bank
may reasonably request.
(b) The Borrower will comply with the financial covenants
set forth in Sections 8.10, 8.11, 8.12, 8.13 and 8.16 of the
Existing Credit Agreement. In the event that the Existing Banks
approve any amendment to or waiver of any of these covenants that
the Bank does not approve, then the Bank at its option may
terminate this Line of Credit 90 days after notice to the
Borrower and any and all advances will be due and payable on such
early termination date.
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(c) The Borrower will provide to Bank with copies of all
financial reports and notices provided to the Banks under
Sections 8.01 or 8.02 of the Existing Credit Agreement at the
same time sent to the Banks.
14. Representations, Warranties and Other Agreements. The
Borrower represents and warrants to the Bank as follows:
(a) It has the power to make and carry out the terms of
this Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance of this
Agreement.
(b) This Agreement constitutes the legally binding
obligation of the Borrower enforceable in accordance with its
terms.
(c) The making and performance of this Agreement does not
and will not violate in any respect any provisions of (i) any
federal, state or local law or regulation or any order or decree
of any federal, state or local governmental authority, agency or
court, or (ii) the organizational documents of the Borrower or of
any of its subsidiaries, or (iii) any mortgage, contract or other
undertaking to which the Borrower is a party or which is binding
upon the Borrower or any of its subsidiaries or any of their
respective assets, and does not and will not result in the
creation or imposition of any security interest, lien, charge or
other encumbrance on any of their respective assets pursuant to
the provisions of any such mortgage, contract or other
undertaking.
(d) No Default or Event of Default as defined in the
Existing Credit Agreement has occurred and is continuing. The
Borrower further represents and warrants that none of the
exceptions described in Schedule II to the Existing Credit
Agreement has any material adverse effect on the consolidated
financial condition, operations, business or prospects of the
Borrower and its consolidated subsidiaries taken as a whole.
15. Events of Default and Remedies. The occurrence of any of the
following described events will constitute an "Event of Default"
hereunder:
(a) Any failure of the Borrower to make any payment
of principal, interest or other amounts when due under
this Line of Credit or under any other obligations of
the Borrower to the Bank;
(b) Any failure of the Borrower or any Guarantor to
comply fully with all of the terms, covenants and
conditions of the Loan Documents, or any breach of any
representation or warranty under the Loan Documents; or
(c) Any Event of Default under the Existing Credit
Agreement.
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Upon the occurrence of an Event of Default: (i) the Bank
shall be under no further obligation to make advances hereunder;
(ii) if an Event of Default specified in clause (f) or (g) of
Section 9 of the Existing Credit Agreement shall occur, the
outstanding principal balance or the Line of Credit Loans and
accrued interest together with any additional amounts payable
hereunder shall be immediately due and payable without demand or
notice of any kind; (c) if any other Event of Default shall
occur, the outstanding principal balance and accrued interest
together with any additional amounts payable hereunder, at the
option of the Bank and without demand or notice of any kind, may
be accelerated and become immediately due and payable; (d) at the
option of the Bank, the Note will bear interest at the applicable
default rate specified herein from the date of the occurrence of
the Event of Default; and (e) the Bank may exercise from time to
time any of the rights and remedies available to the Bank under
the Loan Documents or under applicable law.
16. The Borrower agrees to pay or cause to be paid and to save
the Bank harmless against liability for the payment of all
reasonable out-of-pocket expenses (including but not limited to
reasonable attorney's fees and expenses of the Bank's counsel)
incurred by the Bank in connection with the enforcement of the
Loan Documents.
17. All notices required to be sent to the parties hereto shall
be sent to the following addresses, by hand delivery, overnight
courier, facsimile transmission (with confirmation of receipt) or
other means of electronic data communication or by the United
States mail, first class postage prepaid:
(a) Bank
PNC Bank, National Association
One PNC Plaza
Pittsburgh, PA 15265
Attn: Southeast Group
Facsimile: (412) 762-6484
Telephone: (412) 762-8746
(b) Borrower
LADD Furniture, Inc.
One Plaza Center - Box HP3
High Point, NC 27261-1500
Attn: William S. Creekmuir
Facsimile: (910) 888-6050
Telephone: (910) 889-0333
18. The Borrower agrees that any action or proceeding arising
out of or relating to this Agreement and the Line of Credit Note
may be commenced in the United States District Court for the
Western District of Pennsylvania or in the Court of Common Pleas
of Allegheny County, Pennsylvania and the Borrower agrees that a
summons and complaint commencing an action or proceeding in
either of such courts shall be properly served and shall confer
personal jurisdiction if served personally or by certified mail
to the Borrower
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at the Borrower's address as provided herein or
as otherwise provided under the laws of the Commonwealth of
Pennsylvania. The Borrower hereby waives any claim that either
Pittsburgh, Pennsylvania or the Western District of Pennsylvania
is an inconvenient forum or that either of the aforementioned
courts lacks proper venue for any action arising out of any
transaction involving this Letter Agreement and the Line of
Credit Note. The Borrower also waives any and all rights it may
have to a trial by jury in any action, proceeding or claim it may
have relating to Loan Documents.
19. This Agreement and the Line of Credit Note shall be governed
by the laws of the Commonwealth of Pennsylvania, except conflict
of law rules. This Letter Agreement may be executed in
counterparts, each of which when executed by the Borrower and the
Bank shall be regarded as an original.
If the foregoing accurately reflects the understanding of the
parties, please execute the duplicate original of this Letter
Agreement and return it to me.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By________________________
James A. Fink, Vice President
Southeast Group
Accepted this 28th day of
February, 1994
LADD FURNITURE, INC.
By________________________________
Title_____________________________
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