EXECUTION VERSION
As of November 23, 2008
Ladies and Gentlemen:
This letter agreement ("AGREEMENT") confirms certain understandings
and agreements of the undersigned lenders (collectively, the "TERM LOAN
LENDERS") with respect to (i) the Amended and Restated Term Loan Credit
Agreement, dated April 20, 2007, by and between Lenox, Incorporated, D 56, Inc.,
and Lenox Retail, Inc., as borrowers, and Lenox Group Inc. and other guarantors
party thereto as guarantors (Lenox, Incorporated, Lenox Retail, Inc. and Lenox
Group Inc., collectively, "LENOX"); Bank of New York/Mellon (the "TERM LOAN
AGENT") as administrative agent and the Term Loan Lenders party thereto (as
amended, restated, supplemented or otherwise modified from time to time, the
"TERM LOAN CREDIT AGREEMENT") and (ii) the undersigned's potential bid to
purchase certain assets of Lenox and its subsidiaries pursuant to a chapter 11
plan of reorganization or, alternatively, through a sale under section 363 of
the Bankruptcy Code.
Capitalized terms used but not defined herein shall have the
meanings set forth in the Term Loan Credit Agreement. For purposes of this
Agreement, the term "REQUIRED LENDERS" shall mean Term Loan Lenders holding more
than fifty percent (50%) of the outstanding principal amount of the Term Loans
as of any date of determination and the term "SUPERMAJORITY LENDERS" shall mean
Term Loan Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of
the outstanding principal amount of the Term Loans as of any date of
determination.
1. STRUCTURE; CERTAIN OTHER MATTERS. (a) Each of the Term Loan
Lenders have discussed with each other the possibility of submitting a bid (the
"BID") to purchase some or all of the assets of Lenox and its affiliates,
including (without limitation) the assets that are used or useful in connection
with the manufacturing, sale and distribution of the Lenox, Dansk, ▇▇▇▇▇▇ and
other similar brands, including (without limitation) all inventory, accounts,
intellectual property and other real and personal property (the "PURCHASED
ASSETS"), and have concluded that submission of a Bid consistent with the terms
hereof (including all annexes hereto) is in the best interests of the Term Loan
Lenders.
(b) With respect to the Bid, the Term Loan Lenders agree that:
(i) the terms and conditions of the Bid shall be consistent in
all material respects with the terms of the Plan Term Sheet,
dated as of
November 23, 2008 attached hereto as Exhibit A (as amended,
modified or otherwise supplemented with the written consent
of Required Lenders, the "PLAN TERM SHEET"); provided, that
any amendment, modification or supplement to the Plan Term
Sheet, which, if made to a plan of reorganization, would
require resolicitation under section 1127 of the United States
Bankruptcy Code, shall require the written consent of
Supermajority Lenders;
(ii) the Purchased Assets shall be acquired by one or more
newly formed entities (collectively, "NEW LENOX") pursuant to a
structure to be determined following the completion of due
diligence and analysis of potential tax and other relevant
issues. Each of the Term Loan Lenders (either directly or
through one or more affiliates) agrees to contribute to the
capital of New Lenox all or, as may be determined by Required
Lenders, a designated Pro Rata Share of their respective
Obligations (as defined in the Term Loan Credit Agreement) in
exchange for a Pro Rata Share of the equity interests in New
Lenox. For purposes of this Agreement, a Term Loan Lender's
"PRO RATA SHARE" shall mean a fraction, the numerator of which
shall be the amount of Obligations contributed to the capital
of New Lenox by such Term Loan Lender and the denominator of
which shall be the aggregate amount of Obligations contributed
to the capital of New Lenox by the Term Loan Lenders;
(iii) prior to the execution of a definitive Asset Purchase
Agreement and approval by the bankruptcy court pursuant to a
confirmed plan of reorganization (or pursuant to an order under
section 363 of the Bankruptcy Code), upon execution and
delivery of this Agreement, Required Lenders may deliver to the
Term Loan Agent a written direction to submit on behalf of New
Lenox and all of the Term Loan Lenders, in accordance with any
procedures established by the bankruptcy court, one or more
credit bids for the Purchased Assets in an aggregate amount not
to exceed the aggregate amount of the Obligations;
(iv) any Asset Purchase Agreement to be executed and delivered
by New Lenox shall be consistent with the terms set forth in
the Plan Term Sheet and shall be in form and substance
acceptable to Required Lenders. Any material amendment to the
Asset Purchase Agreement shall require the consent of Required
Lenders; and
(v) New Lenox shall be governed in a manner consistent with the
terms set forth in Exhibit B hereto or such alternative
governance terms reasonably satisfactory to the Supermajority
Lenders. The shareholders agreement or any other constituent
documents of New Lenox shall be consistent in all material
respects with the terms set forth in Exhibit B hereto.
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(c) Except with the written consent of the other parties hereto,
each party hereby covenants and agrees that it shall not (i) represent or hold
itself out as the agent of any other party, (ii) enter into any contract, engage
in any act or transaction or incur any obligation, liability, debt, cost or
expense on behalf, for the account or in the name of any other party or (iii)
purport to bind any other party.
2. TRANSFER. Until such time as the Plan Support Agreement dated as
of November 23, 2008 between Lenox, its affiliates and the Term Loan Lenders is
terminated or the Closing (as defined in the Asset Purchase Agreement) has
occurred, each Term Loan Lender may transfer or dispose of any claim arising
under the Term Loan Credit Agreement as follows:
(a) Subject to the terms of this Agreement, to such party's
affiliates, other Term Loan Lenders that are parties hereto, New Lenox, or, in
accordance with the provisions of the Term Loan Credit Agreement, an assignee
that agrees in writing to be bound by the terms of this Agreement by the
execution of a joinder in form and substance reasonably acceptable to the Term
Loan Agent, or
(b) Free and clear of the terms of this Agreement if (i) such Term
Lender has offered such claims to the other Term Lenders at a set asking price,
(ii) such other Term Lenders have not agreed in writing to purchase all of the
offered claims (subject to ratable cutback) at such set price (x) by the earlier
of the tenth business day thereafter or January 20, 2009, if such offer is made
prior to January 15, 2009 or (y) by the third business day thereafter, if such
offer is made on or after January 15, 2009, and (iii) such Term Lender enters
into a binding agreement to sell the claims to a buyer not a party to this
Agreement in the immediately succeeding ten (10) business day period on terms
and conditions, including price, no more favorable to the buyer than the terms
it offered to the other Term Lenders.
3. EXPENSES; CERTAIN FEES. Each of the Term Loan Lenders shall bear
a Pro Rata Share of all costs and expenses incurred in connection with the
transactions referred to in this Agreement (including, without limitation, the
costs and expenses of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP and ▇▇▇▇▇▇ Buckfire & Company,
and any costs and expenses incurred by New Lenox) that are not reimbursed by a
third party in accordance with the Term Loan Credit Agreement, and each Term
Loan Lender shall make such payments to the Term Loan Agent as may be necessary
to ensure that such costs and expenses are so borne.
4. FINANCING OF NEW LENOX. Each of the Term Loan Lenders consents
to New Lenox (acting under the direction of its duly constituted Board of
Directors) entering into one or more financing arrangements for the purposes of
(i) paying any closing costs associated with the acquisition of the Purchased
Assets, including, but not limited to, cure costs; (ii) refinancing any existing
revolving loans secured by the Purchased Assets; and (iii) providing working
capital from and after the closing date of the acquisition of the Purchased
Assets. To the extent any such financing arrangement is provided by any Term
Loan Lender, each Term Loan Lender shall be provided with the opportunity to
participate in such financing arrangement to the extent of its Pro Rata Share.
For the avoidance of doubt, other than as expressly provided in paragraph 2
hereof, no Term Loan Lender shall be required to provide any new capital or
financial accommodation to New Lenox without such Term Loan Lender's express
prior written
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consent, which consent may be withheld in such Term Loan Lender's sole and
complete discretion for any reason.
5. CONFIDENTIALITY. This Agreement, the terms included herein and
the actual or prospective terms of any proposal for a transaction referred to
herein are strictly confidential and may not be used for any purpose, or
disclosed to any third party (other than a party's affiliates, agents, attorneys
and accountants and, so long as they agree to be bound by the terms of this
Paragraph 4, proposed assignees), without the express written consent of the
other parties or as required under applicable law or as requested by any
regulatory authority. Each party agrees not to use any information provided by
or on behalf of any other in the context of the transactions contemplated hereby
except to evaluate such transactions. Each party shall maintain the
confidentiality of all confidential information provided by any other party with
the same degree of care as is used for its own confidential information.
Notwithstanding anything herein to the contrary, (a) counsel for the Term Loan
Lenders may provide copies of this Agreement to Lenox and any third party in
connection with the Bid and any effort of Lenox to obtain debtor-in-possession
financing, and (b) a party may (i) disclose the terms of this Agreement to third
party marking or rating agencies so long as such third party agrees to maintain
the confidentiality of this Agreement, (ii) consult any tax advisor regarding
the U.S. federal income tax treatment or tax structure of transactions
contemplated hereby, and (iii) disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of such transactions
and all materials of any kind (including opinions or other tax analyses) that
are provided to such party relating to such tax treatment and tax structure.
However, any information relating to the tax treatment or tax structure shall
remain subject to the confidentiality provisions hereof (and the foregoing
sentence shall not apply) to the extent reasonably necessary to enable the
parties, their respective affiliates, and their respective affiliates' directors
and employees to comply with applicable securities laws. For this purpose, "tax
structure" means any facts relevant to the federal income tax treatment of the
proposed transaction but does not include the identity of the parties or their
respective affiliates.
6. REPRESENTATIONS AND WARRANTIES OF EACH PARTY. Each party hereby
represents and warrants (severally and not jointly) to the others as follows:
(a) Such party has the power and authority to enter into and
perform all of such party's obligations under this Agreement. This Agreement has
been duly and validly executed and delivered by such party and constitutes a
legal, valid and binding agreement of such party, enforceable against such party
in accordance with its terms.
(b) Such party understands that there are substantial risks to the
transactions contemplated by this Agreement and it has the capacity to protect
its own interests in participating in such transactions.
(c) Such party specifically understands and agrees that the other
party has not made and will not make any representation or warranty with respect
to the worthiness, terms, value or any other aspect of the transactions
contemplated hereby and explicitly disclaims any warranty, express or implied,
with respect to such matters. In addition, such party specifically
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acknowledges, represents and warrants that it is not relying on any other party
(i) for its due diligence concerning, or evaluation of, Lenox and its affiliates
or their assets or businesses, (ii) for its decision with respect to
participating in any such transaction or (iii) with respect to tax and other
economic consideration involved in any such transaction. Such party acknowledges
that (i) the other party may come into possession of information, with respect
to Lenox and its affiliates or the Purchased Assets, that is not known to such
party and that may be material to a decision to submitting a Bid ("EXCLUDED
INFORMATION"), (ii) it has determined to enter into this Agreement
notwithstanding its lack of knowledge of the Excluded Information, if any, and
(iii) the other party shall have no liability to such party, and that such party
waives and releases any claims that it might have against the other party
pursuant to entering into transactions contemplated by this Agreement, with
respect to any nondisclosure of Excluded Information, if any, now or in the
future.
(d) Except as disclosed on Schedule 5(d) annexed hereto, no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of such party.
7. INDEMNIFICATION. Each of the parties to this Agreement agrees
that the indemnification provided to the Term Loan Agent under the Term Loan
Credit Agreement shall apply equally under this Agreement.
8. MISCELLANEOUS. (a) This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties hereto with
respect to the subject matter hereof. This Agreement shall not be assigned by a
party by operation of law or otherwise without the prior written consent of each
other party. This Agreement may not be amended, changed, supplemented or
otherwise modified except by an instrument in writing signed on behalf of each
party.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
(c) This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
(d) The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that each party shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
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(e) This Agreement may be executed in counterparts, which together
shall constitute one instrument. Facsimiles of duly executed signature pages are
acceptable and shall deemed to be originals.
9. SPECIAL PROVISION REGARDING CHASE LINCOLN FIRST COMMERCIAL
CORPORATION. Notwithstanding anything to the contrary in this Agreement and the
Plan Term Sheet, this Agreement applies only to the Credit Trading Group of
Chase Lincoln First Commercial Corporation, in its capacity as a Term Lender
(the "CHASE LINCOLN CREDIT TRADING GROUP"), and, the term "Term Lender" means
only the Chase Lincoln Credit Trading Group and such business unit's position in
the Term Loans and does not apply to (i) any securities, loans, other
obligations or any other interests in the Term Loans that may be held, acquired
or sold by, or any activities, services or businesses conducted or provided by,
any other group or business unit within, or Affiliate of, Chase Lincoln First
Commercial Corporation; or (ii) any Term Loans that may be beneficially owned by
non-Affiliated clients of Chase Lincoln First Commercial Corporation or any
Affiliate of Chase Lincoln First Commercial Corporation.
[THE REST OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK]
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Please acknowledge your agreement to the foregoing by executing
this Agreement in the space set forth below, whereupon this Agreement will
become a binding contract among the parties hereto.
Very truly yours,
BANK OF NEW YORK/MELLON,
as Administrative Agent
By:_____________________________
Name:
Title:
7
CEDARVIEW LEVERAGED OPPORTUNITES
MA, LTD
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Partner
CEDARVIEW LEVERAGED OPPORTUNITIES
MA II, LTD
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Partner
CEDARVIEW OPPORTUNITIES MASTER
FUND, LP
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Partner
AII INVESTMENT HOLDINGS, LTD
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Partner
Notice Address:
Cedarview Capital Management, LP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
S-1
CETUS CAPITAL, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
Notice Address:
Cetus Capital, LLC
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
S-2
CHASE LINCOLN FIRST COMMERCIAL
CORPORATION, but only as to its
Credit Trading Group and that
group's Term Loan position
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Authorized Signatory
S-3
CLINTON-MAGNOLIA MASTER FUND, LTD.
By CLINTON GROUP, INC., as investment adviser,
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
CLINTON MULTISTRATEGY MASTERFUND, LTD.
By CLINTON GROUP, INC., as investment adviser
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
Notice Address:
Clinton Group, Inc.
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
S-4
LBC CREDIT PARTNERS, L.P.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
LBC CREDIT PARTNERS PARALLEL, L.P.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Notice Address:
LBC Credit Partners, Inc.
▇▇▇▇ Centre
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
S-5
RAMIUS CREDIT OPPORTUNITIES MASTER FUND
LTD (F/K/A RCG CARPATHIA MASTER FUND,
LTD.)
By: /s/ ▇▇▇▇ ▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: Authorized Signatory
Notice Address:
Ramius LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
S-6
TOPAZ FUND
By:_____________________________
Name:
Title:
S-7
TRUMPET INVESTORS LP
By: /s/ ▇▇▇▇ ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Manager
Notice Address:
Trumpet Investors L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
S-8
UBS STAMFORD LENDER
By:_____________________________
Name:
Title:
Notice Address:
UBS Investment Bank
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
S-9
SCHEDULE 5(D)
BROKERS' FEES
1. ▇▇▇▇▇▇ Buckfire & Co., LLC
2. Berenson & Company
EXHIBIT A
PLAN TERM SHEET
================================================================================
LENOX GROUP, INC.
PLAN TERM SHEET
AS OF NOVEMBER 23, 2008
================================================================================
The following is a summary (the "PLAN TERM SHEET") of certain material terms of
a proposed Chapter 11 liquidating plan (the "PLAN") of the Company (as defined
below). This Plan Term Sheet does not contain all the terms, conditions, and
other provisions of the Plan and the transactions contemplated by this Plan Term
Sheet are subject to conditions to be set forth in definitive documents. This
Plan Term Sheet is proffered in the nature of a settlement proposal in
furtherance of settlement discussions and is entitled to protection from any use
or disclosure to any party or person pursuant to Federal Rule of Evidence 408
and any other rule of similar import. This Plan Term Sheet and the information
contained herein are strictly confidential and contain material non-public
information. It is being provided to the Term Loan Lenders and the Revolving
Loan Lenders in accordance with the confidentiality provisions of the respective
credit documents. This Plan Term Sheet does not constitute an offer of
securities, nor is it an offer or solicitation for any chapter 11 plan, and is
being presented for discussion and settlement purposes only.
I. PARTIES
DEBTORS Lenox Group, Inc., and certain of its subsidiaries
(collectively, the "COMPANY" or the "DEBTORS"),
including, without limitation, all Borrowers and
Guarantors under the Term Loan Agreement and Revolving
Credit Agreement.
TERM LOAN LENDERS Bank of New York/Mellon as administrative agent and the
lenders party to that certain Amended and Restated Term
Loan Credit Agreement, dated as of April 20, 2007 (the
"TERM LOAN AGREEMENT") (collectively, the "TERM LOAN
LENDERS"), between the Lenders and D 56, Inc., Lenox
Retail, Inc., and Lenox Incorporated, as borrowers (the
"BORROWERS"), and Lenox Group Inc. and other guarantors
party thereto as guarantors (the "GUARANTORS").
REVOLVING LOAN UBS Securities AG, Stamford Branch ("UBS") as
LENDERS administrative agent and the lenders party to that
certain Revolving Credit Agreement, dated as of April
20, 2007 (as amended, the "REVOLVING LOAN AGREEMENT")
(collectively, the "REVOLVING LOAN LENDERS"), between
the Lenders, the Borrowers, and the Guarantors.
II. PROPOSED CHAPTER 11 SALE PURSUANT TO PLAN
SALE OF ASSETS OF The proposed Plan contemplates (a) a sale (the "LENOX
LENOX BUSINESS SALE") to the Term Loan Lenders of all or substantially
PURSUANT TO A all of the assets of (i) the Lenox Business (as defined
CHAPTER 11 PLAN(1) below) and (ii) the D56 Business (as defined below)
that is remaining at the time of the Closing (as
defined below), and (b) the subsequent disposition by
the Term Loan Lenders of certain remaining portions of
the D56 Business in accordance with the D56 Scale Down
(as defined below) or as otherwise determined by New
Lenox. The assets of the Lenox Business and the D56
Business to be purchased by the Term Loan Lenders (the
"PURCHASED ASSETS") shall include all the assets of the
Lenox Business and the D56 Business as of the Closing
Date other than rejected contracts and any other assets
or liabilities of either business designated as
excluded assets by the Term Loan Lenders at least 10
days prior to the Effective Date.
For purposes of this Plan Term Sheet the term "LENOX
BUSINESS" shall mean all of the assets of the Debtors
that are used or useful in connection with the
manufacturing, sale and distribution of the Lenox,
Dansk, ▇▇▇▇▇▇ and other similar brands, including
(without limitation) all inventory, accounts,
intellectual property and other real and personal
property.
For purposes of this Plan Term Sheet the term "D56
BUSINESS" shall mean all of the assets of the Debtors
that are used or useful in connection with the
manufacturing, sale and distribution of [collectibles],
including (without limitation) all inventory, accounts,
intellectual property and other real and personal
property.
To facilitate the Lenox Sale, the Term Loan Lenders
will create a new entity or entities (collectively,
"NEW LENOX") to which all or a portion of the loans
under the Term Loan Agreement owned by the Term Loan
Lenders party to the Plan Support Agreement dated as of
November 23, 2008 (the "PLAN SUPPORT AGREEMENT") will
be transferred. The Term Loan Lenders will credit bid
an amount up to the aggregate amount of the obligations
owned by the Term Loan Lenders and arising under the
Term Loan Agreement for the Purchased Assets (the
"PURCHASE PRICE"). Upon closing of the sale, which
shall be the effective date of the Plan (the "CLOSING"
or the "EFFECTIVE DATE"), New Lenox (and, indirectly,
the Term Lenders, as the owners of New Lenox), will own
100% of the
---------------------
(1) The Term Loan Lenders reserve the right to direct the Company to consummate
the Lenox Sale pursuant to a sale under section 363 of the Bankruptcy Code in
the event of a default under the DIP Facility, undue delay in the confirmation
of the Plan, in the event the cash payments to the holders of allowed
administrative and priority claims required to confirm the Plan pursuant to
section 1129 of the Bankruptcy Code exceed, in the aggregate, the aggregate
claim amounts set forth herein, or for the other reasons set forth in the Plan
Support Agreement.
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equity in the Purchased Assets.
The terms of the Lenox Sale shall be set forth in an
asset purchase agreement in form and substance
reasonably acceptable to the Company and the Term Loan
Lenders (the "APA"). The APA will also provide for,
among other things, the assumption by New Lenox of
certain other liabilities of the Debtors, in each case
as specified by New Lenox.
Pursuant to the terms of the Plan the Company will
undergo a tax liquidation as soon as reasonably
practicable after the Effective Date of the Plan.
III. PROPOSED SALE/LIQUIDATION OF D56 ASSETS
D56 BUSINESS PROCESS Beginning before the Effective Date and continuing
after the Effective Date, the D56 Business will be
scaled down or disposed of by the Company or New Lenox,
as applicable, either through a scale down plan, a sale
process/royalty arrangement or another disposition (the
"D56 SCALE DOWN"). The net proceeds received by the
Company prior to the Effective Date in connection with
the D56 Scale Down shall be applied in accordance with
the terms of the Revolving Loan Agreement and the Term
Loan Agreement. Any assets of the D56 Business that
remain unsold as of the Closing shall be treated as
"Purchased Assets" and shall be sold, transferred and
assigned to New Lenox.
Prior to the Effective Date, the Company will consult
with the Term Loan Lenders before making any material
decisions regarding the D56 Scale Down.
IV. PLAN ADMINISTRATOR
APPOINTMENT The Plan shall provide for the appointment of a plan
administrator (the "PLAN ADMINISTRATOR") to, among
other things, (a) oversee the claims resolution
process, and (b) wind down the Company.
On the Effective Date, pursuant to the Plan, the Plan
Administrator will be provided with funding (the "PLAN
ADMINISTRATOR FUND"), in an amount to be agreed upon by
the Company and the Term Loan Lenders, which shall be
sufficient to pay the fees and expenses of the Plan
Administrator and its professionals and all costs
incident to winding down the Company, objecting to and
resolving claims, and distributing proceeds under the
Plan (the "PLAN ADMINISTRATOR EXPENSES"). All amounts
realized by the Plan Administrator from the sale,
transfer or other disposition of assets, if any, shall
be added to the Plan Administrator Fund. Any net
recoveries from such proceeds that exceed amounts
reasonably expected to be required to pay for the Plan
3
Administrator Expenses shall be immediately turned over
to New Lenox. When all the duties of the Plan
Administrator have been completed, the Company has been
wound down, all allowed general unsecured claims have
been paid the amount to which they are entitled under
the Plan, there are no remaining disputed general
unsecured claims, and the chapter 11 cases have been
closed, any funds remaining in the Plan Administrator
Fund shall be remitted to New Lenox.
V. TREATMENT OF CLAIMS AND INTERESTS
ADMINISTRATIVE/PRIORITY/ On the Effective Date, pursuant to the Plan, the Plan
SECURED TAX CLAIMS FUND Administrator shall be provided with funding (the
"APST CLAIMS FUND") in an amount to be determined by
agreement of the Company and the Term Loan Lenders, but
in any event, subject to the aggregate claim amounts
set forth below, which funds shall be sufficient to pay
all Administrative Expense Claims, Priority and Secured
Tax Claims, and Other Priority Claims that are allowed
on the Effective Date and that may become allowed after
the Effective Date. The Plan Administrator shall be
responsible for resolving and paying all Administrative
Expense Claims, Priority and Secured Tax Claims, and
Other Priority Claims. After all Administrative Expense
Claims, Priority and Secured Tax Claims, and Other
Priority Claims have been paid in full and there are no
remaining Administrative Expense Claims, Priority and
Secured Tax Claims, and Other Priority Claims, all
funds remaining in the APST Claims Fund shall be
remitted to New Lenox.
ADMINISTRATIVE AND
PRIORITY CLAIMS
o ADMINISTRATIVE Except to the extent that a holder has been paid by the
EXPENSE CLAIMS Company, in whole or in part, prior to the Effective
Date or agrees to a less favorable treatment, each
holder of an allowed administrative expense claim shall
be paid in full, in cash, the full amount of its unpaid
claim on or as soon as reasonably practicable following
the later to occur of (a) the Effective Date or as soon
thereafter as is reasonably practicable and (b) the
date on which such claim becomes allowed; provided,
however, that in no event shall the aggregate amount of
non-professional fee Administrative Expense Claims
(including, without limitation, cure costs) exceed
$[1,800,000].
o SECURED TAX AND Except to the extent that a holder has been paid by the
PRIORITY TAX Company, in whole or in part, prior to the Effective
CLAIMS Date or agrees to a less favorable treatment, each
holder of an allowed secured tax claim or allowed
priority tax claim shall (a) be paid in full, in cash,
the full amount of its unpaid claim on or as soon as
reasonably practicable following the later to occur of
(x) the Effective Date or as soon thereafter as is
reasonably practicable and (y) the date on which such
claim becomes allowed or (b) receive such other terms
determined by the Bankruptcy Court to provide the
holder deferred cash payments having a value, as of the
Effective
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Date, equal to such claim; provided, however, that in
no event shall the aggregate amount of Secured Tax
Claims and Priority Tax Claims exceed $[250,000].
o OTHER PRIORITY Except to the extent that a holder has been paid by the
CLAIMS Company, in whole or in part, prior to the Effective
Date or agrees to a less favorable treatment, each
holder of an allowed other priority claim shall
receive, in full satisfaction of such other unpaid
priority claim, cash in the full amount of the claim,
on or as soon as reasonably practicable after the later
of (i) the Effective Date or as soon thereafter as is
reasonably practicable, and (ii) the date such claim
becomes allowed; provided, however, that in no event
shall the aggregate amount of Other Priority Claims
exceed $[100,000].
SECURED CLAIMS
o REVOLVING LOAN The Revolving Loans (the "REVOLVING LOAN CLAIMS")
FACILITY arising from the Revolving Loan Agreement shall be
"rolled up" into the DIP Facility.
o TERM LOAN FACILITY Holders of secured claims arising from the Term Loan
Agreement shall contribute all of their claims to New
Lenox. New Lenox will credit the Purchase Price and
purchase the Purchased Assets free and clear of all
liens, interests, claims or encumbrances, except as set
forth in the APA.
o MISCELLANEOUS To the extent not previously paid pursuant to an order
SECURED CLAIMS of the Bankruptcy Court authorizing payment of lien
claims during the chapter 11 cases, all holders of
claims secured by valid liens (including, without
limitation, mechanics', materialsmens', artisans', tax
and any other lien) against property not abandoned or
sold will retain their liens on such property and be
paid in the ordinary course of business by New Lenox
UNSECURED CLAIMS
o GENERAL UNSECURED On the Effective Date, the Plan Administrator shall be
provided with an amount to be agreed upon by the Term
Lenders (the "GENERAL UNSECURED CLAIMS FUND") to pay
holders of allowed general unsecured claims. On the
Effective Date, each holder of an allowed unsecured
claim shall receive its pro rata share of the General
Unsecured Claims Fund. The Plan shall provide a
mechanism for delaying distribution to holders of
general unsecured claims pending a resolution of
disputed general unsecured claims.
The Plan will provide a release of all Chapter 5 causes
of action against any person who provided goods and
services in the ordinary course of business.(2)
---------------------
(2) Subject to review of potential claims by Term Loan Lenders.
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EQUITY INTERESTS Holders of equity interests in the Company will not
receive or retain any property or interest on account
of their interests, and all such interests will be
cancelled and extinguished.
VI. SOURCES FOR PAYMENTS UNDER PLAN
PLAN FUNDING At Closing, subject to the aggregate claim limits set
forth above (compliance with which shall be a condition
to effectiveness of the Plan), New Lenox will provide
sufficient funds to make all payments required to be
made, including to fund the Plan Administrator Fund,
the APST Claims Fund, and the General Unsecured Claims
Fund.
VII. OTHER PLAN PROVISIONS
RELEASES AND EXCULPATION The Company/Debtors will release their respective
officers and directors, the Revolving Loan Lenders and
agent under the Revolving Loan Agreement, the Term Loan
Lenders and agent under the Term Loan Agreement, and
the respective officers, directors, employees, agents,
advisors and professionals of each of the foregoing,
including of the Company/Debtors, from all claims
arising on or before the Effective Date, other than for
claims based on willful misconduct, intentional fraud,
or criminal conduct as determined by a final order
entered by a court of competent jurisdiction.
The Plan will include standard exculpation for
individuals and professionals participating in the
Debtors' chapter 11 cases.
The Term Loan Lenders will release the Debtors and
their respective officers, directors, employees,
agents, advisors, and professionals from all claims
arising on or before the Effective Date, other than for
claims based on willful misconduct, intentional fraud,
or criminal conduct as determined by a final order
entered by a court of competent jurisdiction.
INDEMNIFICATION OF Under the Plan, all indemnification provisions
PREPETITION OFFICERS currently in place (whether in the by-laws,
AND DIRECTORS certificates of incorporation, or employment contracts)
for the current and former directors, officers,
employees, attorneys, other professionals and agents of
the Debtors and such current and former directors and
officers' respective affiliates will be assumed by New
Lenox and will survive effectiveness of the Plan for
claims related to or in connection with any actions,
omissions or transactions occurring prior to the
Effective Date. Notwithstanding the foregoing, in no
event will New Lenox's obligation with respect to
indemnification exceed the amount of any deductible
payable pursuant to the directors and officers
liability policy.
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EMPLOYEE TRANSITION The Plan will further provide that New Lenox may, in
PROGRAMS its discretion, assume certain agreements and
pre-petition obligations as currently formulated or as
modified, including, but not limited to portions of the
Company's existing Change in Control, Outplacement,
Severance and other benefits and obligations to Company
employees (3).
PENSION AND RETIREE Pursuant to the Plan, and as a condition to the
BENEFIT PLANS effectiveness of the Plan, all existing defined benefit
and other pension and/or retiree benefit plans
maintained by the Debtors shall be terminated in a
manner reasonably acceptable to New Lenox.
DEFINITIVE DOCUMENTATION The Company, the agent for the Revolving Loan Lenders,
the agent for the Term Loan Lenders, the Postpetition
Lenders, and the Exit Facility lender will negotiate in
good faith definitive documentation for the Plan
consistent with the terms hereof, including, without
limitation, a plan support agreement, the DIP Facility,
and any necessary documents to effectuate the Plan.
OTHER TERMS AND The Plan and all related documentation shall reflect
CONDITIONS the terms and conditions of this Plan Term Sheet to the
parties' mutual satisfaction and shall contain such
other terms and conditions as the parties mutually
agree.
This Plan Term Sheet will become part of the Plan
Support Agreement containing customary terms and
conditions to be executed by the Company and the Term
Loan Lenders in support of the Plan.
The distributions on and treatment of claims of the
Term Loan Lenders contemplated herein shall become
effective and binding only upon the confirmation and
effective date of a Plan under Chapter 11 of the U.S.
Bankruptcy Code which has been voted upon and approved
by the Term Loan Lenders in accordance with section
1126(c) of the Bankruptcy Code, and confirmed by the
Bankruptcy Court.
The Company shall not enter into, terminate, amend,
modify or supplement any Material Contract without
prior consultation with, and the prior consent, which
consent shall not unreasonably withheld or delayed, of,
the Term Loan Lenders (other than for the purchase or
sale of inventory in the ordinary course of business).
For purposes hereof the term "Material Contract" shall
mean (a) any license agreement, or (b) any agreement
that involves the payment of, or the purchase or
provisions of goods or services having a value in
excess of, $250,000 in any year or $500,000 over the
life of such contract.
(3) The Term Loan Lenders will need to review all agreements related to these
programs before determining whether to agree to this provision.
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Prior to the Effective Date, the Company shall have
taken the steps to perform an audit of 2008 financial
results under a format reasonably acceptable to the
Term Loan Lenders and consistent with privately held
corporations.
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EXHIBIT B
NEW LENOX
SUMMARY TERM SHEET
Reference is made to that certain letter agreement, dated as of
November 23, 2008, between and among the Term Loan Agent and the Term Loan
Lenders (collectively, the "SIGNATORY LENDERS") regarding the Term Loan Lenders'
potential submission of a bid to purchase certain of the assets of Lenox Group
Inc. and its affiliates (the "LETTER AGREEMENT"). This Term Sheet is annexed to
the Letter Agreement and sets forth the material governance terms for one or
more entities proposed to be formed by the Signatory Lenders in connection with
any such purchase, it being understood that this Term Sheet is not intended to
contain all matters upon which agreement must be reached among the Signatory
Lenders in order to complete the transactions contemplated hereby, and that any
such matters (including, without limitation, the terms of any certificate of
incorporation, by-laws, shareholders agreement, operating agreement or other
constituent documents) shall be in form and substance reasonably satisfactory to
each of the Term Loan Lenders and Term Loan Agent.
TRANSACTION: It is contemplated that:
a. each of the Signatory Lenders pursuant to that
certain Amended and Restated Term Loan Credit
Agreement, dated April 20, 2007, by and between
Lenox, Incorporated, D 56, Inc., and Lenox Retail,
Inc., as borrowers; and Lenox Group Inc. and other
guarantors party thereto as guarantors; Bank of
New York/Mellon (the "TERM LOAN AGENT") as
administrative agent and the Term Loan Lenders
party thereto (as amended, restated, supplemented
or otherwise modified from time to time, the "TERM
LOAN CREDIT AGREEMENT"), will contribute all (or a
lesser amount as may be determined by Required
Lenders) of their respective interests in the
"Term Loans" to one or more newly-organized
Delaware C corporations (collectively, the
"COMPANY"), in exchange for equity interests in,
or debt securities issued by, the Company; and
b. the Company will use such Term Loans to credit
bid in connection with the possible purchase (the
"TRANSACTION"), in the context of a U.S.
bankruptcy proceeding, of certain assets of Lenox
Group Inc. and its affiliates pursuant to the
terms set forth in the Plan Term Sheet, dated as
of November 23, 2008 (the "PLAN TERM SHEET").
COMPANY: The Company will consist of one or more newly-organized
Delaware C corporations. When the Signatory Lenders
contribute the Term Loans to the Company (the "TERM
LOAN CONTRIBUTIONS"), the Company will issue equity
interests, PRO RATA among the Signatory Lenders (or
their designated affiliates) according to the amount of
the Term Loan
Contributions made by each of them.
To the extent that the Company is comprised of more
than one entity, the Signatory Lenders shall allocate
the Term Loan Contributions based on the relative value
of the assets to be held by each entity.
GOVERNING The holders of equity interests in the Company (i.e.,
DOCUMENTS: the Signatory Lenders or their designated affiliates)
(the "SHAREHOLDERS") will enter into a shareholders
agreement (the "SHAREHOLDERS AGREEMENT") and adopt a
Certificate of Incorporation and By-Laws in respect of
their ownership of the Company in order to give effect
to the provisions described herein. The Shareholders
Agreement shall be governed by Delaware law.
To the extent that the Company is comprised of more
than one entity, the governing documents for each
entity shall be substantially identical and the
provisions described herein shall apply equally to each
entity.
BOARD OF Except where Shareholder approval is required by the
DIRECTORS: Shareholders Agreement or by law, the Company shall be
governed by a [seven] member Board of Directors (the
"Board"). The Board shall be appointed as follows:
[Board designation rights, ownership thresholds for
designation rights and other board composition/
replacement matters TBD] [need to determine threshold
for determination and modification of these rights.]
BOARD OBSERVATION Shareholders who do not have the right to designate a
RIGHTS: member of the Board shall, collectively, have the right
to appoint one non-voting observer to the Board (the
"OBSERVER"). The Observer may be present at all
meetings of the Board, including any telephonic
meetings, and the Company will send or make available
to the Observer such notice of meetings and such copies
of all minutes, consents, correspondence and other
material as are sent, given or made available to
members of the Board (except as may be necessary to
preserve attorney-client privilege). The Observer may
only be excluded from any meeting of the Board or
portion thereof or from receiving any such materials,
if, in any such case, the Company reasonably believes,
upon advice of counsel, that such exclusion is
reasonably necessary to preserve attorney-client
privilege.
TRANSFER: There generally will be no restrictions on transfers
of equity interests in the Company; however, all
transfers must comply with securities laws, the
drag-along and tag-along rights set forth below and the
right of first offer set forth below, and no transfers
will be permitted without the approval of the holders
of a majority of the Company's outstanding
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equity interests to the extent such transfers would
cause the Company to become subject to the reporting
requirements of any securities laws, or would be
reasonably likely to result in the loss of any licenses
or approvals that are material to the Company or its
subsidiaries. The applicable transferee must agree to
be bound by the terms and conditions of the
Shareholders Agreement for any such transfer to be
effective.
RIGHT OF FIRST Notwithstanding anything to the contrary in the
OFFER: Transfer section above, to the extent that a
Shareholder wants to sell all or a portion of its
equity interests in the Company to a non-Shareholder
(other than an affiliate of the selling Shareholder),
it must first offer such equity interests to the other
Shareholders at a set asking price. The other
Shareholders shall have ten (10) business days to
purchase all (but not less than all) of the offered
equity interests (subject to ratable cutback) at such
set price. If the offered equity interests are not
purchased in their entirety by such other Shareholders
within such ten (10) business day period, then, in the
following ten (10) business days, the selling
Shareholder may sell all (but not less than all) of the
offered equity interests to non-Shareholders on terms
and conditions, including price, no more favorable to
the buyer than the terms it offered to the
Shareholders.
DRAG ALONG RIGHTS: At any time, the holders of two-thirds of the Company's
outstanding equity interests may cause all of the other
Shareholders to sell all or any portion of their equity
interests in the Company, on a pro rata basis, to a
buyer that is not affiliated with any of the holders
initiating such sale if such sale would result in a
change of control of the Company, pursuant to a
customary drag along provision.
TAG ALONG RIGHTS: In connection with any Shareholder's (or affiliated
group of Shareholders') proposed sale of equity
interests of the Company (other than a sale to such
selling Shareholder's or affiliated group of
Shareholders' affiliates), [representing more than 10%
of the Company's outstanding equity interests], the
other Shareholders shall be entitled to exercise tag
along rights on a pro rata basis, subject to the same
terms and conditions.
PREEMPTIVE RIGHTS: At the Board's election, each Shareholder shall have
a preemptive right in respect of all equity issuances
by the Company, subject to customary carve-outs.
ANTI-DILUTION RIGHTS: Each Shareholder will, subject to customary exceptions,
have the right to purchase new equity interests in the
Company in an amount that would maintain such
Shareholder's percentage ownership of the equity
interests in the Company pursuant to new equity
issuances by the Company. The Company shall provide
notice to each Shareholder no later than ten (10)
business days after any such issuance in order to
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permit such Shareholder to participate.
INFORMATION RIGHTS: Each Term Loan Lender shall be entitled to receive
quarterly and annual financial statements of the
Company.
ASSET PURCHASE The Signatory Lenders agree to prepare an Asset
AGREEMENT: Purchase Agreement substantially incorporating the
terms of the Plan Term Sheet. Any amendments to or
modifications of such Asset Purchase Agreement must be
ratified and approved by Shareholders holding, in the
aggregate, at least a majority in amount of the Term
Loan Contributions as of any date of determination.
MATTERS Subject to affiliate transaction restrictions, the
SUBMITTED TO A following actions will be submitted for a vote of all
VOTE OF ALL of the Company's Shareholder and will require approval
SHAREHOLDERS: of the holders of two-thirds of the Company's equity
interests:
o sale or merger of the Company or all or
substantially all of its assets; and
o any changes or amendments in or to the
constitutive documents of the Company
that disproportionately adversely affect
the rights of any Signatory Lenders.
AFFILIATE The Company will not engage in any material transaction
TRANSACTIONS: with any Shareholder or any affiliate thereof unless
such transaction is on arms'-length terms or is
approved by (1) a majority of the members of the Board
not appointed by such Shareholder or its affiliates or
(2) a majority of the disinterested Shareholders.
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