UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 16, 2005 (May 10, 2005)
Friedman's Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-22356 58-20583
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
171 Crossroads Parkway
Savannah, Georgia 31422
(Address of Principal Executive Offices)
(912) 233-9333
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement.
Friedman's Inc. ("Friedman's" or the "Company") has entered into a
commitment letter (the "Commitment Letter"), dated May 10, 2005, with Harbert
Distressed Investment Master Fund, Ltd. (the "Harbert Distressed Fund"),
pursuant to which (i) the Harbert Distressed Fund will purchase from Citicorp
USA, Inc. ("CUSA"), a subordinated term loan for $25.5 million (the "Term
Loan") under Friedman's existing $125 million debtor-in-possession Credit
Agreement, dated as of January 31, 2005 (as amended by Amendment No. 1
thereto, dated as of February 25, 2005) (the "DIP Facility") with CUSA, as
Administrative Agent, and a syndicate of lenders, as applicable. The DIP
Facility will be amended and restated to provide for the Term Loan as part of
the DIP Facility. Friedman's has also entered into a letter agreement dated May
10, 2005 with CUSA, pursuant to which CUSA has consented to the terms of the
Term Loan (the "CUSA"), subject to certain conditions set forth therein.
The Term Loan will be funded at closing, at which time, the
revolving portion of the DIP Facility (the "Revolver") will be reduced to $99.5
million, so that the total notional amount of the DIP Facility will continue to
be $125 million. Upon the closing of the Term Loan, the Company will have $12.5
million of additional availability under the Revolver and an additional $12.5
million of availability under the Revolver will become available upon the
Company's receipt of commitments from vendors sufficient to satisfy the
Company's merchandise requirements through the 2005 holiday season.
The Term Loan may be repaid or converted into new common equity of
the Company upon the consummation of a plan of reorganization in the Company's
chapter 11 case and the prior repayment of all outstanding revolving loans
under the DIP Facility. If the Harbert Distressed Fund is the plan investor in
the Company's plan of reorganization, the Term Loan will be converted into new
common equity of the Company following its emergence from chapter 11 at a
conversion price which is equivalent to a 10% discount to the equity value of
the Company upon emergence. If the Harbert Distressed Fund is not the plan
investor in the Company's plan of reorganization, at the election of the
Harbert Distressed Fund, either the Term Loan and a related termination fee may
be repaid in cash, or the Term Loan may be converted at a conversion price
which is the lesser of the equivalent of a 20% discount to the equity value of
the Company upon emergence from chapter 11, or the price which is sufficient to
convert the Term Loan into 25% of the Company's new common equity upon
emergence from chapter 11.
The Term Loan remains subject to the satisfactory completion of due
diligence by the Harbert Distressed Fund, the negotiation and execution of
definitive documentation for the amendment and restatement of the DIP Facility,
the approval of the United States Bankruptcy Court for the Southern District of
Georgia, Savannah Division (the "Bankruptcy Court"), and certain other
conditions. Under the terms of the Commitment Letter, Harbert Distressed Fund
will have no liability to any party if the Term Loan does not close except as
otherwise expressly provided in the definitive documentation for the amendment
and restatement of the DIP Facility to be negotiated.
The foregoing descriptions are qualified in their entirety by
reference to the Commitment Letter, a copy of which is attached hereto as
Exhibit 10.1.
Item 8.01. Other Events
On May 11, 2005, the Company filed motions (the "Motions") with the
Bankruptcy Court seeking approval (i) in connection with the Company's
authority to enter into the transactions contemplated by the Commitment Letter
as described in Item 1.01, and (ii) in connection with the Company's granting
of consents to the transactions contemplated by various participation
agreements entered into between the Harbert Distressed Fund and certain of the
Company vendors relating to such vendors' claims under the Company's
pre-petition trade vendor program (the "Vendor Motion").
As set forth in the Vendor Motion, the Company's consent to the
Harbert Distressed Fund's participation in any particular vendor claim will be
conditioned upon, and final only upon, satisfaction of the occurrence of an
effective date of a plan of reorganization and such vendors' compliance with
certain trade terms, including obligations to fulfill 2005 holiday orders. As
also set forth in the Vendor Motion, the Company believes that its conditional
consent in connection with the vendor trade claims will enhance the prospect of
timely delivery of merchandise by affected vendors through its 2005 holiday
inventory build-up period. The Motions may be accessed free of charge via the
Internet at the website of Kurtzman Carson Consultants LLC
(http://www.kccllc.net/friedmans).
On May 11, 2005, the Company issued a press release (the "Press
Release") which announced, among other things, the foregoing events and certain
of the matters described in Item 1.01 of this Current Report on Form 8-K. The
Press Release also announced that the Company has entered into an agreement
with the Harbert Distressed Fund to exclusively negotiate with the Harbert
Distressed Fund through June 10, 2005, on certain terms and conditions pursuant
to which the Harbert Distressed Fund would become a plan investor in the
Company's plan of reorganization.
The text of the Press Release is attached hereto as Exhibit 99.1 and
incorporated by reference into this Item.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description
------ -----------
Exhibit 10.1 Commitment Letter, dated May 10, 2005, by and between
Friedman's Inc. and Harbert Distressed Investment Master
Fund, Ltd.
Exhibit 99.1 Press Release dated May 11, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRIEDMAN'S INC.
Date: May 16, 2005 By: /s/ C. Steven Moore
--------------------------------
C. Steven Moore
Chief Administrative Officer
and General Counsel
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
Exhibit 10.1 Commitment Letter, dated May 10, 2005, by and between
Friedman's Inc. and Harbert Distressed Investment Master
Fund, Ltd.
Exhibit 99.1 Press Release dated May 11, 2005