PRIOR TO THE
CLOSING DATE HAVE BEEN PREPARED BY THE BORROWERS AND REFLECT PROJECTIONS FOR THE
PERIOD BEGINNING ON AUGUST 1, 2008 ON A MONTH-BY-MONTH BASIS AT LEAST THROUGH
MAY 29, 2009. THE PROJECTIONS ARE BASED UPON THE SAME ACCOUNTING PRINCIPLES
(OTHER THAN ADJUSTMENTS RELATED TO THE IMPACT OF THE CASES) AS THOSE USED IN THE
PREPARATION OF THE FINANCIAL STATEMENTS DESCRIBED ABOVE AND ARE BASED ON
ASSUMPTIONS BELIEVED BY THE BORROWERS TO BE REASONABLE AT THE TIME SUCH
PROJECTIONS WERE DELIVERED IN LIGHT OF CONDITIONS AND FACTS KNOWN TO THE
BORROWERS AS OF THE DATE THEREOF (IT BEING UNDERSTOOD THAT PROJECTIONS BY THEIR
NATURE ARE INHERENTLY UNCERTAIN, THE PROJECTIONS ARE NOT A GUARANTY OF FUTURE
PERFORMANCE, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE PROJECTIONS).
3.5
MATERIAL ADVERSE EFFECT; BURDENSOME RESTRICTIONS; DEFAULT.
Since March 31, 2008, (a) no Borrower has incurred any obligations, contingent
or noncontingent liabilities, liabilities for Charges, long-term leases or non
ordinary course forward or long-term commitments that are material and are not
reflected in the Projections delivered to Lenders prior to the Closing Date and
that have not been approved by the Bankruptcy Court pursuant to section 363 of
the Bankruptcy Code (to the extent such approval is required by section 363 of
the Bankruptcy Code), (b) no contract, lease or other agreement or instrument
has been entered into or assumed by any Borrower or has become binding upon any
Borrower's
13
assets and no law or regulation applicable to any Borrower has been adopted that
has or could reasonably be expected to have a Material Adverse Effect and (c) no
Borrower is in default and to the best of the Borrowers' knowledge no third
party is in default under any material contract, lease or other agreement or
instrument, that alone or in the aggregate could reasonably be expected to have
a Material Adverse Effect.
Since the Closing Date, no event has occurred, that
alone or together with other events, could reasonably be expected to have a
Material Adverse Effect.
3.6
OWNERSHIP OF PROPERTY; REAL ESTATE; LIENS.
(A)
EACH BORROWER WARRANTS THAT IT HAS GOOD, MARKETABLE, LEGAL AND
VALID TITLE TO, OR LEGAL AND VALID LEASEHOLD INTERESTS IN, ALL OF ITS PERSONAL
PROPERTY CONSTITUTING COLLATERAL.
(B)
NO BORROWER OWNS ANY REAL PROPERTY. THE LEASES AND OTHER
AGREEMENTS LISTED IN DISCLOSURE SCHEDULE 3.6 CONSTITUTE ALL OF THE MATERIAL REAL
ESTATE CONTRACTS. EACH BORROWER HAS VALID AND ENFORCEABLE LEASEHOLD INTERESTS IN
ALL OF ITS MATERIAL LEASED REAL ESTATE, EXCLUDING ANY LEASED REAL ESTATE THAT IS
OCCUPIED ON A MONTH TO MONTH OR "AT WILL" BASIS. TRUE, CORRECT AND COMPLETE
COPIES OF ALL MATERIAL REAL ESTATE CONTRACTS HAVE BEEN DELIVERED TO THE INITIAL
LENDERS TO THE EXTENT REASONABLY REQUESTED BY THE INITIAL LENDERS (AND NOT
PREVIOUSLY DELIVERED TO THEM). NONE OF THE PROPERTIES AND ASSETS OF ANY BORROWER
IS SUBJECT TO ANY LIENS OTHER THAN PERMITTED LIENS.
3.7
LABOR MATTERS.
Except as set forth on Disclosure Schedule 3.7: (a) no strikes, work
stoppages or other material labor